Middle-market Treasury Requirements Expand with Increased Global Responsibility
Today’s treasury departments continue to evolve to meet new challenges and demands in our current business environment. This has meant a significant expansion of responsibilities and the adoption of a more strategic and advisory role within the enterprise, particularly amongst the middle-market companies where treasury has traditionally been managed via spreadsheets.
Because of these pressures, there has been some progress made by the treasury departments of many of these companies, such as the automation of certain manual processes. Naturally, the migration to technology has led to streamlined operations and significant cost savings. But some middle-market companies still have increasing technology requirements, as they look to reduce their reliance on spreadsheets, minimise manual processes, and improve workflow and automation. For example, many are not taking advantage of payment factories and in-house banking technologies, and most still struggle with disparate systems that cannot provide one clear, actionable view of operations and cash flow.
For this reason, many treasury departments are looking to centralise their operations to become more efficient in the face of these new, raised expectations. Centralisation has also facilitated access to information through one hub in real time. This single snapshot view of real-time information allows treasurers to provide a strategic vision for the company, resulting in better liquidity management, improved investment and borrowing decisions, and an impact on a business’ bottom line.
Yet, middle-market companies experiencing these shifts in the business landscape are finding that the technology investment of time and upfront licensing costs preclude them from migrating to a centralised, single view system.
The continuation of the application service provider (ASP) movement into the treasury space is making it easier for middle-market companies to modernise and take advantage of new and efficient technologies for automation and centralisation.
However, due to the high demand for more sophistication in the middle-market solutions, ASP systems are evolving and offering more than a simple data repository for basic cash management. What we are seeing is a tiered approach to ASP delivery, offering basic to more complex functionality. ‘Treasury-on-demand’ allows customers to consume treasury solutions based on the level of requirement, meaning a treasury can subscribe to a basic level and then simply ‘turn on’ additional functionality as its requirements deepen.
Treasury-on-demand really leverages the software-as-a-service (SaaS) model, whereby a company, regardless of its size, can implement powerful treasury management software that embodies all of the advantages of enterprise-wide integration cheaply, quickly and with less resources and IT support. This is why the SaaS model provides a good solution for middle-market companies and will drive the continued adoption of treasury technology through the sector. This model also grows as the company grows, so as a middle-market company grows larger and s geographically, the technology strategy allows them to simply expand their usage as time moves forward.
Treasury management software launched through an ASP delivery and ‘on demand’ methodology is global and immediately available through the Internet. It facilitates users from multiple locations throughout the organisation and gives them access to consistent data in real time. By relying on the vendor to take responsibility for the management of the solution deployment, companies are empowered to use their time for more goal-driven initiatives, staying focused on business needs without becoming involved with the technical details to achieve them.
Treasury-on-demand allows middle-market treasurers to deploy best-of-breed treasury workstations without the upfront investment of traditional licensing. More importantly, it inherently offers a migration path, or a protection against investing in old technology.
As daily processes, such as bank reconciliation, will become automated and exception-based, a significant amount of the daily workflow, including connectivity to banks, market rate providers and enterprise resource planning (ERP) systems, can be scheduled allowing treasury staff to focus on value-added tasks.
Having a central database eliminates the complexity of technology and the transferring of data among systems. These solutions allow for a reduction in administrative workload with automated data capture and processing functionality. This gives treasury departments the ability to meet the increased demands placed on them, while also allowing them to do more with less, which is particularly important in the current economic climate.
Deploying treasury-on-demand will give cash managers the ability to perform intra-day reconciliation and forecasting, enabling them to make better informed decisions regarding funding requirements. Daily cash worksheets display current liquidity positions for different pools and groups of accounts or by entity and bank. Data entered or imported can be mapped to user-defined categories, allowing treasurers to easily monitor the forecast amount versus the actual reported amount. Forecasting and ‘what-if’ scenarios are easy to perform on request and support better business decisions within an organisation. This gives treasurers the ability to use the information to fulfil their expanded roles and provide strategic direction to the enterprise.
As requirements deepen, the company may opt to consume additional components to include support for foreign exchange (FX), in-house banking, money markets and other more intricate transactions. Information can be delivered with a consolidated view of the exposures in all markets. Because everyone is using a common, centralised system, this information will be displayed with consistency throughout the enterprise. This real-time access to positions can help treasurers make timely and informed decisions.
Another advantage that middle-market companies will be able to enjoy thanks to more accessible treasury workstations is connectivity to banks and market rate providers and other third parties, including ERP and accounting systems.
Deploying a treasury software solution in-house may be the right way to go for some companies, while other companies’ IT policies may outright require it. The ASP model coupled with the ability to ‘turn on’ features over time should be considered if up-front costs and lack of IT support make in-house deployments prohibitive.
With ASP models, there are generally no up-front fees for hardware purchases. In addition, the service provider serves as a single point of contact for deployment, implementation and all IT support and application management requirements. This reduces the need for organisations to increase internal IT personnel in order to support new services. And it means expending less of the existing IT staff on routine system upkeep, enabling them to remain focused on activities that better support core business functions. When it comes to system improvements and upgrades to the software, they are easily deployed and applied by the service provider when available without disruption to operations.
The changing landscape of today’s business environment, as well as the current economic cycle, has given treasurers and cash managers an expanded role and has put more pressure on them to improve liquidity management. Their decisions and strategies are impacting the bottom line. To meet these raised expectations, a centralised treasury system with automated processes is necessary. For some middle-market companies, the cost and IT staff commitment have been hurdles to deploying these solutions. But they are just as important to these companies as they are to large corporations, and their need continues to build.
As we’ve seen in other industries, the Internet levels the playing field. Launching treasury management tools through an ASP model allows middle-market companies to overcome capital and IT-related hurdles, providing access to the same solutions that large corporations are using. This gives them centralised operations, automated processes and better cash management. Streamlined operations and a single view of real-time information puts treasurers and cash managers in a position to impact the bottom line and provide the strategic vision that will guide organisations through shifting business environments and down economic cycles.