Digitalisation Is The New Treasury World, But Has It Really Helped Treasurers?

By Kirsi Larkiala | 28 August 2015

Digitalisation is the buzzword we hear everywhere but what has actually happened to significantly reduce the burden on treasurers? Not enough, both technology providers but also advisory capabilities from the banks and different players in the treasury ecosystem have not helped to support enough the view treasurers’ need through a holistic lens.

Many technology providers and advisors remain focused on traditional product verticals with no real focus on how the products impact the complete cash management life cycle and liquidity position and how to help with better information about cash to understand the nature of exposure and build further an improved profile per currency.

Treasuries are enjoying an increased strategic role in their firms and are looking to take advantage of opportunities in innovation where technology can carry out once-laborious manual processes more quickly. But they also have expectations to do this focusing on complete liquidity position, without traditional product verticals offered by banks and software houses; something that will require digital platforms but also new type of salesmen and advisors to be able to address a rising demand for a new type of treasury consultation. Additionally, many regulations have indirect effects on bank clients and somebody knowing the technology but also regulatory effects should help the clients.

As treasurers increasingly must do more with less, the spreadsheet approach that many surprisingly still use to manage treasury operations across the entire company reaches its limits. At the same time, need for real-time information, the silos we have with the systems further complicate the need for efficiency, visibility and control.

Enterprise resource planning systems (ERP) usually cover much of the financial supply chain and it is the base system for companies where all relevant data is stored and connected with each other. Despite the evolution of many ERP systems in the treasury space, the functional coverage may not be sufficient for some organisations and that is probably one reason for the strong uptake of treasury management systems (TMS), especially the cloud-based setups. TMS systems provides highly specialised technology for treasurers allowing for more flexibility in terms of features and access.

The TMS is farthest away from the ERP system, and it requires an interface to connect with key data from the ERP system for treasury operations. There are solutions that are integrated in an ERP can offer the best of both worlds but not all.

Technology is increasingly providing greater access to more real-time information, transaction channels are emerging also and focus has shifted to mobile devices.
Some innovative software companies have succeed in the treasury technology market and continue to emerge after others are acquired because corporate treasury teams demand a distinct set of complex features. There is no such thing as ‘nice to have’ features. There are features that add value and those that do not. The list of those that add value is lengthy, ranging from simple bank connectivity to cash forecasting, bank analysis and market information. More recently, both working capital and risk management have emerged as ‘must haves’ within every treasury system. 

Many of the technologies currently used have been around for some time, but until recently the business case and demand for their use by treasury had not been made. Drivers behind the business case are standardisation itself; BPO in trade finance, commodities standardisation, seamless FX reporting, electronic bank account management and digital personal signatures just to give some examples. New era started also when SWIFT opened its door to corporates.

To really utilise the benefits of technological progress and standards in the treasury area in the future there should be much more communication between corporates and external parties like software providers and consultants but especially banks.

Treasury advisors should help clients to implement simplified setup to increase transaction efficiency significantly and not to focus traditional product verticals like only to A/P and A/R or e-invoices, fx- confirmations or market data. Today's technology can bring access and great visibility across all client's bank accounts through a single treasury hub.

Another key benefit with a single hub is greater security and control and the beauty to have

a complete picture from beginning to end. Combining different systems the treasury previously used into one can also reduce costs significantly.

The most important value for the treasury is that they can add greater strategic value to the whole company and focus on financial risk management strategies or even more efficient working capital and streamlining of trade finance operations and truly leverage the information for business units. With the co-operation by software providers, consultants and banks within treasury ecosystem we need to be able to conduct a new type of holistic operational review in order to identify the company’s operational challenges and impact of regulations, compliance and risk on their business.  We should be able to recommend process changes and technology solutions that will ensure automation and efficiency from invoicing to collection and liquidity position handling and to help treasurers meet their liquidity and risk-management needs.

With the digital platforms and cooperation among different stakeholders within treasury ecosystem, we should be able together automate routine tasks and significantly improve the speed and efficiency of day-to-day treasury operations, and reduce the burden on treasury departments considerably.

Customer experience should be the key for all stakeholders.The challenge, however, has been always that all service providers are competing for the same customers. Emerging technology is making it easier for new entrants to exploit areas of dissatisfaction and underinvestment. Customers have more options than ever and do not view banks and software providers as having significant advantage over newer types of banks and startups and technology companies – even when it comes to advice. This requires a shift from a transactional and silo driven mindset to one that is more focused on the joint relationship with the customer with the value adding co-operation.

We have seen more corporates focus on centralised risk, cash and liquidity management by setting up global pooling structures, in-house banks and payment and collection factories across the entire company and gradually utilising the current wave of massive standardisation not only with the traditional payment transactions but also gradually focusing on entire treasury value chain. These have a knock-on effect in treasury systems but also to the dialogue among stakeholders within the treasury ecosystem as they require relevant changes in functionality but also totally new way of communication and cooperation among stakeholders without product verticals and together with the customer.

Corporate treasurers are no longer simply focused on basic liquidity, cash, funding, investing and risk and compliance duties. Treasurers are looking for centralised solutions that essentially meet all of their requirements and can accommodate the workflows and business practices. They are also asking software providers to be more than just that. Software providers should be able to behave as strategic and trusted partners, advisors with several years of experience who can take a consultative approach to the relationship and who can cooperate with the banks and other providers in the treasury ecosystem. 

There is still much work to do and we are curious to see who will take the treasury hub position and who will be a strategic partner, and can both innovate and quickly adapt to challenges that are on the horizon. Change is constant and life will be full of consolidations, economic changes, mergers and acquisitions, new digital innovation and changing regulatory scene and corporate treasurers need one point of entry who can act as an advisor.

By Kirsi Larkiala and Johannes Asuja, bobsguide contributors

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