Treasury Outsourcing

Companies seek to outsource their Treasury because it is cost effective, easier and someone else deals with all the technology requirements.

Outsourcing of an integral part of the (operational) treasury process is now customised and modularised to meet specific requirements, the best examples being:

  • A complete treasury solution: the provision of front, back and middle office and a Cloud SaaS1 technology solution to meet a company’s specific needs.
  • Back and middle office services: where the company’s in-house treasury runs its own front office in-house, while using the outsourced service provider’s treasury Cloud SaaS1 technology infrastructure and for treasury back and middle office services.
  • Outsourcing of special Treasury related services.

Special treasury related services are activities that operate on a standalone basis, such as inter-company netting and inter-company administration, but also liquidity management, cash flow forecasting, cash pooling and risk centralisation can take part of an special Treasury related service that can be outsourced.

According to market experience a multilateral netting system can for instance save between 0,1% and 0,4% on their gross inter-company payments from operating a multilateral netting structure. Netting easily lends itself to outsourcing, particularly where internal resources are limited and/or stretched due to for instance a reorganisation.

Inter-company loan administration also lends itself easily to outsourcing, particularly where the company has more complicated loan structures arranged from multiple tax efficient countries.

Why do companies choose managed treasury on an outsourced basis:

  • Cost: installing a cost-effective professional treasury with all necessary systems can be difficult. As many companies cannot justify the level of resources required to provide a best practice treasury control environment.
  • Technology: outsourcing avoids the expensive investment in treasury technology and infrastructure. There is also a significant cost and effort required in retaining the technology resource expertise to maintain and operate the technology platform. Although a company invested in a TMS, outsourcing is a real alternative for a company with a technology need or with legacy systems.
  • Resources: for certain types and sizes of companies, attracting and retaining expert professional staff can be costly and problematic, and a back and middle office service can work in this circumstance.
  • Control: for companies where there are control gaps, outsourcing part of the process such as the back office, immediately contributes to having a sound corporate control framework.
  • Set-up: in a situation where there is a need to establish treasury capability quickly, for example in the case of a merger or divestment, outsourcing lends itself to a quick implementation timeframe since the technology infrastructure and resources are already in place.

Experience tells us that average savings can be generated of 0,25% of Gross Turnover. With an ROI of more than 100%, Treasury Outsourcing is generating cash and EBIT.

1 Cloud SaaS can be installed on an internal or external cloud, according to the wishes of the company.