Evolution of the treasurer Featured

8:00pm EDT August 26, 2008

A treasurer’s job used to be narrowly defined and focused on managing daily cash positions and liquidity. Today’s treasurer, however, is more involved with devising business strategies and supporting operational goals. In fact, forward-thinking CEOs are giving treasurers a seat at the table for strategy meetings and brainstorming sessions. Rapidly evolving technology, new accounting standards and globalization are just a few of the reasons why the treasurer’s role is expanding to a more intensive management of working capital deployment and business risk coordination.

Craig S. “Sandy” Saxer, senior vice president of sales development in PNC’s treasury management group, talked to Smart Business about how a strategic treasurer can be an asset in a sluggish economy.

How has the treasurer’s job changed?

Historically, the treasurer’s job responsibilities consisted of short-term borrowing, banking relations, risk management and other financial advisory functions. Rarely were day-to-day treasury management tasks — monitoring cash received or authorizing the funding of checks presented for payment — integrated with other business processes.

The modern-day treasurer supports all of the different core business activities, such as marketing, sales, production and procurement, in addition to overseeing daily financial stability. Treasurers still provide timely cash flow information to the CEO and other stake-holders, but are also becoming directly involved in the management of supporting systems such as accounts receivable, credit and accounts payable as a way to improve flows.

Why has the role of treasurer evolved?

Technology has made the job of treasurer much more efficient by uniting cash, payments, and trade and investment processes. Adding speed and transparency to transactions like payables and receivables allows treasurers to spend more time on strategic activities like forecasting and risk management. In addition, the treasurer has timely information with which to advise company management on business decisions.

Legislative reforms, primarily the Sarbanes-Oxley Act of 2002, have forced corporations to improve their financial disclosures to combat the accounting fraud that plagued certain companies. The guidelines within Sarbanes-Oxley require tighter internal controls and the appropriate segregation of duties to evaluate every aspect of a company’s financial procedures. Companies have had to strengthen their internal controls to comply with this legislation, which means that the controller has had to become much more involved in establishing and overseeing the financial functions. As a result, treasurers have adopted the management of the daily corporate financial functions from an operational viewpoint.

There has also been a fundamental shift in how the United States conducts business with other countries. Information and global trade opportunities are changing traditional international commercial practices. Open trade credit is evolving as a practice and dynamic information systems are assisting the movement of information to encourage more of these transactions. The treasury function is becoming more of an internal adviser in this capacity because of its traditional links with banks and its role managing the receivables component of working capital.

How can a more progressive treasurer affect a company’s future financial viability?

Beyond making process improvements, effective treasurers add value to the company by integrating treasury management functions into other business processes. For example, a treasurer may work with marketers to develop various payment options that appeal to a wider customer base or become more actively involved in investments as a natural extension of his or her interactions with external parties like bankers and credit analysts.

Despite the institutional changes in the treasury management function, managing working capital remains the most important aspect of any treasurer’s job. Effective treasury management practices that include accounting for unforeseen events like market cycles and changes in customer base are essential to a company’s financial viability. The strategic treasurer that devises a comprehensive view across all of a company’s operational disciplines and integrates sound working capital management practices greatly increases the future success of the company and his or her own personal success. <<

This article was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice or recommendations to buy or sell currencies or to engage in any specific transactions and does not purport to be comprehensive. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other adviser regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.

©2008 The PNC Financial Services Group, Inc. All rights reserved.

CRAIG S. “SANDY” SAXER is senior vice president, sales development, in PNC’s treasury management group. Reach him at (215) 585-6677 or craig.saxer@pnc.com. To learn more about trends in treasury management, check out our webinar on this topic at pnc.com/joinus.