What does success look like in treasury management?

As treasury management shifts from a back-office support group to a strategic partner that drives financial institution revenue growth, it’s more important than ever to quantify its success. Measuring and reporting empowers you to advocate for the resources and collaboration needed to cultivate a profitable treasury management service — but first, you need to understand what success means. Here’s what success looks like in treasury management and how to advocate for it.

What success looks like in treasury management

For our purposes, treasury management success can be divided into two branches: organizational success and client success. Organizational success measures the value treasury management brings to your financial institution. Client success measures the value it offers to customers. Let’s break down what success means for each.

Organizational success

The role of treasury management is evolving from a back-office service unit that supports other departments to a self-sustaining line of business that generates clients, deposits, revenue and value for financial institutions. In an era of dwindling margins and heavy competition from Fintechs that cherry-pick the most profitable banking functions, treasury management has emerged as a new way for banks to boost revenue.

This transformation requires buy-in from bank leadership, interdepartmental collaboration and resource allocation so treasury management can grow into its new role. A robust treasury can:

• Deepen customer relationships
• Differentiate your financial institution in the market
• Generate new revenue streams
• Help protect your bank from Fintech disruptors

Those are all barometers of success, but securing organization-wide support is predicated on your ability to prove treasury management’s value to your bank.

How do you do that? By measuring and reporting metrics that quantify exactly how treasury management improves bank profitability.

Track and communicate key performance indicators (KPIs)

Treasury management success depends on creating specific KPIs and then tracking and communicating metrics. Your KPIs might vary depending on the primary function of treasury management within your financial institution, your value proposition and how you differentiate from competitors; however, the ultimate goal is to prove treasury management’s value. Common treasury management KPIs include:

• Process efficiency: Efficient treasury management processes, including automated workflows and straight-through receivables processing, quantifiably improve profits
• Error rate minimization: Fewer errors means fewer costly mistakes and eliminate the need to dedicate resources for error resolution
• Target returns on assets: Setting ROA targets — then meeting or exceeding them — is a powerful way to prove treasury management’s value
• Deposit volume: Increasing the number of clients, and therefore deposits, treasury manages is an important and simple way to demonstrate value
• Fee-based income: The amount of fee-based income treasury management brings in is a definitive way to confirm revenue growth

Organizational success, then, means consistent improvement in KPIs; this in turn enables you to elevate treasury management’s stature within your financial institution, secure bank-wide buy-in and obtain necessary resources that promote continued growth. 

Client success

Of course, you need to offer customers a compelling treasury management service in order to compete in today’s digital market and achieve organizational goals. That’s why it makes sense to create a different set of KPIs for treasury management clients. For example, you might track cash management metrics such as earned interest and investment returns.

Setting, tracking and communicating client KPIs makes it easier to market treasury management services to business customers. It empowers you to compete against Fintechs, which fragment services, and bring the entirety of business financial accounts under one roof: your bank’s.

Customer service and experience is the backbone of treasury management. The better you understand the experience your clients seek, the easier it will be to implement solutions that cater to their needs and desires. It also empowers you to achieve better results, which positions your financial institution as the best choice for treasury management services.

Ultimately, client success fosters organizational success. The better you serve your customers, the more customers you’ll have.

What resources does treasury management need to advocate for?

Treasury management must have adequate resources in order to achieve both organizational and client success. They include technology, talent, structure and marketing. Let’s take a closer look at each.

Technology

Technology is one of the biggest challenges of treasury management today. As Fintechs disrupt traditional business models and enhance the customer experience, banks that are held hostage by internal bureaucracy fail to implement the technologies their customers want.

Leaders who are able to secure advanced treasury management solution technology such as remote deposit capture, integrated receivables and paperless onboarding are well-positioned to compete. However, many financial institutions — especially smaller banks — don’t have the resources to develop bespoke solutions. That’s why many have elected to engage with Fintechs in collaborative partnerships. Fintechs bring new ideas while financial institutions offer the safety and security of established processes and systems. In this manner, once-competitors can profit through enhanced customer service.

