A Guide to Centralizing Treasury Functions for Better Control

February 6, 2025

A Guide to Centralizing Treasury Functions for Better Control

Treasury management is complex. For businesses with operations spanning multiple geographies, currencies, and financial systems, achieving visibility and control over cash and liquidity can be challenging. Centralising is strategic solution address these challenges, enabling companies to streamline processes, improve decision-making, and reduce risks.

At FTI Treasury, we specialize in helping organizations optimize their treasury operations through innovative solutions. This guide will explore the benefits of centralizing treasury functions, share practical steps to achieve this transformation, and highlight how it can drive better control and efficiency for your organization.

What Does Centralized Treasury Mean?

A centralized treasury consolidates key treasury functions such as cash management, risk mitigation, and funding decisions into a single, cohesive framework. Instead of relying on decentralized operations across various regional or subsidiary levels, a centralized approach unifies these activities, typically through a treasury center or shared service model.

Key features of a centralized treasury include:

  • Centrilzed funding to optimize core expenses and strategy
  • Centralized cash pooling to optimize liquidity and reduce idle cash.
  • Standardized processes for transactions, reporting, and compliance.
  • Enhanced oversight of financial risks and exposures.
  • Streamlined communication with banks and external stakeholders.

Benefits of Centralizing Treasury Functions

1. Improved Visibility and Control

Centralization provides a unified view of your company’s financial position, including cash balances, liquidity, and risk exposures. With real-time visibility into these metrics, treasury teams can make more informed decisions and respond proactively to market changes.

2. Cost Efficiency

By centralizing operations, businesses can eliminate redundancies and leverage economies of scale. For example, consolidating bank accounts or automating processes through a single treasury management system (TMS) can significantly reduce administrative costs and banking fees.

3. Enhanced Risk Management

Centralized treasuries are better equipped to identify and mitigate risks, such as currency volatility or interest rate fluctuations. A unified approach enables companies to implement consistent hedging strategies and ensure compliance with global regulations.

4. Strategic Agility

With centralized data and streamlined workflows, treasury teams can allocate resources more effectively and focus on strategic initiatives, such as funding growth or optimizing working capital.

5. Simplified Compliance

Regulatory requirements vary across regions, and ensuring compliance at a local level can be resource-intensive. A centralized treasury simplifies this process by standardizing reporting and ensuring alignment with global standards.

Practical Steps to Centralizing Treasury Functions

1. Assess Current Operations

Begin by conducting a thorough audit of your existing treasury processes. Identify inefficiencies, redundancies, and gaps in visibility or control. This assessment will provide a roadmap for transitioning to a centralized model.

2. Leverage Technology

Invest in a robust treasury management system (TMS) or enterprise resource planning (ERP) platform that supports centralization. Look for solutions that offer real-time data integration, automated workflows, and advanced analytics.

3. Implement In-House Bank Structure

Establish an in-house bank structure allows organizations to centralize fund management and streamline inter-company loans, enhancing liquidity control and reducing financial risk.

4. Implement Cash Pooling

Establish centralized cash pools to aggregate and manage liquidity across subsidiaries. This approach reduces idle cash, minimizes borrowing costs, and ensures funds are allocated where they’re needed most.

5. Standardize Processes

Create standardized workflows for core treasury activities, such as payment processing, reconciliation, and reporting. This reduces inconsistencies and ensures a consistent approach across the organization.

6. Engage Stakeholders

Centralizing treasury functions often requires cultural and organizational change. To ensure alignment and buy-in, engage key stakeholders—including finance teams, IT, and business leaders.

7. Partner with Experts

Collaborate with treasury consultants or service providers who have experience in centralization. Their expertise can help you navigate complexities and achieve a smoother transition.

Case Study: Achieving Centralization Success

A global MedTech company faced challenges managing cash and liquidity across its subsidiaries in different regions. Decentralized processes led to inefficiencies, limited visibility, and higher costs. By partnering with FTI Treasury, the company:

  • Implemented and centralize IHB structure supported by an advanced treasury technology infrastructure.
  • Centralized cash pools and inter-company loans portfolio.
  •  Implemented inter-company netting processes.

The result? Streamlined treasury processes led to a significant reduction in operational costs.

Conclusion

Centralizing treasury functions is a strategic move that delivers greater visibility, control, and efficiency. By unifying processes, leveraging technology, and partnering with experts like FTI Treasury, businesses can transform their treasury operations and position themselves for long-term success.

Ready to centralize your treasury functions? Contact FTI Treasury today to learn more about our solutions and how we can support your journey.
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