In 2011, gtnews reported research which showed that the estimated level of visibility of cash as a percentage of total cash within an organisation was typically 78%. This figure was reached after a prolonged effort by many treasury groups to centralise information reporting through a variety of channels including directly through their own banks, treasury system providers and third party information aggregators. Today, however, meaningfully improving the figure much beyond the 78% may be difficult due to a number of factors including the lack of SWIFT reporting capabilities in various countries and cost of integrating some of the smaller accounts.
While improving the level of cash visibility remains important, particularly as the trend of globalisation continues, the incremental return on increasing the level of visibility may not be as relevant compared to fine tuning cash forecasting and finding opportunities to unleash cash that could be stuck within the business cycle.
Next Step: Unlocking Cash
According to the recent Asia Corporate Treasury survey conducted by PricewaterhouseCoopers (PwC), 52% of Asian corporate treasurers were unsatisfied with their levels of cash flow forecasting and a further 32% were unsatisfied with their level of cash visibility. These findings suggest that cash visibility in different regions has not reached its optimal level and a deeper emphasis on cash forecasts is becoming even more important to the treasurer. In other words, it is what treasurers do with that cash visibility that really counts. The priority should actually be on enabling effective cash forecasting, which optimises liquidity as well as working capital management.
This is echoed in Standard Chartered’s survey of 100 local and large multinational corporate clients across Asia, Africa, Middle East, US and Europe. The top key treasury issues in treasury management revolved around collections and liquidity pain points. Data analytics, which includes improving cash visibility, ranked slightly lower.
A decline in the return on capital employed of globally listed companies over the last decade has been noted in recent EY and PWC reports. This is despite businesses taking an increased focus on balance sheets since the financial crisis in 2008.
The revised Payment Services Directive regulation, regarded as one of the most disruptive in Europe’s financial services sector, will begin to make an impact on January 13, 2018.
This year promises to further the regulatory compliance burden imposed on financial institutions. How are firms in the sector responding to the challenge?
Global trends, technology and the role of the treasurer in 2025 were hotly debated by treasurers at this year’s Treasury Leaders Summit in London. A focus on technology and automation was universal, others argued over the impact of macroeconomic and global trends on treasury.