Is Cash Management the Cure for What Ails Us?

Families, businesses and particularly government entities continue the valiant battle to overcome the debt epidemic traced back to the ‘easy money’ virus that was left unchecked by decades of fiscal ‘under-responsibility’. While scientists most often research cures for epidemics, it is the green-visored financial managers of US businesses that may have discovered the cure to our ongoing malaise. It does not involve shots, pills or universal precautions. The prescription for battle-weary chief financial officers (CFOs) today is a good dose of down-to-earth cash management practices wrapped in the latest technology.

Gone are the days of miracle cures, when a company’s financial executive could take for granted the ability to enhance the company’s margins on the back of float and interest income at rates we may not see again for years. Financial executives are finding that getting back to basics is good business. Solutions once deemed old-fashioned or archaic are being repurposed and modernised. It is the treasury professionals who are preparing their organisations for the strains and opportunities that lie ahead. Indeed, it is the treasury function where the medicine gets metabolised.

Down-to-earth approaches to cash management are not only the solutions attracting attention from CFOs in 2012, but they are also the recipients of meaningful attention from the savviest banks.

So what are these remedies that are shaping this back-to-the-future trend? They are:

  • Integration.
  • Globalisation.
  • Mobilisation.
  • Administration.


Institutions are seeking ways to integrate proven bank-supported capabilities deeper and more broadly into their financial processes. Working capital management is the driving theme and reducing the reliance on external financing is the end game, while significant gains in financial efficiency are a by-product of this healthy regiment.

The ‘payment hub’ concept is gaining traction. From an accounts receivable (A/R) standpoint, this means reducing payment channels without impacting customer relationships or behaviours. It puts the bank in the role of consolidating various payment types and delivering information on those payments to the accounting and A/R systems of the company in a comprehensive manner. Beyond simply furnishing data, evolving solutions today harness more and more information. One example is applying algorithms to match incoming payments to open invoice numbers. As a result, organisations may free up a greater quantity of A/R assets by shortening the order-to-cash (O2C) cycle, enhancing visibility to unapplied payments and reducing exceptions in general.

A similar aggregation of processes is also now available on the accounts payable (A/P) side by automating the invoice handling process and providing straight-through processing (STP) with invoice automation. This powerful combination of electronic invoicing (e-invoicing), scanning and capturing offers financial executives better control of incoming invoices before they enter the payment phase of the cycle.

Banks are providing tools to manage workflows whereby approvals for payments or exceptions are routed within the organisation to the appropriate decision-makers. In addition, banks assist customers with ways to make those payments through the most efficient channel possible, including automated clearing house (ACH), wire, cheque or increasingly via integrated card platforms. As payments are made, some banks offer fraud detection and payment security. The trend toward leveraging card technology will remain pervasive into 2012 and beyond, as organisations seek to optimise more strategic payments into what remains the only payment channel to offer a hard-dollar return in the form of rebates and payment cycle extension.

These payment hub solutions are becoming the backbone of the payments operations for businesses today with the associated data more concentrated and accessible. As a result, many companies are realising the value of the business intelligence opportunity that all of this information might unlock. Tracking historical payment patterns is one of the many obvious ways that banks are beginning to harness data with the goal of building useful forecasting applets and other data analytics tools.


Businesses today are continuously looking toward new markets for revenue expansion. They also seek out more cost-efficient manufacturing sites or new sources that improve their global supply chain. It is a given that banks must adapt transaction capabilities to support customers as they seek opportunities globally. But regulatory challenges, payment initiatives and currency volatility are becoming more dynamic region by region, particularly as a result of Basel III and the single euro payments area (SEPA) and the internationalisation of the reminbi (official currency of China).

As a result, executives are frequently turning to their banks for know-how or expertise beyond transactions. Global expertise is fast becoming a sought after product of many leading US banks.

Increasingly even large regional banks in the US are deepening their presence around the world by establishing full-scale banking operations in the most active international marketplaces (Canada, UK, the eurozone and China, for example). Augmenting a physical presence, some institutions are joining international banking consortiums, such as International Banking One Solution (IBOS), which give member institutions access to a referral network when their clients have in-country needs, or can help forge bank relationships to offer integrated international cash management services. International bank alliances offer tremendous value to domestic companies that have minimal presence and leverage with local banks in foreign countries.

Seamless cross-border payment capabilities, along with more standardised information handling, will continue to attract investment in 2012. There is much room here for improvement across the industry, whether banks use their own bricks and mortar network of international branches, rely on relationships with multiple banks abroad, or use some combination of these alternatives. Complexity and inconsistency are often by-products of these solutions that have evolved over many years.

