One of the key challenges still faced by many organisations today is full accessibility and control over financial data and treasury critical processes such as payments management and liquidity forecasting. The lack of access to centralised information was named as the top hurdle by 35% of respondents of the recent Serrala Finance Survey.
The ongoing pandemic has put a spotlight on cash visibility and many companies were struggling to obtain a clear overview of their cash resources and cash flows. When asked about their top priorities in the EuroFinance Treasury Report 2021, 70% put cash and liquidity management at the top of the list, followed by cash forecasting.
Enabling better cash visibility and control over liquidity is a multidimensional issue – it affects all organisations regardless of size and sector. Siloed thinking in terms of owning data and processes left many organisations stuck. We believe it is time to investigate how the visibility, access and control over financial information can be accelerated.
Questions to ask are: how can organisations overcome this hurdle and start mapping out strategies to centralise applications, data and processes, and move a core asset – data – into the centre of attention? What are the best strategies to ensure that data security and the overall wellbeing of the organisation become top priority for everyone in the future?
The data as such are not the problem. In most cases, they already exist within the company. What remains difficult, however, is the lack of accessibility. Treasurers often do not have direct access to data, which is spread across various systems throughout an organisation. Such silos hamper an easy exchange of data within the company.
It doesn’t come as a surprise that the top priority for 51.7% of treasurers looking for a treasury management system (TMS) is the integration of applications with the enterprise resource planning (ERP) system, as the EuroFinance Treasury Report reveals. This is also the experience of Serrala when talking to organisations globally – treasurers increasingly want to go beyond information from account statements, payment runs and loan plans.
The decision-makers need to be equipped with high-quality data to be able to make decisions, so they need to see data in their entirety and in real time.
Let’s have a look at a best-practice example of how integrating systems can provide that holistic view.
Forecasting incoming cash is usually more difficult to forecast than cash-out, particularly in B2B payment environments. While organisations have full control over the process of sending data of payments, they do not know for sure when customers will pay their bills. The customer may have raised a dispute on an invoice and therefore not paid the bill on the due date.
Consequently, the cash-flow forecast is likely to show a deficit for that customer on the due date. The forecast will be inaccurate, and treasury will not know when the money will come in – or if it comes in at all, or at a reduced amount, or in instalments. Crucially, however, that kind of information is available somewhere in the company.
Treasury systems that are embedded in the ERP system offer seamless application integration with the various data sources and access to critical data. Cloud solutions and software as a service (SaaS) are ideal for complementing such systems and can help build up central, interconnected platforms, especially in more complex or international organisations.
Today, cloud solutions and SaaS are already used or planned to be used for treasury management by 74% of treasurers, according to the 2021 Treasury Technology Analyst report.
Access to data is not the only issue. The evolution of markets, products and services is accelerating and requires the treasurer to work step by step with real-time data. Real time has already become market practice and is considered a top priority for 66% of treasury professionals.
UK fast payments or SEPA instant payments are an example of that and demonstrate how corporate processes and systems will likely transform corporate payment processes from batch-processing to real-time payments in the coming years.
Consumers are already used to immediate confirmation of the purchase and payment when shopping online, so why not adopt that for B2B? Shipping, buying, vendor and customer verification along with up-to-date information on credit ratings will have to be moved from near-time to real-time information. Data that are available 24/7 will have an impact on technology requirements and the way we work.
Machine learning and artificial intelligence (AI) can take the benefits of application integration and real-time data exchange further, and reduce manual workloads. Many treasurers believe this will add value to their organisation as it automates processes and at the same time ensures that quality standards will be met and even increased.
In PwC’s 2021 Global Treasury Survey, 28% of treasurers say that cash-flow forecasting is (still) the most manual treasury activity.
AI-based technology is designed to automatically collect and process data, identify patterns, and generate cash forecasts and better insights for treasury. AI automation can handle data efficiently even when data sources and volumes grow significantly.
It goes beyond rule-based automation and learns from the broadest possible set of historical data to increase the accuracy of cash forecasting. Will AI take a treasurer’s job away? Very unlikely, since experts will still be needed to evaluate the quality of the data, draw conclusions from it and take strategic decisions.
Treasurers are in a more strategic position today than ever before. They are faced with many challenges, but they also have opportunities to shape systems and processes that make their life a lot easier – and contribute to the success of the business. They manage and control a large quantity of data already simply because of their role.
Armed with accurate, real-time data about corporate cash and the control over business-critical processes, it is without doubt that treasury should become business owner over financial data to support business and decision-makers.
Application integration will be a critical success factor going forward, with treasury application integration being a key starting point. As such, the best TMS is one that not only provides visibility into bank balances, trading portals and market data, but also integrates effectively with internal and external systems and a solution that can lead to better-informed decisions.
Bart Parren works in SVP solution transformation, and Alexander Rehberg is senior treasury solution architect, at Serrala
