Cash & Liquidity ManagementCash ManagementCash ForecastingBuying guide: Treasury tech for a changed world

Buying guide: Treasury tech for a changed world

Digitalisation and automation of the treasury function will be key in helping the department manage the cash management of their company and for firms further along the digital journey, that has helped immensely.

“The current crisis is more of a ‘black swan’ event and different to 08-09 – we are seeing treasurers wanting a better idea on intraday liquidity usage and forecasting of cash and then looking to understand how this would be impacted under stress”, says Cindra Maharaj, Director for Baringa based in New York.

“This means technology now is more focused on seeing positions and P&L in real time. We don’t see the level of existing focus on these areas changing due to the pandemic but rather being re-enforced.”

Marcus Hughes, director of business development at Bottomline Technologies also believes coronavirus isn’t fueling any revolutionary changes but is propelling corporate adoption of existing technologies.

“Coronavirus has simply accelerated this migration to digital and it will continue to do so after we are released from lockdown. Above all, it’s accelerating the digitisation process and the importance of real time information, digital payments and invoicing. “

However, many businesses are still in their infancy when adopting more real-time technologies. Technologies that are key in allowing for better forecasting and cash management. Only 22 percent of businesses in the UK had access to real-time data, with a third of businesses indicating it took a week or more to track company wide spending, according to a survey conducted by Soldo and The Financial Director.

Like the technology treasurers depend on, the role of the treasury department has also been evolving beyond its traditional bookkeeping origins and Simon Shorthose, managing director for Northern Europe at Kyriba expects that one of the lasting consequences of this crisis may be the rise of a new role for corporate treasurers.

“The treasury department really has the opportunity to become strategic partner to the board, to the CFO rather than someone who does a bit of cash forecasting or a bit of FX placements etc. It’s a real opportunity. I think this crisis has really shown the importance of treasury and liquidity on a broader level.”

To achieve that, treasurers need to adopt more digital processes to better manage their broader liquidity requirements while stress testing.

Liquidity and cashflow management

One of the greatest challenges for treasurers and the department during the crisis was around cashflow and account visibility. Treasures were asked to complete reports and financial forecasts that normally took weeks or months in a matter of days.

In most cases, businesses used whatever processes they had in order to achieve better cash visibility. This ranged from manual processes that included spreadsheets to more automated and cloud-based systems that utilise SaaS offerings. Companies that have relied on more manual processes faced more challenges in compiling these reports.

“This is a twofold problem”, says Simon Gray, director at Baringa Partners.

“One is the process side, which in some cases in still quite manual and high-intensity [in terms of labour]. The second is functionally, where manual processes were more easily done in an office setting because of physical proximity and is now more difficult because of the remote working environment.”

While manual processing to achieve cash visibility has become more cumbersome given the new work environment, the need for it has never been greater says Tim Coates, head of blockchain and digital ecosystems at Synechron

“In the past, having that real time cash management capability was mostly for revenue optimization. Now real time cash management is becoming a more strategic service to the CEO.”

The cash problems that many businesses are facing is reflected in the latest Business Impact of Coronavirus Survey conducted by the ONS. 42 percent of businesses indicated they have less than six months of cash reserves, while nearly four out of five businesses having put staff on furlough using the Coronavirus Job Retention Scheme.

Coates says better and increased use of bank APIs will be key to accomplish cash visibility. “With cash flow management, in order to do that effectively, it requires real time API access to all the bank accounts that an organisation has. This could be 20 or 30 or even 200.

“The ability to get a real time view into all your banking relationships to have a full complete view of your cash flow management situation, that is the demand that’s particularly heightened right now. Treasurers are saying ‘I can’t make this analysis a once a day process it needs to be several times a day  to more efficiently view cash flow and predict future shortages.’”

Hughes echoes this sentiment adding that quick adoption of SWIFT and ISO 20022 will further enhance the treasury departments ability to oversee cashflow.