Enhanced multi-currency services offered through bank platforms and strategic alliances allow corporate and institutional clients to house deposits in foreign currency, enabling international and local payment types to support overseas expansion initiatives. These new platforms will maximise STP and sustain relationships where banks have branches abroad or where they rely on correspondent banks. Web-based features will include the ability for customers to view a consolidated cash position for all domestic and international balances via a single sign-on, view subtotals by currency, initiate multi-bank transfers via SWIFT, and conduct foreign exchange (FX) transactions.

The on-going crisis in financial markets and the spread of the sovereign debt issues throughout the eurozone will drive increased interest in supply chain finance programmes into 2012. Working capital optimisation and reduction of supply chain risk are cited as the key drivers of greater interest in institutionalising these types of programmes. While many legal and jurisdictional issues remain, large buyers can offer favourable terms to their suppliers, thereby ensuring their financial health as well as their supply channels during times of tight credit. Because of the natural fit with the working capital cycle, many transaction-oriented bankers are looking for ways they can play a role in this evolving space.


What CFO doesn’t want to pull out their smart phone at a meeting with the CEO and pinpoint the firm’s up-to-the-minute cash position in the palm of their hand? Clearly, financial decision-makers see the practicality of secure mobile technology to make balance inquiries and routine transaction approvals. Expect banks to make strides on mobile applications for commercial and institutional customers. In fact, some predict that these applications will gain ground compared to consumer banking applications in 2012.

Given the sensitivity and potential volume of business information delivered via mobile channels, it is not surprising that the development process is more complex and time-consuming, particularly as it relates to rolling out ‘industrial strength’ security. Banks and device manufacturers are working closely together to develop security features that meet or exceed those found on desktop reporting systems.

The opportunities created by this 24×7, anywhere access to banking information are obvious. Organisations that take advantage of this seamless flow of data will be able to do more with less, share decision-making information more broadly within their enterprise, and speed decisions that affect working capital and risk. Without a doubt, mobile solutions are evolving as a critical part of the constant information flow between banks and their clients. Eventually this innovation will have a very significant impact on overall productivity.


Let’s face it, as financial institutions are diligently working to fulfil many new compliance regulations, it is harder for bank customers to accomplish some of the most theoretically simple tasks. Recent enhanced documentation requirements related to rules around anti-money laundering and Know Your Customer (KYC) are designed to require consistent due diligence by the banks and to help ensure the integrity of the payment system. The importance of security when it comes to protecting the movement of funds is understood. But, it is easy to forget that the simple opening of a chequeing account requires a significant front-line defence against fraud or worse.

The increasing complexity of administration felt by organisations around managing bank accounts and related services is creating a new level of interest in self-serve solutions. This concept is similar to the frequent flier whose experience in a fast-track security line at the airport is much different than that of the occasional tourist. Companies want their employees to bypass the more intensive pat-downs at the airports. They are looking to their banks to aggregate the information they already have and to use that information to accelerate the effort to open new accounts, change administrative features, maintain signatories, and even add treasury management services.

Banks will be eager to accommodate. Self-service solutions for account administration, client service inquiries or other transaction-related support are not only attractive to customers, but they offer efficiency, added security and ultimately cost savings to the provider. Industry–side solutions such as electronic bank account management (eBAM), or other similar proprietary offerings, will be refined and expanded in 2012 and beyond. Robust offerings based on this self-serve concept will take time to roll out and mature into comprehensive tools.

Delegating account administration at any level by the financial institution or within the organisation opting for this approach must be done with extreme diligence. Banks offering this capability will carefully assess the risks and require extensive controls that may make the solution impractical for certain users.

As this category of service gains investment and grows, it will most certainly encourage organisations to consolidate account activity to capable providers and this will increase control and reduce risk, ease administrative burdens and generally enhance efficiency.


So as companies look toward 2012, one thing is clear: there are some nasty fiscal maladies which are threatening the well-being of companies. Fortunately, the banking industry stands ready to help boost your organisation’s immune system through some new formulations of some tried and true remedies and prescriptions for relief.

When taken as recommended, financial leaders will find material improvements to efficiency, control and access to information. Firms making the commitment to these regimens will find themselves more financially fit and able to endure more environmental stress. These practical, and perhaps old-fashioned, approaches can enhance the long term viability of these institutions as they seek to strategically deploy resources toward ‘real’ investments, such as acquisitions, purchases of new equipment and new technology.


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