TTS: The Consumer Sector & Role of Treasury

Treasury and Trade Solutions 2 By elevating KPIs such as working capital/free cash; cost of goods sold (COGS); and sales, general & administrative (SG&A) expenses, company boards have raised the stature of treasury within their organisations. Sales, procurement and many other parts of the business are critical. But treasury has an instrumental role to play in measuring these KPIs and implementing strategies capable of delivering improvements. Treasury’s role in working capital management has increased from 58% in 2009 to 83% in 2017, according to Citi’s Treasury Diagnostics report (a proprietary survey that provides detailed treasury benchmarking that many multinationals have used to measure their performance vs. their peer group over time). For treasury, the challenge is to identify the greatest and fastest opportunities to help the business achieve its goals. Fortunately, much of the information it needs is already available. The effective use of big data can help treasury to decide which areas to focus on and what tools are best suited to execute its objectives. Banking partners can support companies in realising opportunities to hit many of these KPI’s via a range of cash management, trade and cards solutions that drive working capital, SG&A and COGS reductions, and increase operational efficiencies.  For treasury, the challenge is to identify the greatest and fastest opportunities to help the business achieve its goals  However, before looking at potential solutions to hit these KPI’s, Citi works with many of its clients to use data to better inform decisions. Thanks to Citi’s leading role in managing global commercial flows (we processes USD 4 trillion client payments per day) we can share aggregated insights on a client’s global flows (with Citi) — who they are paying and collecting from, how much, how frequently, in which currency etc. Then we can use this data to give clients insights regarding the potential financial benefits of adopting solutions. Putting the spotlight on treasury digitisation strategies, or implementing zero-based budgets, where product lines have to compete for spend. FMCG firms have been forced to respond to this challenge, and have adopted many of the same strategies – slimming down their unwieldy product portfolios, acquiring disruptive players (as in the razor blade market), and cutting costs across the business. Company boards have also announced revised financial targets to demonstrate their commitment to financial discipline. While these KPI’s are specific to each company, there are some common themes – sales growth targets; cost reductions; increases in operating margin; increased return-on-invested capital; share buybacks and dividend increases; and cash conversion ratio improvements.