Building a Strong Foundation for Treasury Management Success

"The best way to predict the future is to create it."

This timely quote could apply to many aspects of banking but holds especially true for community bankers trying to establish themselves as first choice treasury management providers to their business customers.

Why is this strategy important today?

Rising interest rates create challenges for community bankers in terms of retaining low-cost core deposits – which are critical to profitable lending. Providing treasury management services can retain and grow commercial deposits of small and medium-sized business customers.

The treasury management opportunity

Deposit priorities are shifting, according to a Cornerstone Advisors survey conducted in the first quarter of 2024 that involved 359 community-based financial institution executives. They found 64% of banks and 53% of credit unions focus on small business deposits. This research highlights the growing importance of treasury services in driving deposit growth across different segments. 

A recent article in Bank Director reinforces this trend, “Treasury services have become indispensable for businesses striving to maintain financial stability and growth. As economic trends evolve, the strategic value of these services has never been clearer.”

The article goes on to point out that key components of treasury management include:

• Efficiently managing the inflow and outflow of cash.
• Ensuring the organization has enough liquidity to meet short-term obligations.
• Identifying and mitigating financial risks, such as currency fluctuations and interest rate changes.
• Making informed investment decisions to optimize returns on surplus funds.

Creating a foundation for success

Community banks must anticipate the treasury management needs of small and mid-sized businesses before these entities inquire about services. If your bank has had to turn down opportunities for treasury management services, then you may never get a second chance on that business-- and possibly lose a commercial lending relationship in the process.

The key to being able to respond to such needs is for community bankers to create a foundation for sustainable treasury management success. They must:

Identify the high potential segments in their customer base for treasury service that should include municipalities, homeowners’ associations, (HOAs), title companies, and professional services firms (medical, legal, and accounting). This can be accomplished with increasingly sophisticated analytics tools working in concert with a bank’s CRM application. Data available from outside sources can add greater insight and help to identify prospects beyond existing customers.

Maintain high service levels to keep their service edge; while delivering treasury solutions, community bankers should take the following steps:

• Gain any insight available on customer habits. Survey often and learn the characteristics of your customers’ industries.
• Don’t rely on a one-size-fits-all approach for all business customers. Not all customer relationships are of equal value.
• Provide relevant information at the right time. Understand requirements for real-time and supplemental relevant information.  
• Recognize individual business users’ digital preferences.

 Identify customer personas and apply sales trained staff. Community bankers need to think from the perspective of their customers’ CFOs. Train customer-facing staff to speak the language of these individuals. Have the treasury management professionals in your institution attend industry conferences to understand client ecosystems, cash management needs, platforms they use to run their business.

Beyond conference attendance, look to share product strategies with key customers in treasury management group forums and executive one-on-one sessions.

 Anticipate the content with customers’ treasury management RFPs. Understand likely requests in the request for proposals (RFPs) so your bank can have the services ready to go when the business comes available. Community banks should ensure they have robust solutions in the areas of:

• • ACH, wire, positive pay, cash management solutions
  • ERP platform connectivity, support for vendor specific file formats
  • Integrated payables and receivables
  • Cash positioning and forecasting solutions

Ensure the data analytics are in place across these treasury management solutions to confirm institutions are maximizing the value to customers and their bank. Beyond applying data analytics in customer identification, apply this rigor to monitoring customer satisfaction, product usage and relationship engagement. Use this intelligence to help apply the time of valuable treasury management staff.

Remember the community bank relationship advantage

Community banks excel in local decision-making, which allows for quicker and more flexible responses to the needs of small businesses.

This local focus can enable community banks to build strong treasury management relationships with their clients, understanding their goals and challenges on a deeper level. With the proper foundation, the result is a more supportive and responsive banking experience that can adapt to the dynamic needs of local businesses.