Complete Guide to Global Treasury and Cash Management

In this article, we explain global treasury management. Does your company handle foreign exchange well? Check out our “How to Eliminate Currency and Forex Challenges in Payables.”

Your company has a treasury function that may consist of the CFO, treasurers, and financial staff in various international locations or as a more centralized operation of global treasury services, which is the trend. The goal for multinational corporations is to optimize global cash flow management and working capital and make timely payments to valid suppliers and partners while experiencing less financial risk.

Learn how to effectively manage cash, mitigate risks, and optimize liquidity in an international business environment for streamlined global treasury management operations.

What is Global Treasury Management?

Global treasury management is the worldwide control of cash flow, financing, banking, and payments using foreign exchange conversion to different currencies in international countries, risk management, including fraud risk, strategic analysis, decision-making, and global regulatory compliance. 

The Role of Cash Management in Treasury

The global treasury cash management role is to generate reasonably accurate cash forecasts, have cash available when and where needed without holding significant idle balances, manage banking relationships, optimize interest earned, borrow money from financial institutions, participate in equity financing in capital markets, and minimize financing, interest rate, and transaction costs. 

The treasurer or CFO also establishes FX conversion and hedging policies for cross-border payments due at a later date.  

Domestic vs. Global Treasury Management

Domestic vs. global treasury management is the difference between financing and cash management in one currency vs. cash management that considers foreign currency risk, hedging, foreign exchange (FX) conversions, and a range of global regulations in domestic and international countries with different available payment methods and cash needs and varying degrees of fraud risk. 

10 Ways to Optimize Treasury Management on a Global Scale

Ten ways to optimize global treasury management are:

  1. Select the right treasury and global AP automation/FX software
  2. Determine the best level of centralization vs. decentralization of global treasury functions
  3. Reduce the need for foreign regional bank accounts
  4. Establish multilateral netting and bilateral netting programs
  5. Choose cost-effective payment methods
  6. Use cost-competitive exchange rates for global payments
  7. Hedge transactions
  8. Forecast cash flow needs 
  9. Establish cash controls for enterprise risk management
  10. Strategize and perform decision-support functions

1 – Select the Right Treasury and Global AP Automation/FX Software

To optimize treasury management globally, your company can use treasury software, which is specialized software that helps you perform global treasury operations functions as a treasury management system (TMS).

Global payments and AP automation software with added FX and hedging features give your company a consolidated and multi-entity view of payables and supplier payments to better manage working capital and cash liquidity, strengthen internal controls, control costs, and reduce fraud risk. 

2 – Determine the Best Level of Centralization vs. Decentralization of Global Treasury Functions

Every multinational corporation needs to decide which treasury functions can be centralized at the corporate treasury department level and which should be performed at the local level. 

3 – Reduce the Need for Foreign Regional Bank Accounts

With some global treasury solutions like Tipalti Multi-FX combined with Tipalti AP automation software, you can use software-based virtual currency accounts instead of needing a regional network of foreign banks to handle treasury management internationally by providing cash balances in local currencies for your foreign payments. 

4 – Establish Multilateral Netting and Bilateral Netting Programs

Multilateral netting between more than two companies and bilateral netting between two companies can be used to offset balances and the number of required transactions. In netting, accounts payable balances are offset against accounts receivable balances before payments are made. Netting is used for transactions between corporations and third-party companies and also for intercompany transactions. 

5 – Choose Cost-effective Payment Methods

Many companies rely too heavily on expensive international wire transfers (through the SWIFT system) for cross-border payments. Instead, use payment solutions that allow you to make payments effortlessly with a choice of available payment methods. Wire transfers are one of these payment methods you can use when justified by transaction size or business needs.

Other global payment process methods besides wire transfer are global ACH (such as SEPA payments in Europe by member countries), prepaid debit cards, and paper checks. Paper checks are the least desirable option because of potential fraud risks if checks are stolen. 

6 – Use Cost-competitive Exchange Rates for Global Payments

If exchange rates to make payments in alternative currencies (foreign currencies) aren’t competitive, you’ll spend too much on routine transactions. These costs can add up, so look for a payment platform offering live exchange rates that are cost-competitive. 

