From Startup to Fortune 500: Ten Key Areas of Focus to Help Achieve Treasury Success from the Outset

Brittany Richards

Brittany Richards,
Director, Solution Sales,
Treasury and Trade Solutions, Citi

Some of today’s most successful companies had humble origins, but, as the saying goes, from humble beginnings often come great things. In fact, as of the middle of last year, the most highly valued startup worldwide was Uber, the transportation network company, which was estimated to be worth $68 billion.1

According to Forbes, venture capital investment in startups has surged to its highest level ever, reaching $148 billion last year alone.2 Additionally, CNBC reports that 2019 is shaping up to be a record year for massive tech IPOs, with valuations that could exceed $100 billion.3

For many startups, getting the company up and running is the primary focus, so dealing with the fine points of the treasury function is sometimes put off until another day. As the company grows, it is often left with a patchwork implementation of accounts payable, accounts receivable and cash management. Surprisingly, some of the most iconic and successful startups in the marketplace today had to play catch-up, assembling a treasury organization on the fly long after they had outgrown their previous procedures.

While it may not be top of mind in the early heady days of rapid growth, there are a number of things organizations can consider in order to put the right people and processes in place to support future growth objectives.

Put the right people and structures in place

  1. Build a team, starting with an assistant treasurer — Small and growing organizations may not always need the firepower of an established treasurer. With cost consciousness in mind, startups should consider hiring an experienced treasury director from the ranks of a large company, perhaps luring them over with the title of assistant treasurer and the opportunity for greater autonomy and career advancement. This type of hire can offer a number of advantages. You can tap into the individual’s job experience, while at the same time leveraging important connections to contacts at ERP and treasury workstation solution companies. You will also have access to a deep well of trusted and proven colleagues when it is time to expand the department.
  2. Keep treasury centralized (at least, initially) — In the beginning, tight resources and a small treasury team will typically necessitate keeping operations closer to home. Critical treasury decisions will often be easier to make when operations are centralized and standardized. It will also be easier to track connections, new bank accounts, banking partners, etc. Once the business expands its footprint beyond 20 or so countries, opening regional treasury centers to accommodate growth and add greater regional expertise may be required.
  3. Drive automation in your interactions with your customer service provider — With the workforce being multi-generational, it makes sense to look for banking and service provider organizations that offer both traditional customer service routes like phone and email as well as new service tools such as chatbots, which tend to be the preferred choice for younger professionals. Communicating through a real-time channel decreases time spent on customer service calls, lowering frustrations and driving greater treasury efficiency.

Explore treasury technologies to simplify processes

  1. Choose new connections to simplify the implementation process — The advent of application programming interfaces (APIs) is revolutionizing treasury to bank connections. By leveraging APIs, treasury can query balances on demand, track payments after release, and simplify previously repetitive banking functions. Once connections are established, treasury can scale quickly, using the same connections to new regions without having to expend additional technology resources.
  2. Develop knowledgeable technology partners internally — For any business, but especially for growing ones, knowledge is power. That is why you should cultivate technology experts, whether within treasury or elsewhere in the organization, who can help to implement connections with your banking partner’s systems. This knowledge can be captured in a playbook, making it available for future use, particularly as personnel changes occur.

Focus on working capital

  1. Evaluate your receivables — As the lifeblood of your organization, your receivables are absolutely vital. Work to ensure your receivables design delivers a positive working capital flow. Evaluate the terms, methods and currency of your payments. Also, examine invoice or billing design and make sure it is easy for clients to pay and that terms match with your credit availability. Internally, be sure to consider having a cash application strategy that is automated and reconciled, bringing you as close as possible to straight-through processing. This can reduce strains on vital treasury resources and potentially minimize errors that can affect how quickly you collect.
  2. Improve management of payables — It’s important to look for opportunities to unlock working capital trapped in your payables processes. Start by partnering with other stakeholders, such as colleagues in procurement, to negotiate more effectively with suppliers. Increasing days payable outstanding (DPO), issuing payments through cards and utilizing supply chain financing can all be part of an effective strategy to manage and simplify payments. Using some of the new payment methods, like instant payments, may also allow you to make the most of your DPO.
  3. Use metrics for cash forecasting — Having a crystal ball to see into your cash flow will prove invaluable. Ensure you have a constant stream of metrics for both receivables and payables, which can allow for more efficient cash forecasting. Choose a banking partner who has benchmarking tools that will enable you to see best practices from industry leaders.

Consider security strategies

  1. Watch for external threats — Your organization may be new, but that won’t make it any less of a target for fraudsters. One of the biggest risks to your organization’s assets is having a security breach. This can be as simple as someone hacking and spoofing an invoice, or changing an account receiving payments. Having a strong vendor management/procurement protocol, that helps maintain a clean vendor record and methodology to verify if there are changes, is critical. Establishing the ability to identify payments that are outside of normal patterns is also vitally important for reducing threats.
  2. Use tools to minimize internal exposures — Sometimes the greatest danger a business can face comes from within. Look for a banking partner that offers biometrics and other authentication tools that can be quite effective in helping to maintain a secure banking portal. Leveraging these new technologies and establishing the correct hierarchies and entitlements on your banking portal can help create a barrier to internal fraud that can protect your company.

The earlier a startup can begin to create an effective treasury function, the better off the organization will be in the long run. Be sure to leverage the knowledge and expertise of a trusted banking partner to ensure treasury is able to support the growth objectives of the business.