The winds of change are blowing strong through the world of finance. A recent survey shows a third of mid-market CFOs anticipating double-digit revenue growth in 2024. This optimism, however, is tempered by significant headwinds. CFOs are caught in the crossfire. A recent survey found that nearly 70% of CFOs are feeling the pressure to deliver immediate results due to inflation and economic uncertainties.
Rising costs, talent shortages, and technological gaps threaten to derail their ambitious goals. Internally, finance teams are stretched thin, lacking the resources to keep pace with growing business demands. The talent shortage in finance makes adding headcount a challenge, creating a disconnect between revenue goals, team capacity, and available resources.
So, how can CFOs bridge this gap and achieve efficiency amidst a talent drought? Treasury outsourcing to reputable consulting firms offers a powerful solution.
What Do Treasury Consulting Firms Do?
Treasury consultants act as an extension of your finance team. They collaborate with you to define and review strategic treasury goals, crafting a holistic set of processes to achieve them. Their expertise provides valuable market insights and best practices on various themes:
- Treasury Centralization: Streamlining treasury operations for maximum efficiency. This involves consolidating banking relationships, standardizing processes, and centralizing cash flow management. Consultants can help you identify opportunities for consolidation, develop standardized operating procedures (SOPs), and implement centralized cash pooling structures to optimize your financial resources.
- Performance Benchmarking: Measuring your treasury function against industry standards to identify areas for improvement. Consultants can help you identify key performance indicators (KPIs) relevant to your industry and size, allowing you to benchmark your performance against competitors and identify areas for optimization. This might involve metrics like cash conversion cycle length, cost of capital, or foreign exchange transaction costs.
- Industry-Leading Trends: Staying ahead of the curve with the latest treasury innovations. Consultants keep a close eye on emerging technologies and best practices within your industry, ensuring your treasury function remains competitive and adaptable. This could involve implementing blockchain technology for secure and efficient trade finance transactions, or leveraging artificial intelligence (AI) for automated cash flow forecasting and risk management.
- Merger Integration: Ensuring a smooth financial integration during mergers and acquisitions. This can involve consolidating systems, harmonizing accounting practices, and managing cash flow during the transition period. Consultants can help you develop a comprehensive integration plan, manage data migration, and ensure minimal disruption to ongoing treasury operations.
Valerio Trinchi, Treasury Practice Lead at RSM, emphasizes the value of consultant expertise: “Consultants can provide critical benchmarking and lessons learned by other organizations, proofing in advance what works and what doesn’t.” This real-world experience allows you to adopt proven strategies while avoiding costly missteps. For example, consultants can share insights on best practices for integrating different treasury management systems post-merger, or advise on effective strategies for managing foreign exchange exposures during periods of economic volatility.
Why Are CFOs Outsourcing Treasury Functions?
The talent shortage in finance is a key driver of the outsourcing surge. For example, according to a 2021 report by the American Institute of Certified Public Accountants, the number of U.S. students graduating with a Bachelor’s degree in accounting has declined by 8% since 2011. There are similar trends across finance functions. This shrinking pool of qualified candidates makes in-house hiring increasingly challenging.
Outsourcing presents a cost-effective alternative for critical financial processes. For example, audits require dedicated internal resources, which can be a significant expense for smaller companies. Outsourcing allows access to qualified audit professionals on an as-needed basis.
Valerio Trinchi elaborates on the benefits of outsourcing: “Organizations of all sizes can benefit from deploying models that include outsourcing as part of their operations. By outsourcing, companies can capitalize on technological advancements and leverage the latest tech platforms and qualified personnel at a fraction of the cost of hiring specialized staff in niche areas like risk management, derivatives, or hedging.
Furthermore, companies of all sizes, and depending on their level of automation, can now enhance their processes considering this new outsourcing model supported by evolving technologies, skilled resources (that companies do not need to keep on their full payroll). This helps to avoid the internalization of processes that increase bottom line costs and require continued maintenance and improvements. By outsourcing, internal teams can repurpose their efforts to focus on analysis and decision making on finalized metrics rather than engineering how to produce, maintain and massage data.”
Beyond cost-effectiveness, outsourcing can address geographical limitations. Finding the right talent can be difficult depending on your location, making outsourcing a viable option to access a wider pool of qualified professionals with experience in specific industry regulations or niche treasury functions.
When to Consider Treasury Outsourcing?
Obtaining additional support for lean treasury teams is one major use case for outsourcing. However, another key area of support where treasury consultants add value is in accelerating digital transformation.
In the wake of the pandemic, the pace of technological adoption in finance has accelerated. Bank APIs, AI, and machine learning are rapidly evolving, creating a need for skilled professionals to implement and manage these new technologies.
Paul Bramwell, Enterprise Treasury Lead at Trovata, comments on the talent gap in technology implementation: “Many CFOs are combating a lack of digital expertise present in their team members. Consultants can bridge this gap by providing support during the digital transformation journey and ensuring smooth integration of new technologies like data analytics tools and cloud-native treasury tech.”
Here are some specific examples of how treasury consultants can assist with digital transformation:
- Technology Selection and Implementation: Consultants can help with evaluating different treasury management platforms and cloud solutions, ensuring you select the right technology to meet your specific needs and budget. They can also guide you through the implementation process, ensuring a smooth transition and minimizing disruption to daily operations.
- Change Management: Introducing new technologies can be met with resistance from some team members. Consultants can help develop a change management strategy to address these concerns and ensure user adoption of the new system. This might involve providing training workshops, creating user guides, and fostering a culture of continuous learning within the team.
- Data Analytics and Reporting: Modern treasury management platforms generate vast amounts of data. Consultants can help you develop a data analytics strategy to transform this data into actionable insights. They can assist you in setting up dashboards and reports to monitor key performance indicators (KPIs) and identify areas for improvement.
Outsourcing empowers you to address skill gaps, navigate the complexities of digital transformation, and ensure your treasury function operates at peak efficiency.
How to Choose the Right Partner?
Identify the areas where your team needs the most support. Some common areas include treasury management, audit and assurance, and software implementation and support. Consider conducting a skills gap analysis to pinpoint specific areas of expertise that would be most beneficial to outsource.
The key to successfully choosing the ideal partner for your company lies in finding the right balance between cost and expertise. While cost is a factor, prioritizing the quality of the firm’s experience and qualifications is paramount. Carefully vet potential firms by requesting references and verifying their track record in your specific industry and with similar sized companies.
Valerio Trinchi offers additional advice on evaluating treasury consultancies: “Look for a treasury consulting firm with a proven track record of delivering measurable results for clients in your industry. Ask for case studies and references that demonstrate their ability to solve specific challenges similar to yours. A data-driven approach that focuses on measurable outcomes will ensure you get a strong return on your investment. Lastly, review the profiles of the team the consulting firms are offering; most of the time well known brands demand a premium but is the team to serve you on par with the asking fees?”.
By partnering with the right treasury consulting firm, you can overcome the talent shortage and drive significant value for your organization. Consultants provide the expertise, experience, and scalability you need to achieve your financial goals.
Whether you’re leveraging consultants or need a quick and easy in-house solution, Trovata offers a flexible implementation process that caters to your specific needs.
Trovata can be seamlessly integrated into your existing workflows. See how Trovata can empower your treasury team – book a demo today!
