What treasury-related trends are you seeing within SAP Ariba?
“It’s a very interesting question for us because the treasury audience has never been a direct target audience for us, or at least not at the level that gets their attention. But, we do have value that we can bring to the treasurer. So, we like to talk to the treasurer as part of an overall sales cycle to show them what value we can bring.
“What we’re doing that’s related to Treasury are things like dynamic discounting, which can increase your return on cash. Pay a supplier early, you get a 1% discount, that act works out to like 16% APR, which is heck of a lot better than the half a percent you’re getting from a Libor fund or whatever.
“The other thing is the ability, through procurement and early payment options to your suppliers to affect your DPO. You can improve your working capital by extending your terms, not hurting your supply chain, but giving your suppliers the opportunity to get paid early through third party financing, or supply chain financing. Or through a card. The ways that we can bring value to the treasurer right now are really the ability to impact their return on cash, their working capital, and then, to some degree, to help them manage their B2B payments.
“B2B payments are a little different to consumer payments. There’s a lot of information that needs to go with the payment. And there’s no really good way of doing that right now. The traditional electronic payment rails are limited. ACH is limited to 94 characters, the EFT in Europe is also restricted in terms of characters, but you could potentially have 100 invoices being paid in one payment, and you need to know what’s going on there. So, what we do uniquely, having the network and all the transactional volume, is we can marry that to the payment in a way that makes it very visible and very easy for AP and the treasurers to understand what’s being paid and applying it and all that kind of stuff. So that’s really where we bring the value to the treasure right now.
“We’re adding p card initiatives – our recent Amex announcement is a good example – and we recently announced a partnership with Barclaycard, which is a kind of a hybrid, using EFT rails to do card-like slightly early payment, charging basis points and giving a rebate to the buyer. And often it’s treasury that benefits from that rebate.”
One comment you made early on is that you like to talk to and about treasury as part of the overall, holistic view of an organisation’s payments and finance approach. Does that reflect the growing strategic influence of treasury departments?
“I think it does. In my opinion, treasury departments have grown in influence since 2008/09 when they were the ones that kept companies afloat, with cash flow and working capital! Bringing them in is all about getting their voice procurement. What you’re wanting to do for operational efficiency and things like that can have a great impact on a company’s financial statements. That really adds value to the overall and raises the strategic level of the treasury.”
A lot is always made about the need and desire for treasurers to have clear lines of communication and a stronger link with CFOs. Do you think the same should apply to CPOs?
“I do because the CPO is the one that controls DPO and the terms that they negotiate with suppliers. That’s one of the three legs of working capital and the cash conversion cycle, so they absolutely should. After the crisis in 2008/09, treasury was getting a table there. I don’t know if that trend has faded back, but I think they absolutely should have close relationships with CPOs.”
Another point you mentioned earlier was working capital. Given there’s a lot of uncertainty in the world at the moment with Brexit, possible recessions and so on, is working capital more important than, than ever?
“I think so. The interesting thing about it, in my mind, is that we’re still at a place of high cash balances in in corporations. I think, I hope, that it’s still early enough after the crash of 2008/09 because it will still be fresh in people’s minds. It diminishes when it’s not a crisis moment, but I think the people who earned their battle scars last time around are still here. People realize that you can have a great business model and whatnot, but if you’re not managing your working capital and cash flow it’ll end right there.”
Do you think there’s a need for organizations to have more integrated technology platforms and solutions across the whole finance function?
“Yes, I do. Across the finance function, and, frankly, the procurement function, because the procurement function ends with payment, so it ends with finance. It affects the actual cash going out and affects the timing and working capital. So yes, I absolutely see a need, which is why I think a platform like SAP is a really good one as it brings to the table everything needed for treasury. Some companies are doing it. Many have not. Treasury is still struggling with treasury workstations right now in all too many instances!”
How do you see Ariba’s relationship with treasury developing?
“I actually see it starting to develop soon. We we’ve had some reorganizations in our payment side of things at Ariba. Recently, because of that, Deepak Krishnamurthy, the Chief Strategy Officer for SAP who reports to Bill McDermott, has taken over the payables business that’s based in SAP Ariba and is doing so because he sees the value in payments and payables across SAP. Given that, who he is, and where he sits in the organization, I think we’re going to start nailing some of these things we’ve talked about that are valuable to treasurers. Outside of Ariba, SAP has some areas that have a decent relationship with treasurers, too.
“So, yes, I do see that growing, primarily because we’re going to leverage the assets of the broader SAP, versus just trying to do it ourselves. How you talk to a treasury audience is very different to how you talk to procurement. Our sales DNA is procurement, so we’ve always had a little bit of a hard time really getting into that market, because what we offer is valuable, but it’s a slice of what the treasurer is concerned about. With SAP now, I think that we’re going to start making that slice bigger.”
Do you think SAP would you consider expanding through acquisition?
“That’s always on the table. I can’t think of one that we’re that we’re looking at the moment, but particularly with a guy like Deepak, I would say that that’s definitely a possibility. The B2B payments space and treasury is interesting, that’s for sure.”