Corporate treasuries

Corporate Treasuries: The Need To Relook For Investment Opportunities In Companies

Corporate treasuries miss out on investment opportunities using their company assets that have the potential to be a game-changer. Read to know more to turn the tables.

The treasuries of large private corporations must be proactive and rethink their investment strategies – a trick that they can learn from the Indian government who is taking constructive measures to tackle issues like seamless payments for SMEs and creating investment options out of the payments.

Companies striving to better their investment options and profitability need to look deep into their assets and figure out ways to create possible investment options through the invoices without disrupting the roadmap of their strategies.

By owning the responsibility of taking care of their vendor companies, corporate treasuries can play a vital role in preventing the besetting of SMEs and realise the investment option through their early payments.

Analysing The Missed Opportunity

A visible lapse on behalf of corporate treasuries is allowing their supply chain to look for other financial means of settling the dues like banks. On the hindsight, it creates an imbalance in the supply chain with SMEs cash-starved and slowing down the business.

The uncertainties prevailing in the current payment cycles have strained the relationships between SMEs and the corporations. Switching to new financial services by vendors is no doubt a better idea but it comes with its drawbacks and limitations.

Despite the thriving markets, the lack of coordination of dues doubles the complexity with the existing varying payment cycles. Prolonging the business relationship with their vendor ecosystem is affected following constrained liquidity of cash.

The Rescue Act By Government

The budget 2020 by the FM Nirmala Seetharaman introduced TReDs, an online trading platform for investors to bring them on the same page. The move was to ease the burden on investors for fast single-point approval.

TReDs has also been used for a dual purpose by the government which has gone a step ahead by directing its top companies to get onboard their entire network of vendors on to the TReDs to prevent the clogging of invoices due to the long payment cycle. The aim is to unclog payments or trade receivables obstructing the funding for small businesses.

Since it’s a directive from the government it is bound to fix the issue whereas the private enterprises dealing with multiple vendors do not have a transparent early payment system in place.

Looking Through The Investor Angle

CFOs handling the treasuries of large corporations are embroiled in clearing the dues of vendors and neglect the possibilities of converting their surplus funds into investments. By harnessing the opportunity of retaining the vendors within the treasury’s purview can help in being equipped with an early payment solution while enterprises can divert their funds and focus on profitable investment options. 

A surplus fund only means:

  • Clearing debts instantly
  • Investing the cash surplus

The above possibilities can be achieved if the corporate treasuries focus on identifying, realising and utilising the company’s assets to the fullest.

Enterprise’s Trust With Their Vendors

The government is brimming with financial solutions for early payments but that hasn’t taken off as the crisis still persists with uncertainties looming large. Accessibility and sanctioning of loans along with overdraft facilities come with a lot of clauses and funds aren’t disbursed immediately.

Corporate treasuries, on the other hand, can contribute to reducing the tension by attracting the vendors into their payment ecosystem and develop a cordial relationship with them. This would lead to a healthy economy and diversification of portfolio for companies.

Bottomline

Corporate treasuries have a huge responsibility in channelling and using their funds judiciously as they shoulder the entire financial burden of the company. Taking ownership of the early payments for vendors is a great way to realise the potentiality of the company’s assets. In short, the idea is to create an investment opening with the company’s assets and maintain an uninterrupted supply chain with vendor retention and resolve the cash flow crisis.