Companies restructure treasury to reduce costs

With Treasuries at all-time lows and bank lending still declining, companies are reorganizing their treasury operations in record numbers as they strive to increase efficiency, reduce costs and make best use of their internal cash. According to a recent survey by JP Morgan Treasury Services, 61 percent of companies polled had either just completed a treasury restructuring, were in the process of restructuring, or were building the business case for a restructuring.

The poll of 182 treasury executives—primarily from large corporations--found that 35 percent were implementing systems that would allow the company to get a global cash balance, 25 percent were reorganizing their bank account structures to reduce their number of banking partners, and 19 percent were restructuring their cash concentration programs to make use of extra cash for self-funding or debt repayment.

The need to make more efficient use of existing cash balances has been a growing theme throughout the crisis and continues to be a big driver of corporate treasury reorganization, as we discussed last week. Swiss logistics company Panalpina, for example, recently went through a restructuring and treasury refocusing to reduce group-wide operating costs and better manage FX and interest rate exposures in the current market. The firm underwent a full review of its foreign exchange management and investment policies in order to more efficiently manage counterparties and instrument tenors, and better hedge FX exposures. The next step, according to the company, is to move to a single global treasury management system that is integrated with its ERP.

Improving data automation is key to improving cash visibility, and companies are increasingly using more advanced systems to help with that. In the JP Morgan survey, 35 percent of those polled reported using an automated feed into their ERP or treasury system to collect cash balance information. However, 34 percent reported being required to download data from single or multibank platforms, and almost 25 percent reported that they still use Excel spreadsheets, fax or email communication from subsidiaries to get cash balance information.

Although most companies are looking at ways to improve their use of cash, it is clear that there is still a long way to go for many firms to make use of available technology to automate data flows and get near-real-time visibility into cash balances.

And, of course, there is little they can do about the puny returns available for their cash.

This article was first published at cfozone.com and is written by dbedell.