Today’s corporate treasurers are challenged to address increasingly complex and diverse business requirements. These include managing the organisation’s cash, its payable and receivable flows and its supply chain finance operations proactively, accurately and cost effectively. Treasury is concerned with efficiently fulfilling a range of operational needs and also with supporting financial oversight and decision taking at the executive level.
Current technological advances offer new opportunities for treasurers to play a leading role in enabling and securing the profitable growth of their companies.
Essential technology support
Effective treasury operations require access to the relevant information in real time or near real time; in both consolidated, summary form for executive awareness and effective decision-taking purposes and in readily accessible detailed form in support of efficient day-to-day operations. The deployment of contemporary technology is central to achieving best practice treasury management results – and the choice of the technology solution that most closely fits requirements is among the most important decisions for treasury managers. The right marriage of technology with business requirements liberates the treasury team from mechanical and essentially unproductive data management tasks, to focus on its professional finance management duties – and to fulfil them to best effect.
This article examines the ways in which recent treasury technology innovations are opening up new horizons and potentialities in treasury management, providing value-adding pathways to achieving higher levels of control, transparency and operational effectiveness, enhanced management reporting, and optimised decision taking.
The role of spreadsheets
Treasurers have been generally reluctant to abandon spreadsheet solutions, which continue to offer flexible approaches to several aspects of treasury data manipulation and reporting. Spreadsheets, however familiar, are not functionally interactive with their user community in comparison with today’s treasury management systems (TMSs); in contrast, these enable treasurers to configure and use robust automated treasury processes, which then allow treasury to focus on key tasks and decisions.
TMSs enable routine treasury processes – such as payment management, bank statement management, cash positioning and forecasting and bank account management – to be automated to a large extent, liberating the treasury team for more valuable tasks. Spreadsheets will remain a useful tool for treasurers, but they are not now fit for the task of managing the treasury operation.
Mobile technologies and KPIs
Today’s emerging mobile technologies offer new and flexible facilities for managing and reporting business functions, in line with the general scope of contemporary apps aimed primarily at the individual, especially the consumer. Such facilities offer dependable, secure high-speed business application performance independent of the user’s location, requiring no more than reasonable quality connection to the internet or intranet.
The underlying advantage is that treasurers can now easily configure solutions that instantaneously provide up-to-date and complete information on the status of central treasury processes. The treasury executive enjoys ready access to critical current information.
From a management perspective, information can be analysed and consolidated in the form of key performance indicators (KPIs), which may be designed to summarise the specific information sets needed by each user, delivering exactly what is required for the individual to fulfil his/her role in the organisation’s treasury management workflows.
Today, there are no significant restrictions in functionality and information availability when KPIs are presented on mobile devices. KPIs and other treasury management functionalities are now designed to work on all common mobile devices using the iOS and Android operating systems, offering treasury executives very high levels of mobile power and flexibility. In contrast, there are some apps which are primarily designed for operation on workstations. In such cases, large volumes of data are evaluated and the user has access to the full scope of the underlying detail, such as a list of all the individual transactions comprising a position or exposure.
A complete treasury and finance solution therefore offers both mobile, essentially summary level functionality such as KPI reporting and detail-level high volume operational functionality to support the full scope of business operations, especially in larger treasuries.
The value of dashboards in payments management
Dashboards are today’s tools for presenting a customised set of KPIs to the organisation’s treasury team, on mobile and other devices as required and appropriate. The following examples address the use of dashboards in payments management.
At the executive level, the authorised users have immediate, mobile access to current information, organised on a personalised dashboard to maximise ease of use. This is illustrated in Figure 1, which is a dashboard overlaying a complex set of payment processes and management analysis:
Figure 1 – High level dashboard of a payments management process:
This example includes the monitoring of the underlying payments processes which are currently in operation, including notification of detected error conditions that require intervention and repair, combined with the reporting of various supporting KPIs. It provides a full overview of this critical financial process, enabling treasury management to understand the present status of all components of the workflow – and to intervene where necessary. Using such tools helps to ensure that problems are being researched and repaired in good time and in avoiding the costs and risks of payment failures. Such facilities are just not available in spreadsheet solutions.