“[Treasurers] today would be best served by looking at SWIFT adoption. At the moment, it’s SWIFT connectivity for multi bank payments and cash management. APIs have a role to play as we move into the next few years. On top of this, liquidity forecasting is really in massive demand, along with things like cash concentration.”


Faster payments

While there is huge demand for liquidity and cash forecasting, conversely there is a slowdown on adopting faster corporate payments.

“Within the corporate environment, the technologies are there for faster moving payments, more visibility, more control. But in the current climate, people don’t necessarily want to pay faster”, says Shorthose.

“The main issues [on payments] is around security, control and cost. For faster payments, there is a lot of noise around it. But my personal view and what I am seeing from the business side is faster payments isn’t the answer to everything. It is more orientated towards the consumer or retail facing side.”

Faster payments may also have an adverse affect on liquidity. Gray says, “Some of the challenges faster payments have created is more inefficiently from a liquidity perspective. The funding requirements for faster payments have created a ‘hold’ on liquidity.”

He added from the perspective of corporate payment infrastructure, faster payments is a step in the right direction but with the emphasis on liquidity right now it is having a knock on effect when companies are closely watching their spend.


Remote working

Remote working has probably had the biggest impact a businesses’ day to day operations and the treasury department is not immune to this change. This has put a spotlight on one of the key tenants of cloud-capable solutions says Anand Chandra, senior director of capital markets at Synechron.

“[Prior to coronavirus], there were conversations where one of the offerings a vendor had for an end client were disrupted because they were not cloud solutions. The maintenance of an on-premise solution is a problem right now because of a lack of physical access to infrastructure. The majority of our clients, in last two years have created a cloud strategy if not entirely adopted it.”

The remote working environment has demonstrated the need for a remotely accessible solution but Shorthose says coronavirus is more an accelerator rather than a driver of this change.

“If you are running a legacy on premise TMS, you are probably not going to make that decision just because of coronavirus. It may have exposed things, and it probably makes someone realise problems like: we couldn’t restart the database, the IT team couldn’t access it and therefore I couldn’t do what I needed to do. Those are things that create a need to change a legacy system.”

He adds that treasurers looking at cloud should also note the difference between a cloud and a cloud plus SaaS solution.

“Having a cloud system is not the same as having a SaaS system. Cloud just means it’s hosted by someone else remotely. From a scalability point of view, having a SaaS system, which is one code, one system, which can be managed all around the world that enables people to work on a common system, because there’s only one code base at one point in time.”

New needs

The crisis and the new working environment of most corporate treasurers have also broken traditional barriers to change.

“There is a lot of openness and willingness to technologies like cloud, which previously corporates were very sceptical in terms of regulation, data, privacy and the ESG part of their strategy. But now they are taking more of a flexible approach, and the ways of working are definitely changing”, Anand says.

Bruce Laing, partner at Baringa says that the vulnerabilities between processes and controls in the treasury, liquidity and the settlement functions have been made more apparent and that the crisis provides an opportunity to brings these functions together. They also expect the increased use of third party solutions as treasurers look to increase automation and efficiency in their department.

Globally, scientists continue to warn that there remains a risk of a second wave of infections, but most businesses are now moving from a ‘react’ phase into a ‘recovery’ phase.

Cash visibility continues to remain the priority for treasures for the immediate future but coronavirus is already changing the way businesses handle both corporate and consumer payments.

Hughes believes that coronavirus has provided a huge boost in the transition towards digitalised payments. For example, in North America, he expects businesses to start moving away from paper invoicing and cheques.

“In North America, some treasures like to send cheques out and they expect to receive cheques and have processed and getting captured through lockbox. I think there is a shift and coronavirus will accelerate the movement away from that.

Maharaj agrees but also says that changes to the payment landscape need to be an industry led initiative.

“[Digital/electronic payments] have always been on the radar, to change some of the ‘plumbing’ of the financial system. It’s not going to be done on a bank by bank basis but will be done more holistically. I think what we’ll be seeing in the next few months, is a bit more of a push from industry leaders and regulators. I wouldn’t say I’m seeing firms move down this path right away, there needs to be a more industry-led effort.”


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