7 – Hedge Transactions

To manage currency volatility risk, your company can hedge transactions to lock in rates before payment or receipt of funds denominated in foreign currencies. Hedging is useful for planning cash flow.

8 – Forecast Cash Flow Needs

Your company needs visibility to effectively manage working capital and cash flow. Cash flow forecasts should be prepared at the business entity level and rolled up at the consolidated corporate level. 

9 – Establish Cash Controls for Enterprise Risk Management

A system of cash controls incorporates internal controls over cash to prevent misappropriation of funds and other forms of cash-related fraud. Cash controls are essential in the framework of enterprise risk management. The controller and treasurer have the responsibility to ensure cash controls are adequate. 

10 – Strategize and Perform Decision-support Functions

With automation systems, global treasury managers and treasury teams can shift their focus to more strategic treasury roles, including M&A-related and other business, financing, forecasting, and cash management advisory roles. 

How can your business improve global treasury management?

Download our white paper, How to Eliminate Currency and Forex Challenges in Payables,” to learn how your growing business can optimize global treasury management for AP. 

Use Tipalti AP automation software combined with its Multi-FX and Hedging products for better FX conversions and hedging for payments, reduced fraud risk and errors, and global regulatory and tax compliance.

How Automation Streamlines Global Treasury Management

Automation software streamlines global treasury management by providing solutions for invoice processing and global payments using cost-effective payment methods, with optional advanced foreign exchange and hedging features in different countries. AP automation software gives your company multi-entity and consolidated visibility in accounts payable for better cash forecasting in treasury management. 

Tipalti Finance Automation and FX Software Products

Tipalti provides AP automation software for global accounts payable and payments that can be combined with Tipalti’s advanced Multi-FX and FX Hedging software products. Tipalti also offers automation software products for Mass Payments, employee Expenses, and Procurement solutions.

Tipalti Multi-FX and AP Automation Software

The Multi-FX solution from Tipalti provides virtual currency accounts that will replace your need to establish a network of regional banks solely for making cross-border payments and payouts. You’ll be better able to minimize your cash balances needed when making payments to different foreign locations from a centralized source. You can automatically enable self-service execution of transfers within Tipalti instead of spending unnecessary time manually making bank conversions and bank transfers using multiple bank accounts. 

Tipalti provides your company with live foreign exchange rates for currency conversion at very competitive rates based on the $43B of Tipalti platform payments spend. Tipalti also gives you visibility through information reporting for your company’s foreign currency conversion status.

Tipalti AP automation software lets your company pay in 196 countries with 120 currencies using a choice of country-available payment methods. Tipalti’s advanced Multi-FX solution provides support for 30 currencies. 

As your global payments transmitter, Tipalti has money transmitter licenses (MTL) and operates as a money services business (MSB) registered with the U.S. Treasury. 

Tipalti FX Hedging Software

Tipalti FX Hedging lets you lock in foreign currency rates for transactions with later payment dates. You’ll be better able to perform forecasting of cash positions and mitigate foreign currency loss risks due to currency volatility. Tipalti FX Hedging lets you manage end-to-end global payables, FX conversion, and intercompany bank transfers.

Time Savings for Strategic Focus Shift

With AP automation software and real-time FX solutions, your treasurers and other finance team members don’t need to spend their valuable time making manual fund transfers through numerous banks. Instead, global treasury managers can shift their focus to more strategic treasury roles, including M&A-related and other business, financing,  forecasting, and cash management advisory roles.

Summing It Up

Global treasury management and treasury services can be streamlined and more centralized to achieve efficiency, liquidity management, cost reductions, and better enterprise risk management. Accounts payable management is one form of working capital management.  Your company can use global payables and FX payments management software solutions to position available cash balances to make global payments wherever needed and manage cash needs when payments are due.  

Payables automation software combined with optional FX and hedging features will help your company improve its treasury and cash management. To learn about holistic AP transformation as part of global treasury management, read “The Holy Grail of Accounts Payable.” 

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