According to the latest edition of the ‘Journeys to Treasury’ report, commissioned by the European Association of Corporate Treasurers (EACT) in collaboration with PwC, BNP Paribas and SAP, treasury digitisation remains a major priority for corporate treasurers, with 43% citing it as a key objective this year, topped only by cashflow forecasting (63%).
The report notes that digitisation is now at the heart of treasury optimisation with corporate treasurers exploring opportunities for data analytics (54 percent), robotic process automation (40 percent) and the use of APIs (36%) to enhance both the quality and access of their data.
The report notes that improved data and analytics will help treasury departments demonstrate their value to the wider company and hence expand their influence over factors contributing to both liquidity and risk. It also suggests that treasurers require complete visibility into all relevant data when undertaking a working capital assessment, liquidity analysis, bank fee evaluation or business case for technology investment.
As such, treasurers are still looking for better ways to exchange data and transactions, according to the research, and manage liquidity in real time.
As digital business models evolve, and expectations for the immediate fulfilment of goods and services increase, the need for real-time or just-in-time treasury processes and decision-making continues to grow.
Meanwhile, JP Morgan reports that for many corporates the pandemic made the adoption of digital tools a necessity, with more treasurers turning to their banks for added support.
“Companies with better control of working capital through their treasury set-ups reaped benefits during the [Covid-19] crisis, such as greater flexibility over raising capital.” says Lia Cao, managing director – global co-head of corporate and e-commerce sales and solutions at JP Morgan.
“It has a tremendous impact on working capital if you release cash trapped in markets – maybe you don’t have to issue expensive debt,” says Cao. “That emphasises the importance and real tangible benefits of data visibility.”
She also notes that corporates have started to collaborate more closely with their bank partners since the pandemic, which has led to a “huge spike in API adoption” that will help create valuable data for corporates.
“Eighteen months ago we were pushing the expansion of API capacity,” she says. “Now it is a two-way communication where there is a pull from corporates.”
At global logistics company GXO Logistics, SVP treasurer Zeeshan Naqvi says there has been significant progress with regards to automating and digitising various treasury operations within the organisation. However, he admits there is still room for improvement in digitising the company’s cash forecasting and the management of intercompany flows.
“Cash forecasting is challenged by invoicing and collections processes, customer payment behaviour and seasonality,” he says.
“Timely and accurate settlement of intercompany flows across various currencies with sometimes disparate Enterprise Resource Planning (ERP) systems creates challenges that have traditionally required sizable manual efforts.”
He adds that there are several fintech companies with experience in robotics process automation and artificial intelligence (AI) that can help treasuries digitise these critical areas.
Automating cash visibility
Naqvi explains that a well-implemented treasury workstation can automate cash visibility and reporting for a global corporate treasury team, and notes that any issues experienced in automating cash visibility are not typically related to getting transactional data from banks.
“More often than not, the hardest part of automating cash visibility is the amount of effort and detail required to implement the treasury workstation correctly,” he explains.
“In addition, post-implementation maintenance is critical for any global company. Automating cash visibility has been most successful for us when my team included super users of treasury workstations who knew the configuration and could provide maintenance. “
He adds that GXO has also experienced progress in automating risk management but this is not complete.
“There are still areas, such as fraud detection and consolidating financial risk exposure, where more development is needed,” he says.
Naqvi explains that the digitisation of a treasury department takes a great deal of coordination from both the finance and IT functions.
“In addition to support and development from the IT department, various finance departments such as technical accounting, controllership, tax and financial planning need to be engaged,” he says.
“Business operations teams also need to be involved to ensure we are successful. These cross-functional initiatives also require support from senior leadership.”
He adds that treasury teams are often part of global, cross-functional processes.
“We take data from various sources and create insights for business and leadership. Cash forecasting is a great example and that data comes from various sources,” he says. “In this process, treasury collates the data, analyses it and produces cash forecasts that are utilised by the business, not only for managing liquidity but to also make critical capital allocation decisions.
“Therefore, successfully digitising treasury processes requires input and active participation from multiple departments.”
External system vendors can also play a key role in the automation and digitisation process, according to Naqvi.
“External system vendors can be very helpful in integrating technologies,” he says. “Organisations are often a patchwork of systems, and data can be distributed across multiple ERP tools.
“Vendors who can aggregate data and interface it with a variety of systems are key to automating access to such data. External system vendors also have the implementation expertise from delivering solutions to similar enterprises.”
He concludes that a focus on staff training is also crucial to automation.
“Treasury teams need to continuously upgrade their skill set to understand and efficiently work with various new technologies. Training our teams or hiring individuals who are experienced with various IT systems is critical,” he says.
“Given that in-house IT departments have limited resources, it is more and more important for finance team members to be knowledgeable about various technology platforms. Investing in our people makes a critical difference when it comes to deploying successful automation.”