“When Serrala created its Managed Services group in early 2018, its aim was to deliver a suite of modular services capable of improving the clients’ operations and reducing their costs,” says Mickey Vonckx, the group’s VP. Can that really work for specialised treasury functions?
VP Managed Services
Most treasurers will recognise this scenario: the need for specialised resources are urgent but the competitive differentiation derived from the task is, at best, moderate. It’s a hard sell when it comes to creating a business case for something that, in the eyes of senior management, won’t make that much difference. And yet the truth, as most treasurers will also recognise, is that outsourcing some of the basic operational tasks around payments, for example, would free up time for real business-wide value-adding activities.
But is outsourcing, traditionally based on a ‘time and materials’ (T&M) type contract, a suitable model for treasury activities, where knowledge and expertise are still required? It is when the old T&M approach is replaced by one of an “outcome-based relationship” that is capable of rapidly delivering readily available services governed by clear service level agreements (SLAs), says Mickey Vonckx, VP Managed Services, Serrala.
Vonckx advocates a ‘managed services’ model for treasurers, especially those beating a path to digitisation. “They want to benefit from new software solutions immediately, not engage in lengthy implementation cycles,” he explains.
The desire for instant access is a result perhaps of how, as consumers, many of us have got used to going online and having “everything available at our fingertips”, notes Vonckx. That same level of expectation is feeding into the finance functions – including treasury – of the corporate world.
But with intense competition from many other functions travelling the path, treasury’s access to the internal technical resources needed to help deliver a digital transformation can be limited. The creation of Serrala’s managed services group presents a “readily available and flexible means of addressing treasury’s pain-points”.
Indeed, by bundling Serrala’s expertise and experience, Vonckx says clients can benefit from quickly integrating cloud-based micro-services within their own business processes. This can be achieved either with Serrala’s own payments, receivables and treasury software, or supplementing software from third-party providers. “Feature-function is important but it’s increasingly important to have flexibility around the fast and seamless integration into the processes of the customer,” he says.
Responsive to change
For a global treasury, the need for change – driven internally and externally – can be constant, says Vonckx. Existing within this dynamic environment means being able to respond quickly to change. A treasury with global and local banking partners will, for example, wish to substitute one institution for another or bring on board an additional one. If a need has been defined, treasury will want to have its new accounts operational in the shortest possible timeframe.
In a managed services context, the speed with which new connectivity and transactional services are delivered will be governed by the SLA. But the SLAs offered by Serrala precisely define delivery not only in terms of the initial set-up but also for managing changes in the bank formats, bank connectivity, banking partners and so forth. As Vonckx says, with the ongoing demand to keep ahead of the curve, fighting over project delivery times is a distraction most treasurers could do without.
What’s more, with the arrival of developments such as open banking, APIs, instant payments and SWIFT challengers such as Ripple, corporates need to stay alert, taking up the challenge where it suits. But treasurers also need to consider whether they can and will adequately develop and maintain the necessary skills within the team to manage such changes or use a third party to act as its on-call skills-centre. For Vonckx, a third-party service provider that can deliver all these changes with the backing of an SLA for each should be a serious consideration.
One of the major pain-points for treasuries today is around connectivity, says Vonckx. This includes essential but potentially time-consuming sub-processes such as payment format handling which can require some niche skill-sets, depending on factors such as location, bank and payment type.
Indeed, whilst target formatting for a corporate moving in-country from one provider to another is a relatively simple process, the same corporate opening a bank account in overseas countries can experience a serious challenge when seeking to understand different payment types.
With treasury needing to ramp up its local knowledge every time the business moves into a new jurisdiction, Vonckx says it can be a lengthy process assessing and understanding what is required before payments can be made and received. “With the number of accounts typically needed by a large international corporate, it’s easy to see how the complexity of this task increases,” he says. “Treasurers should be asking if they really want to build up that expertise as a series of one-offs or if they can hand it over to a specialist provider.”
For Serrala, having built up and continually developed its experience and expertise of both core and niche treasury processes with multiple corporate customers and banks, in multiple locations globally, there is a cumulative benefit that can be enjoyed by all clients, says Vonckx.
Another domain in which inefficiencies and challenges often exist is receivables. Although banks can provide EBS and lockbox statement details, there are still a lot of paper-based remittances provided by customers that cannot be processed automatically, says Vonckx.
As such, he believes in the increasing relevance of cloud-based services that can, for example, automatically combine information received in a statement with invoice and remittance details. “Often these documents need to be interpreted, sometimes using OCR technology or predefined templates,” he notes. “Having this done on an outsourced basis, being provided with a streamlined file that can be automatically uploaded into the ERP, is a huge benefit.”
This opportunity extends downstream, notes Vonckx. Accurate information on paid invoices means credit lines are more effectively cleared, enhancing sales streams. Perhaps even more advantageous is the way in which same-day visibility on paid invoices enhances working capital management and forecasting accuracy.
Whilst employing third-party services will present a new cost, Vonckx argues that taking this path actually delivers cost efficiencies. Retaining processes such as format conversion and remittance handling in-house creates a number of hidden costs that can quickly add up, he says. Having prepared many business cases for customers he is in a position to know that “significant gains” can be made when using the right managed services provider.
There is a logic to this; in offering services to multiple customers, economies of scale apply. In Serrala’s case, these are translated into its pricing model. A treasurer required to present a business case for taking this path can be assisted in its creation, with supporting qualitative and quantitative data stacking favourably against the costs of in-house processing which often lack transparency, says Vonckx.
Furthermore, as part of the consultative approach, the Serrala team will assist the client in defining process best-practice, this being benchmarked against the many implementations it has already carried out.
In staking his claim that Serrala aims to give its clients a “best in class process that is a lot more efficient and transparent”, Vonckx confirms that ‘transparency’ relates not only to the SLAs that ensure correct delivery but also to the pricing of those services. “Clients always know what to expect so that if their service needs grow, they will know exactly how it will impact their costing structure. Treasurers using internal resources will find this aspect much more difficult to assess.”
Making the difference
Of course, managed services and classic outsourcing providers all claim a USP. Serrala appears to have one that really does have mileage. In the past few years, the company has extended its product portfolio to cover the entire accounts payable, accounts receivable, treasury, data analytics and document management functions.
In doing so, it has built what Vonckx describes as a “comprehensive end-to-end service for incoming and outgoing payments and related financial processes”. This, he adds, not only manages format handling and bank connectivity but all workflows from invoice to payment, and remittance to cash application.
One of the additional advantages of an end-to-end service is that it can play a key role in the essential fight against payments fraud. “If a service provider focuses on a single function within that chain, it is difficult for them to capture and control information outside of that process,” comments Vonckx. “By covering the entire process, we are in a better position to manage our clients’ security, fraud and compliance concerns.”
Of course, as clients’ demands evolve and demand new services, Serrala is continually developing its solution set to meet their evolving needs. Following an intense period of acquisition and integration, enabling “strong emphasis on end-to-end service provision”, it underwent a rebranding earlier this year.
Now, in addition to accelerating the extension of its work in the multi-ERP space to include all the main platforms, Vonckx reports “full commitment to extending Serrala’s functionality in the cloud and the creation of additional managed services”. The quest to improve niche treasury operations and reduce costs is not only possible, with the managed services model it is now a proposition that has wings.