Cash & Liquidity ManagementCash ManagementCash ForecastingNew Angle on Cash Position Management

New Angle on Cash Position Management

Before you can optimize the use of your cash, you have to know how much you have. Obvious though this may be, it is still something that many corporates struggle to achieve. Even on a domestic basis, organizations with multiple bank relationships can find this translates into multiple rounds of copying, pasting and re-formatting. Take that to a global level, with multiple currencies and banks distributed across numerous time zones, and it becomes incredibly laborious.

It is also a burden that usually falls disproportionately upon the treasuries of mid-sized and smaller corporates. For the largest multinationals, which can justify the cost of sophisticated treasury workstations, collating the necessary information is relatively straightforward. Those lacking this sort of technological edge instead find themselves having to translate and consolidate information from multiple data formats – a task that can take hours and is particularly unwelcome in the often lightly staffed treasury of today.

Consolidating the Task and not Just Data

Apart from the sheer effort required, an additional irony is that so many treasurers in this position are in effect re-inventing the same wheel. Many of them will be dealing with the same banks and converting their multiple data streams into the same standard spreadsheet, accounting system or ERP formats. A logical alternative to this unproductive replication of effort is to move the workload back up the financial supply chain to a bank. It is not unreasonable to assume that if a corporate is aggregating funds with a particular bank, then that bank should be capable of providing it with this sort of cash position consolidation service.

Under this model, rather than multiple treasuries undertaking the same or similar scripting and translation, a bank (which will only have to write one translation routine per third party bank) undertakes it on their behalf. This is not the same as some of the existing ad hoc services where a bank passes on third party bank position information to the client, often truncating critical data in the process.

Instead, the objective of such a service is to provide the end user with a reliable global view of their cash by polling third party banks automatically (with clients’ authorization) for the necessary information and then translating and consolidating it into a single visual interface. The consolidated data could also be made available in a variety of file formats as required by the client.

Obviously, the translation interfaces the primary bank is prepared to write will be directly proportionate to the widespread usage of the third party banks concerned. In the case of small third party banks that are used by a minority of the primary bank’s clients, it will be hard to justify the programming cost. However, such banks are likely to represent only a fraction of clients’ workload in consolidating their cash positions.

A bank-centralized model for aggregating cash position information can be beneficial in terms of time and cost savings. However, it must be acknowledged that it is to some extent dependent upon the quality and timeliness of the data provided by the third party banks. If their reporting systems are down, no amount of polling on the part of the primary bank’s aggregation service will produce the necessary data.

Technology Breeds Compliance and Resilience

As already mentioned, traditional methods for aggregating cash position information (for those without access to a locally installed treasury workstation) have been largely manual and/or homespun. Delivering the same data via a bank-operated ASP (application service provider) model to a browser connection with security features eases this burden, but also offers some additional benefits. One advantage is that the use of web technology means that the reporting interface is available anywhere with Internet access, thus providing operational redundancy should the corporate treasury be inaccessible for any reason.

A further potential advantage is its value as a compliance tool. A reporting service of this nature offered by a trusted third party, such as a bank, could also incorporate multi-level user authority and a full audit trail. Not only could the start/finish of user sessions be recorded, but also all activities undertaken during those sessions. For example, a suitably authorized user might observe a particular cash surplus and decide to reinvest it elsewhere. The details of any resulting wire transfer could be tracked and recorded, including any additional authorizations necessary. A detailed and time-stamped audit log of this nature is obviously of value with regard to Sarbanes-Oxley or other compliance procedures.

Accessibility

The other major benefit attached to this web-based model is reduced cost, which in turn allows wider accessibility. Instead of having to pay perhaps $500,000 for a dedicated global treasury workstation, corporations of all sizes could have access to consolidated cash information for a fraction of that cost.

Furthermore, by creating customized ‘templates’ users could automate certain actions (e.g. sweeping or funding) in response to specific credit/debit balances. If the service was linked to their ERP/accounting system, it could access data on known liabilities (such as payroll data) and thereby also be used for cash forecasting.

Conclusion

Although a cash position tool of the type outlined above could save treasuries time and unprofitable manual effort, this is only part of the picture. If such a tool can also be connected to other bank or corporate systems then it ultimately becomes a global virtual treasury workstation, but one with a price tag accessible to corporations of all sizes.

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