Talent

A new generation of workers are eschewing traditional banking jobs in favor of the Fintech "cool factor." It’s tough for traditional banks to compete with flexible hours, ping pong tables and craft beer. However, that doesn’t mean your bank can’t leverage its strengths to attract bright minds from a young talent pool.

One idea is to establish a mentorship program that clearly defines a path for career advancement and succession. While uncertainty permeates the world of Fintech startups, career-minded employees might find the stability and security of a traditional bank attractive — especially if you can offer an innovative culture that enables them to make an immediate impact with their work.

Structure

As mentioned, it’s important to transform treasury management from a back-office support function to an independent service capable of attracting and retaining its own customers. Doing so requires internal collaboration with other departments and prioritization placed on treasury.

To those ends, treasury management leaders should have a seat at the table for important organizational decisions, and treasury management’s goals and functions should directly tie-in to strategic corporate objectives.

Marketing

If treasury management is an independent service, then it must have marketing support. Treasury and marketing should partner to generate leads, nurture them via customer relationship management systems, and take advantage of both digital and print direct marketing tools.

Moreover, treasury management staff should be trained to close sales. Or, your bank can hire a dedicated sales staff to convert leads into customers.

Armed with these resources, treasury management can blossom into a significant revenue stream for financial institutions. However, to get such resources you first need to prove treasury management’s value.

How to advocate for treasury management

The more support treasury management gets from your financial institution, the easier it will be to grow treasury services, improve revenue and generate greater value for your bank. That’s why you need to advocate for treasury management.

Communicate KPIs

Communicating KPI metrics is the most powerful way to advocate for leadership buy-in, bank-wide collaboration and increased resource allocation. Start by tracking key performance indicators over time, then follow these communication tips:

• Keep it simple: Don’t inundate leadership with data overload; rather, select the most important KPIs to showcase at board meetings. What is the bottom line? How much revenue does treasury generate? How many new customers? How much fee-based income?
• Show, don’t tell: Graphics make it easy to visually communicate treasury management’s value. While there’s no doubt banking leaders understand numbers, graphic representations are simple to digest at a glance — and exciting to behold
• Forecast: It’s one thing to show leaders treasury management’s current value; it’s another to show them how much more valuable it could be with proper resource allocation

Document and broadcast successes

Document wins with individual clients and share them anecdotally alongside business results. Encourage treasury staff to share success stories with staff members at all banking levels. Doing so will help your financial institution appreciate your group’s contributions.

Treasury management leadership should tell other banking leaders about their department’s successes. Work with commercial lending teams and other departments to change the perception of treasury management. Identify ways to align sales, product and other departments to help one another; where commercial lenders once sent clients to treasury, now treasury can send clients to commercial lenders.

The more support you can earn from all corners, the more likely you will be able to get the resources you need to succeed. 

What if you don’t have any success stories?

How can you prove value if you can’t get out of the back office, or if you don’t have the structure or resources needed to market, attract or retain clients?

Conduct your research. There are plenty of resources that explain treasury management’s emergence as a critical service necessary to compete in today’s financial environment. Many of them can be found here at Deluxe. You can also develop estimates and forecasts that illustrate the impact your group can have on your bank’s bottom line if granted the opportunity. You might need to start slow, and you might not get there as quickly as you’d like, but as successes trickle in bank leadership should be happy to allocate additional resources to treasury management for continued growth.

This might also be time to consider partnering with a Fintech company that can help you make your case to bank leadership. Experienced providers already know and believe in your potential, and they can help you articulate it to key stakeholders.

The role of treasury management is rapidly transforming, and financial institutions that embrace its evolution gain an immediate competitive advantage. Define what success means for your bank’s treasury department, then develop a plan to advocate for the resources you need to succeed.

The information provided in this blog does not, and is not intended to, constitute legal or financial advice.