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Shaping your treasury operations for the digital era

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(Image credit: Shutterstock)

Corporate treasurers are constantly being faced with a multitude of challenges in the increasingly fast-moving world we live in. For instance, the events of the last two years have forced an entire re-think of how treasury departments operate.

Priorities completely changed and the focus became cash flow, with a recent European Association of Corporate Treasures survey showing that over 60 percent of treasurers saw cash flow forecasting as a top priority.

It’s one challenge for treasurers to adapt to these new priorities, but it’s another to ensure this is done safely and securely.

Preparing for a new digital age 

As global businesses priorities have changed in the digital era, treasurers have had to review their working practices and accelerate the pace at which they adopt digital treasury management systems.

Up until this point, the take-up of digital solutions by treasury professionals has been limited. In 2019, the Citi Treasury Diagnostics (CTD) survey reported that only 54 percent of treasury professionals reported using application programming interfaces (APIs) to assist with their treasury functions.

The same report also revealed that 63 percent claimed their Treasury Management System (TMS) operations are either completely unconnected or only somewhat connected to their enterprise resource planning (ERP) tools. With this lack of integration, treasurers are hindered significantly and are reliant on multiple disparate systems to manage their payments, transactions, and currency risk management – something that lacks practicality when operating remotely.

With the majority of finance teams worldwide continuing with remote working, now is a sensible time to look at alternatives.

Ensuring you have the right tools for the job 

Any modern alternative treasury management system must be fit for purpose, easy to access and use, deliver a diverse range of functionality, and ultimately ensure corporate treasurers can do their jobs as normal with no disruption.

The levels of security are also a key consideration. Many incumbent systems were built to be accessed primarily on-site, so their security systems are geared accordingly. But those working remotely from an individual or company-issued electronic device have different challenges to consider. The risks from hacking, malware and fraud are exacerbated as firms’ cyber perimeters grow. With multiple points of entry, as opposed to one, any weakness can be a gateway for unauthorized access to a company’s entire network.

One way to combat these issues is to look at systems that cater to all your needs in one place. Not only does this reduce duplication and the number of systems and accounts being accessed at any time, but it means you have access to the full suite of payments, cash flow, FX hedging and risk tools in one place – all from the comfort of your home.

Having the ability to work from one system, one account and monitor all of your operations from one screen greatly improves visibility, security and interoperability while standardizing your treasury operations.

This is especially important when making payments in multiple currencies. Very few treasury teams are limited to one currency in their day-to-day operations. As a result, they require multiple accounts to manage their international payment needs. Centralizing these accounts can greatly improve both security and efficiency.

Improved business decisions with data analytics 

This rapid adoption of digital technologies has opened numerous opportunities for treasurers – one being improved insights. Prior to the advanced technology we have now, analysts would spend hours trying to collect and find meaning in data. Digitization has changed this process. Treasurers can now go one step further and used tailored data and analytics from the company’s history of trading, payments, and cash flow. This enables businesses to have a complete view and understanding of their corporate behavior, backed by unique data and intelligence.

Data can answer the questions that businesses struggle to answer, are all payments made on time, or even too early? Or what percentage of their customer’s payments are delayed, and by how much? How can temporary cash shortfalls be addressed more effectively? These answers are unique to each business and can result in improved forecasting and enhanced financial decision-making.

Data analytics have also overcome the challenge of maintaining a positive cash flow, which has especially been an increasing struggle for corporates and SMEs during the pandemic. In these uncertain times, the ability to monitor outgoings versus income, make payments to staff and suppliers, be paid on time, and preserve a healthy order book for customers are an extremely difficult task, especially when considering the wider economic environment.

Tailored information for your business 

No two businesses are the same, and a flexible digital treasury management system takes this into account. Technology allows for solutions to be made based on your organization’s specific needs, allowing for better-informed decisions and welcoming new revenue.

This brings other benefits too. A digital treasury system can also create new opportunities for your business by sharing unique insights on how the market is evolving and how to deal with these and handle upcoming challenges.

Tailored and controlled access can also be effective in improving cybersecurity. Senior managers can control the features each of their teams' members can make. This way, if there were any unauthorized access, it would be easier to identify and address the source without disrupting the entire system.

Looking ahead 

If treasurers can implement new and modern digital treasury systems in a secure way that is fit for purpose, they will unlock numerous benefits. For instance, the reduced reliance on manual intervention for routine and straightforward processes improves productivity and saves time. Having understandable data on hand means decision-making is more informed. This also helps with improve forecasting and predicting customer preferences can improve a customer’s experience and new business opportunities.

Treasury teams can no longer rely on the traditional systems they used, as they simply are not suited to today’s treasury workflows. Digital, real-time treasury management systems are necessary if treasury teams are to thrive post-covid and into the digital era.

Laurent Descout, co-founder and CEO, Neo

Laurent Descout, the co-founder and CEO of Neo, a one-stop-shop for FX corporate risk management and payments for SMEs.