Today a high performing treasury team is a business partner, a value-adding change agent and a thought leader. Over the coming years, a treasurer will also need to further intensify collaboration with colleagues in shared service centres (SSCs) and lines of business in order to optimise, standardise and automate, especially the order-to-cash (O2C) and purchase-to-pay (P2P) cycles.
In my experience, a treasurer should establish highly scalable, flexible, standardised, automated and ERP integrated treasury and payment processes across the company. In addition, a quick return on investment (ROI) in terms of IT is crucial for a treasury’s success.
This is a huge challenge for internal IT teams. During my time as treasurer I had several projects with excellent business cases, including high ROIs. However, many projects were slowed down because in-house IT resources were not available or the IT team did not have the expert knowledge required to make payment processes more efficient and secure. IT departments are often uninterested in taking on responsibility for treasury’s technology for a good reason: most IT organisations spend 80% on maintenance and only 20% on innovation which directly supports the lines of business. By reducing the high maintenance costs for treasury IT, resources (money and people) can be freed up for innovation and improvement, which can help the organisation be more competitive and better achieve its ambitious growth targets.
Buying treasury IT as a service has become an attractive option for treasurers, CFOs and CIOs. The cloud computing/software-as-a-service (SaaS) trend in payments and treasury is moving faster than many may think. Compared to SaaS, a typical traditional on-premise solution is a painful road to take, with time-consuming and costly hardware and software installations, followed by lengthy and apprehensive IT projects that tend to take an enormous amount of treasury and IT resources.
Jayakumar Venkataraman, Partner, Financial Service Consulting Practice, Infosys:
The global financial crisis in 2007 and economic downturn led to a sharp reduction in the lending activities by the banks and thus made access to credit extremely difficult and costly. The complexities of working capital and liquidity management were compounded by fluctuations in interest rates and commodity prices and new regulations. This has created a high level of uncertainty in assessing the financial position within the corporates and the potential impact on profitability. The role of the CFO and corporate treasurer in the management of funds has therefore become extremely challenging. Within this context, technology plays a crucial role in helping the CFOs run an effective treasury function.
There is no doubt that the person in charge needs a sound head for technology. Whether it is re-engineering accounts receivable (AR) and accounts payable (AP) processes to release idle cash from within operations, or implementing liquidity management tools to reduce reliance on bank credit and implementation of SSCs, IT is central to any successful treasury management programme.
In many businesses, it means the CFO is often the best person to take on this responsibility. Not only do they have visibility of the company’s financial and business strategy, but they also have control of many of the technology tools already in place being used to make effective treasury decisions, such as information reporting and cash flow forecasting tools. By harnessing these technologies and closely aligning them with corporate goals, the CFO can be the primary driver for internal change initiatives and ensure a healthy pot of funds for the business.
New additions to the CFO’s arsenal include mobility and big data tools which help provide real-time reporting and analytics. These enable the CFO to monitor and better understand treasury activity and requirements, as well as harness data from the rest of the business to make more effective decisions. This can be particularly useful for liquidity management where a holistic, real-time view can provide the CFO with a better understanding of liquidity and risk positions across asset classes, geographies and currencies. Furthermore, these technologies can provide the CFO with the right financial tools to forecast their cash flows, understand their working capital needs based on the cash flows, benchmark their business metrics against industry peers and drive operational improvements.
David Whelan, Director, Capita International Financial Services:
IT is central to the operational requirements of corporate treasury. The problem is that the information held and used on these systems is so important, confidential and market sensitive that it needs to be kept under strict control. That does not mean that treasury can function without the support of IT, but overall control needs to remain with treasury.
Treasury is an area where there is a limited number of operational staff, so IT can be invaluable in achieving effective segregation of duties, to cover access and control. However, the input of transactions and data and authorisation need to be separate from each other, to minimise the risk of errors and fraud.
Companies using ERP systems will often expect treasury to conform to a corporate systems policy to use a particular supplier, even though their specific treasury capability may be of limited value. Providers of systems usually try to absolve themselves of any responsibility for losses incurred as a result of using their systems. Therefore, IT should manage the systems – but they don’t have the capability or experience to understand the exceptional risks which exist in treasury operations. Treasury must be accountable for errors and losses that might occur and should remain in overall charge of all its IT.
Bob Stark, Vice President of Strategy, Kyriba:
Treasury should be in charge of everything treasury, including IT responsibilities such as application support, performance monitoring, and disaster recovery. The obvious question of course arises: how is this possible?
The answer is simple: while treasury should be responsible for the support of their systems, they enable this by leveraging the cloud and an ecosystem of cloud solution providers that provide SaaS for treasury.
There are a number of important reasons why this should be the case:
Internal IT resources are scarce.
Treasury has specific and on-demand service levels, including high system availability and above-industry-standard business continuity requirements, no matter what the disaster. IT departments are not staffed to meet these needs, so treasury must turn to external providers.
Security.
Hardware and data controls are rarely sufficient when systems are hosted internally within an organisation, especially when treasury information is concerned. Therefore, greater safeguards are needed. IT resources are often insufficient to protect treasury’s interests to the level that is mandated or recommended by internal or external auditors.
Cost.
Treasury’s budget is usually quite low in comparison to other teams. To offer the service levels and security that the treasury requires unfortunately consume a disproportionate amount of budget compared with other teams. Cloud providers – offering better service levels and disaster recovery metrics – cost less than installing software in-house and, as a result, offer better value to the treasury team. This also frees up budget for other projects; never a bad thing for an aspiring treasurer.
The nice thing is that this isn’t a tug of war between IT and treasury. IT doesn’t want to be in the business of installing software and troubleshooting software conflicts; instead it wants to be much more focused on technology projects that deliver business value for the organisation. This means that treasury’s shift to the cloud is completely aligned to IT’s objective.
The next question
“How do treasurers determine share of wallet with their banks?”
