FinTechAutomationEnhancing treasury through digital transformation

Enhancing treasury through digital transformation

How can digital treasury transformation deliver benefits to an organization and help treasurers deal with the changing financial landscape? We share some of the thoughts from the Q&A session at Kyriba Live 2019 on the subject.

What’s the impact of the cloud on the treasury and finance profession?

Jim O’Connor, Global Finance & GBS Advisory Practice Leader, The Hackett Group: “When I think about the cloud and its impact on treasury, there’s are lots of gaps in today’s systems. There are gaps in ERPs and Treasury Management Systems (TMS). I saw a stat that said 50% of treasurers are using Excel for many processes. If you can use cloud to overlay that, you can start to integrate across the treasury function, including cash forecasting. Instead of getting busy, you can start getting a better picture of an organization’s position.”

Rue Jenkins, Former AVP & Treasurer, Costco Wholesale: “From a Costco perspective, the cloud is a huge move forward. Previously, we had two different versions of a TMS before moving to our current cloud-based version. One, it produced it an alliance on It and resources. With an installed version, IT resources are tight, so it was difficult to get the internal support needed to keep a system like that up-to-date.

“Another thing that it allows us to do is roll out a TMS worldwide. Each of the 10 countries we operate in has its own treasury function – so you have 10 different ways of doing data capture and banking relationships and so on. One cloud-based platform allowed us to bring everything together.

“Third, it gave us the platform to pull together the global cash position. We now know where all of the bank accounts are and can produce a cash position on a daily basis. The interesting part of that is if you think about it from a US perspective, given the geographic spread of Costco, the daily cash position now begins in Asia, moves through to Europe and then onto the US, where it ends. It’s a different way of thinking and gives you a different perspective.

“Once you know where the cash is you can begin to build and leverage banking relationships and from that point start to look at centralizing payments. The doors that are opened by the cloud and the opportunities it creates are huge.”

Is there a reluctance on the part of treasury and finance to move to the cloud?

Kevin Permenter, Senior Research Analyst, Enterprise Applications, IDC: “There’s a problem with perception. Go back five or 10 years and the belief was that data security or fraud protection wouldn’t be as effective. People believed data would be vulnerable, so there was reticence on the part of companies to adopt cloud.

“However, in the last few years, as new security initiatives have been employed, handing the job of data security over to a vendor with far more resources is becoming increasingly popular. It becomes the vendor’s responsibility to keep up with new security threats and cyber-attacks, and they can do it far better than any individual company.”

When you think about digital transformation in finance, which areas and jobs do you see moving towards RPA, machine learning and AI to free up time for treasurers?

Permenter: “A lot of digital transformation is happening in some of the related functions such as AR and AP. This is feeding into treasury and providing an incredible amount of visibility, which is turbocharging the ability to find out where your money is. If you can do that faster and more easily you have a better understanding of your global cash position. When you know where your money is right now you can make decisions about moving it into or out of markets. You can be more aggressive. If you’re confident in your cash flow you can perhaps take more risk.

O’Connor: “Unsurprisingly, RPA is the most common technology being used by finance departments to transform their delivery models. AI is less common, but it is gaining momentum. Within treasury we’re seeing lots of technology being applied around general accounting, analysis and planning.

“There’s a mass of opportunities for treasurers to benefit from digital transformation, although it’s still early days. Those that are utilizing technology fully are really doing great things around cash forecasting and working capitals.

Jenkins: “When you’re dealing with millions of sales transactions every day on some form of ‘plastic’, the odds are something will go wrong. The question is can you identify what went wrong? And if you can, how will you resolve the issue? As a treasury department, you need to have problems flagged to you, and then be able to delve into the data sets to identify the problem, whether it’s a network failure or whatever. Technology really becomes useful when it can spot problems before they happen – for example, where there are anomalies in a certain geographic area. Speed of fix is crucial.

“AI and machine learning can monitor and analyze data far faster and more effectively than humans – and that’s where it will prove its worth over the coming years. Really getting a handle on data management and feeding that information into your treasury management system will make a difference.

“From my perspective – which is retail – in any type of business where you are accepting payments, the way these payments take place will change in the future. The traditional cash or card model will change. You only have to look at Amazon Go, where there are no lines and no checkout. How could that apply to us? How quickly can you get somebody in and out? The key is how quickly you can turn a parking space. Making payment in a more efficient manner is key to this, but how are you going to handle the payment side in treasury? That’s the transformation that’s on the horizon and if you’re not thinking about it, you’ll receive whatever someone else puts in place.”

What steps should treasury take to overcome the problems of legacy IT?

O’Connor: “If you’re an extremely complex organization, legacy systems can be a valid reason for having your transformation held back. But it doesn’t mean you can keep your head in the sand. I think you need to ask what’s working and what’s not? What are you trying to improve with technology? What’s the input that I need? I therefore encourage people to step back and take a look before they get too caught up.

“The great thing with digital transformation is that it doesn’t have to be a fixed three-year initiative. It’s ongoing. So, start with what’s going to work, pick something that’s suitable and pick something that’s quick and you’ll kickstart your digital transformation.”

Permenter: “I think you’ve got to start internally. Start with what’s in front of you. Document places where inefficiencies with your legacy system have led to issues.”

Jenkins: “If you want cash visibility around the world, that becomes the first thing you look at. How you go about achieving it becomes your process.”

What are the skillsets needed to be successful in a digital treasury?

O’Connor: “It’s about having the data and technology savviness to succeed in the digital world. Analytic modelling is helpful, as is storytelling or problem solving. Finding time to hone these skills is going to be critical moving forward.”

Jenkins: “Data and system skills will be required. When were recruiting we were looking for somebody who could handle data and understand transactions and then apply analytic skills to build a process. Visualization and computer skills are also required, as is the ability to understand how systems can interoperate, because in treasury you’re dealing with the TMS, bank platforms, payment platforms and so on – and they all need to integrate.”

Permenter: “One thing I would like to add is that as AI and machine learning become embedded in treasury management systems, you’ll be face with the future where you manage both humans and AI algorithms so that systems can keep learning. Going forward, treasurers will need to therefore understand what will happen with algorithms, which means coding skills will be required.”

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