Treasury Management: How To Build An Agile Strategy

Written by Keegan Chamberlin
July 28, 2022

In today’s world, it is critical to establish an agile treasury management strategy.

According to McKinsey, 84% of CEOs believe that innovation is critical for growth. Innovation doesn’t just apply to their product offerings, but also to processes.

As we saw during the COVID-19 pandemic, many businesses had trouble paying their bills since demand plunged. Many organizations were forced to slash their capital expenditures by 25 to 30% just to keep their doors open.

Even in tremulous economic times, it is critical to maintain a healthy cash flow. Your organization needs to be able to change your treasury management strategy on-the-fly.

An agile treasury management strategy will enable you to succeed in both bull and bear markets.

treasury management best practices

How To Ensure Your Treasury Management Strategy Is Agile

Automation Is a Must, Not a Luxury

These days, automating tedious treasury management processes is becoming increasingly necessary. Managing cash flow in spreadsheets is no longer feasible in the long term.

Time utilized to log into bank portals and normalize data could be better spent on analysis. 

A platform built upon open banking APIs can empower you with a unified view of cash across all accounts. These banking APIs securely connect to your banks and automate the normalization of cash flow data.

By automating tedious data management, your treasury can avoid the typical struggles of managing cash in spreadsheets.

How Spreadsheets Hold Treasuries Back:

  • They create siloed and disparate data sources
  • Manual data management is time-consuming and difficult to organize
  • Manual data entry invites the potential for human error
  • They lack version control, making group collaboration impossible
  • No scenario modeling and variance analysis capabilities out-of-the-box
  • Lacks sophistication when it comes to performing daily cash analysis

Adopting an API-first approach to treasury management enables your treasury to pivot quickly.  You can generate cash reports and forecasts as well as perform scenario planning and variance analysis instead of building basic reports. 

Benefits of An API-First Approach to Treasury Management:

  • Gain a unified view of your bank data in one platform
  • Easily explore and analyze cash flow trends
  • Onboard with no IT requirements in weeks, not months, compared to other treasury management systems
  • Increase cash forecasting accuracy with a forecast baseline and variance analysis capabilities
  • Eliminate manual data management processes. Instead, focus on discovering powerful insights through strategic analysis

Ensure Your Treasury Management Strategy Addresses Your Organization’s Strengths and Weaknesses

Technology is only one piece of the treasury management puzzle. It is also crucial that your treasury management strategy addresses your weaknesses. You can better address potential market changes by examining your processes’ strengths and roadblocks. You can do this by performing a SWOT analysis.

swot analysis
Image Source: Investopedia

A SWOT analysis can help you identify:

  1. Your treasury management strategy’s strengths. Analyze the strength of your current bank relationships and existing processes and procedures.

  2. The weaknesses of your current treasury management processes. Figure out which roadblocks are preventing you from making data-backed, strategic decisions.

  3. Opportunities for improvement. After listing your strategy’s strengths and weaknesses, start identifying opportunities for improvement. Start with picking low-hanging fruit that can impact your processes the most.

  4. Potential threats that could negatively impact cash flow. Pinpointing potential threats can help determine how market conditions could impact cash flow. If these threats have a high probability of occurring, it is critical to create contingency plans that minimize the impact.

Enable Scenario Planning By Maintaining A Forecast Baseline

You must establish a forecast baseline to ensure your treasury management strategy is agile. If you have to create every cash forecast by hand, it will be difficult to discover potential cash shortcomings before it’s too late. You can eliminate these surprises by establishing an automated forecast baseline. 

By using a platform built upon open banking APIs and machine learning technology, you can easily create a baseline cash forecast based on historic bank data. For example, our cash management platform, Trovata, utilizes machine learning to analyze historic data trends to establish a cash forecast baseline automatically. 

This forecast baseline can further be utilized to perform scenario planning. By implementing custom variables, you can generate pessimistic and optimistic forecast scenarios. This can help you better understand certain market conditions that can affect your liquidity. Of course, you can also export your forecast data into Excel for further custom analysis.

You can be confident that you are crafting scenarios based on accurate data while eliminating manual data normalization. 

These forecasted scenarios can spark conversations regarding responding to certain market conditions. This way, you have a proactive game plan instead of scrambling at the last second. 

Increase Your Treasury Management Strategy’s Agility With Trovata

It’s time to forgo tedious cash flow management in spreadsheets. With Trovata, you can establish a cash forecasting baseline that provides rich insights when you need it, wherever you need it. These rich insights help develop contingency plans that enable you to pull levers with agility. 

Read our latest resource, 5 Keys To Successful Treasury Management, to discover more tips on creating a treasury management strategy that reduces financial risk.

treasury management best practices

Subscribe to Newsletter