Figure 2 shows some more detail of the KPI analytics that can be easily extracted into a customised dashboard using a modern TMS:
Figure 2 – Cash management analytics:
Figure 2 provides the treasury with intuitive information about the organisation’s current liquidity position, enabling the team to take quick funding decisions based on up to date information. These KPIs help the team to minimise funding risk.
Figure 3 shows a performance comparison between several versions of a cash plan:
Figure 3 – Cash plan comparison
This dashboard enables treasury to evaluate the cash planning process performance. The team can better understand which processes are working well, and which need improvement. Such information facilitates the achievement of dynamic treasury performance improvements across the organisation, within and beyond the boundaries of the treasury department.
Similar dashboards may be configured to monitor other relevant payments process KPIs such as days sales outstanding (DSO), enabling treasury to measure customers’ payment performance, facilitating follow-up programmes to improve cash inflow. Similarly, treasury can track its own payments performance, enabling inefficiencies to be detected and corrected.
The payments process is among the most sensitive and important elements of treasury and finance management, which is benefiting from technology innovations. There are numerous other areas in which the technology of a contemporary TMS can be put to work to achieve significant improvements in process quality; some of the most important of these are summarised below:
Bank statement management
Today’s treasury technology empowers treasurers to implement robust, global multi-bank statement management solutions. These involve fully automated and scheduled processes that retrieve statement information from all parts of the world, regardless of the banks’ connectivity technologies, message formats and communication and security protocols.
The optimum result is that central and regional treasurers are presented with fully dependable cash positions on which to base their daily cash management decisions. They can move cash to where it is needed, invest surpluses and fund shortfalls efficiently. They can execute transfers and deals in confidence, because of the underlying quality of the managing technology. The related set of KPIs measures such key variables as the timeliness of statement retrieval and the incidence of errors and delays.
Achieving dependable cash forecasting has proved to be an elusive goal for many corporate treasuries. An effective solution demands the use of advanced technology that can handle the required connectivity, data management, integration and analysis. The solution detail is dependent on the organisation’s enterprise resource planning (ERP) implementation. In practice many companies, which have grown through merger and acquisition (M&A) – are served by multiple ERPs, presenting a complex integration challenge in the management of the evolving payables and receivables positions which are absolutely central to accurate forecast derivation, consolidation and construction. Forecasting KPIs focus on the variance between forecast and actual cash flows, providing an objective means to analyse and optimise forecasting.
Bank account management – including bank fee analysis
Streamlined electronic bank account management, aka eBAM, is another best practice finance management function which has proved difficult to achieve in practice, and which is now in reach of corporate treasuries through TMS evolution.
eBAM provides central visibility and the potential for control over a corporation’s global network of bank accounts. It is now possible to ensure that all bank account opening, closing and amendment processes are fully and transparently controlled, including authorised signatories and mandate administration. The TMS database provides an up-to-date and accurate repository of bank account information, establishing a sound basis for reporting and regulatory compliance, including the implementation of AML requirements.
eBAM additionally enables treasuries to analyse bank fees and charges, opening the opportunity to negotiate improved commercial terms with banks based on the objective comparative information provided by a contemporary TMS. This is a truly powerful benefit, as strong eBAM functionality provides transparent insight into exactly how the banks are charging – and opens the opportunity to secure more favourable terms. This had not really been possible with older technology, as sufficiently granular information was not available to bank clients.
This article has looked into some of the areas in which advances in technology, especially in relation to mobility, integration and analysis, have provided scope for corporate treasurers to achieve real and measurable improvements in the quality, speed and value of their department’s operations. Treasury today has the opportunity to use dynamic, powerful tools to measure and mobilise cash and working capital to best effect for the corporation. The dependability and functional richness of today’s TMSs enable treasurers to transcend the limitations of spreadsheets, and to work dynamically and interactively in individually flexible, customised environments.
As technical evolution continues, those treasurers who are in tune with today’s realities are best positioned to take competitive advantage of the possibilities which are now in reach.
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