Accounting Best Practices, Fifth Edition

11–26. Optimize the Organization of Treasury Operations

A large multinational company typically became large at least in part through acquisitions, which leaves it with a complex set of banking relationships and accounts, as well as a highly dispersed treasury management group that resides in a multitude of locations. This results in the inefficient use of cash, which in turn reduces interest income and does not allow a company to pay down the optimal amount of debt.

These problems can be mitigated by implementing regional treasury management centers, usually one per continent. By doing so, the treasurer can concentrate those treasury staff with the highest levels of expertise in the same locations, while also achieving a much higher level of control over the underlying cash pooling and foreign exchange transactions, not to mention better clerical tracking of any resulting intercompany loans. By concentrating activities into this smaller number of regional treasury centers, the treasurer can also more easily obtain online access to the overall status of cash flows for the entire company.

The price of this increased level of efficiency is a considerable amount of resistance by individual companies within the corporate conglomerate, since local controllers and chief financial officers will be reluctant to hand over the administration of their cash flows to a regional center that is outside of their control. Also, such a high level of cash management calls for centralized information ...