It is trite to note that Treasury has already achieved a certain degree of centralization with all the reforms and policy adjustments since the introduction of the Treasury Single Account in Nigeria. There are however challenges, working with core banks for cash management is important but not all of those banks provide cash management services. An essential first step, however, has been to centralize liquidity so that treasury has visibility and control over resources.
By providing the benefits of centralization, whilst also ensuring that there are no disruption in budgetary activities and production templates, the influence and control centralized treasury have led to trust and open communication in resources and fund management. Understanding cash and treasury management requirement and constraints would lead to greater efficiency and transparency.
Implementing a liquid management tool is instrumental towards allowing effective mobilization of cash balances from banks in operation by government. This will lead to better visibility over cash balances across board, it will enhance identification of ‘trapped’ cash i.e. cash that is held in bank account that are not included in cash pools and/ or is inaccessible for regulatory or other reasons.
In other to build a reputable treasury, it is important to develop a Cash Hunt Project strategy that would not be a one off initiative but that would lead to building cash pool network as a holding as a transit into the main treasury at the close of business each day work needed to be done with units to enhance reporting and cash transfer mechanism for accounts held in various banks to ensure visibility over non-treasury accounts.
It is important to put in place Treasury Process Development in place; a variety of both operational and strategic initiatives should be developed to highlight opportunities for greater efficiency and ensure processes are well documented for compliance and staff continuity purposes. This can be done by firstly, identifying and documenting original processes, and then analyzing and refining each one of them. These would clarify individuals’ roles and responsibilities and improve efficiency.
One aspect of this process development project is to standardize reporting, in the past producing bespoke information and formats require considerable effort. Now things are more streamlined since such report are now automated and comes from one source; namely summary of all banking transactions summarized into the holding accounts while other account receivables reflects zero balances.
The functions of treasury as defined by various school of thought is complex as it entails diverse field of finance chief among which are investments, portfolio management, account receivables, cash and liquidity management, FX and bank relationship. It is therefore imperative for treasury operations to be conducted by treasury professionals as opposed to becoming integrated into the wider accounting function with different priorities. For organizations and entities that have embraced these, they have recorded high success with better process cohesion, clearer responsibilities, greater efficiency, and a stronger treasury identity.
While it is important to optimize treasury processes, attention must be paid to processes that influences working capital management; such as sales outstanding collections. While it is true that collections are not part of core treasury responsibilities, it is essential that treasury is involved in the project to reduce overdue customer collections, not only due to working capital implications, it could also conflict with overall cash hunt initiative.
The value of relationship cannot be over emphasized in standardizing, streamlining and centralizing treasury activities because of the multiple benefits in terms of more efficiency, readily available information and trustworthiness to banking entities, and counterparties on project collaboration and executions.