Treasury managers at high-growth tech companies operate in an unusual environment. The fast pace of these companies can lead to growing pains, but it also offers Treasurers a unique opportunity to contribute to their businesses’ success.
To discover the common issues that this group faces, Bank of the West sponsored the first meeting of the Tech 20 High-Growth Treasurers’ Peer Group in Silicon Valley. The sessions focused on top issues at fast-moving companies. Three primary areas stand out among the Treasurers’ concerns:
- Setting up treasury for future success
- Creating successful banking relationships
- Solidifying the role of treasury inside the company
Here’s what the peer group had to say about each area.
1. Setting up treasury for future success
Among the most fundamental responsibilities, these participants said, is ensuring that the reason for the corporate treasury function is fully understood. Beyond cash management, they believed a forward-looking Treasurer should anticipate future funding needs, support daily operations, and manage financial risks.
This is particularly challenging as many high-growth tech companies are in hyperproductivity mode. Treasurers at the Tech 20 sessions were likely to have fewer than five people in their department and only one or two direct reports. Even so, they have to match the pace and integrate solutions that are quickly scalable throughout the company.
“Including myself, we are a relatively small treasury organization, and members are expected to be cross-functional,” a Treasurer said. “For instance, the same [Assistant Treasurer] will work on liquidity as well as capital structure and capital markets.”
Cash awareness is also especially vital for these companies, where cash reinvestment, rather than funding returns to shareholders, is paramount. As such, the Treasurers agreed that a pervasive culture of cash awareness should be created to ensure reliable forecasting and planning.
2. Creating successful banking relationships
Banking relationships—and making sure that both sides understand their mutual expectations—are also a top concern.
The first recommendation among Treasurers is to clearly assess whether their bank fully understands the company’s business, to ensure that the bank is making appropriate commitments, and that the bank has the right capabilities.
For example, the credit underwriting process should meet the particular needs and match the growth status of the company, including whether the account will be handled by the commercial or corporate banking area. Ensuring access to the right bankers is vital, they said.
The banking relationship with treasury should also be understood by the board and the CEO, these Treasurers said. As the senior executive who often has the most experience with bankers, the Treasurer should set internal expectations that the relationship resides fully within treasury management.
But a solid banking relationship should not necessarily inhibit Treasurers from looking beyond traditional banking. They should consider seeking new technology and financial solutions that would bring efficiencies and cost savings to the company.
Treasuries with bank-agnostic infrastructures, together with ensuring end-to-end service delivery and speed-to-market capabilities, might help position their companies for significant opportunities in the future.
3. Solidifying the role of treasury inside the company
For a Treasurer at these high-growth companies, one of the most important elements is solidifying at the highest levels a clear understanding of treasury’s role and responsibilities.
To help ensure treasury objectives reinforce the company’s goals, a firm understanding of the ongoing strategic vision of the CEO is critical, as well as an analysis of the company’s mission statement for current and future cash flow needs. Many Treasurers believe any mention of capital or business objectives that are capital intensive should be incorporated into treasury planning.
One important way to win support for the treasury function is to deliver specific accomplishments early, the Treasurers said. Specific and quick-to-deliver wins that address the concerns of the C-suite can ensure treasury management is understood as a vital and respected part of the company’s operations.
Finally, as treasury strategy is developed with a global view for expansion, either now or in the future, a multicurrency mindset should be adopted to accommodate the acceptance of local and foreign currencies in payments and receipts. Anticipating future needs and building them into current practices is one of the best ways to ensure relevant and successful treasury management, according to many treasury managers.