Insight & Analysis

Cash management is dead, long live cash management!

Published: Sep 2019

Coins on a clock, leading to a skull to symbolise death of coins

Over recent decades technological innovation and deregulation have enabled the rapid development of cash management. What lies ahead and what changes and influences are anticipated for cash management? Treasury and finance consultant, Dr Christian Bartsch, explores the future treasury landscape.

Despite repeated reference to the importance of digitisation, standardisation and automation, operational tasks are considered to be at the core of cash management rather than the more strategic and forward-looking tasks.

From the literature and research, it is obvious that technology is a key driver of change in cash management processes, capabilities and responsibilities. Its future is thus highly correlated with technological change, says Dr Christian Bartsch Finance Director of a global IT/software business.

With more than 15 years of international experience in finance and corporate treasury – and an active role within the Cash & Liquidity working group at the Association of German Treasurers – Bartsch is well-placed to bring reason to the often-speculative field of treasury technology.

Through his own financial interim, project management and consulting company, Cavetio, Bartsch understands that cash management is in a “constant state of change in response to a number of different influences”. The nature of this change has brought about three major trends: connectivity and automation; corporate web services; and actionable analytics and digitisation.

Connectivity and automation

“The complexity of treasury management is the leading cause of connectivity challenges as firms grow and engage with global partners,” notes Bartsch. “In the past, corporations were connected with their partners through proprietary electronic systems, desktop software and browser-based applications.”

The paradigm continues to function with particular focus on reliability, security, and ease of use as well as enhanced functionality, he notes. The authenticity of the transferred data and files is paramount. Yet, with the proprietary systems comes “a lack of flexibility and/or individuality” where the desired result is flexible and sophisticated software for corporate transactions.

However, cash automation is a relatively new future pathway as corporate treasurers have sought out different automation processes. Early attempts emphasised restructuring settlement procedures, and empowering company treasury divisions with the capacity to settle transactions automatically through dedicated computer terminals or interfaces with their banks.

“Subsequent processes have concentrated on automating the cash position and liquidity-projecting procedures,” notes Bartsch. “Automation affords transparency, alleviates operational risks and generates a homogeneous procedure that is reiterated on every occasion.”

Corporate web services

Firms that have invested a significant amount of money in financial tools such as Oracle, Microsoft and SAP are often looking for alternative solutions to leverage their investments. Given the heterogeneous IT landscape in corporations, there is no standard or single solution for a treasury system interface. Hence, says Bartsch, corporate clients are requesting à la carte modules compatible with their in-house systems.

“Corporate treasuries need to focus on strengthening efficiency and control through consolidation of various systems, such as infrastructure, security protocols and user entitlement, into global enterprise resource planning (ERP) interfaces,” he explains. “This, in turn, puts more pressure on the traditional financial tools which have focused on end-to-end software.” Instead, corporates and software providers may consider delivering web services or, rather, service-oriented architecture (SOA).

Actionable analytics and digitisation

New technological possibilities, such as instant payments, require corporations and financial service providers to go beyond the end-of-day transaction booking and balance reporting, and provide real-time analytics. “The need for actionable and meaningful information is vital for a corporate treasury that assumes the more strategic and broader role of supporting increased business activities,” comments Bartsch.

Firms tend to have a repository of data integrated with other data sources. For example, cash flow prediction remains a primary treasury challenge due to the uncertainty of the incoming flows, which are beyond the control of a corporation and dependent on their customers.

“Integrating additional data from various data points, such as time series analysis and receivable systems, means corporations can easily forecast future cash flows,” he notes. “Applying an analysis tool can determine optimal capital requirements that will aid in the decision-making process in relation to surplus or deficit cash positions.”

World of possibilities

The results show that technology is anticipated to play a very important role in the future of cash management and to direct its further development. New decentralised technologies like Blockchain (for international payments), or connectivity and individual software solutions, will also be important, Bartsch believes. In respect to cash management, he feels that the “one-size-fits-all” approach is assumed to no longer apply. With enabling technologies, new and individualised solutions will emerge.

The shift to a focus on cash management and the possibilities deriving from technology have placed company treasuries and particularly cash management in a new and much more central role, argues Bartsch. “The responsibilities are constantly shifting and growing. External influences and factors are shaping cash management processes and require the adjustment of organisational structures,” he advises.

However, in light of further developments, the future of cash management “is full of possibilities”. The larger the company, the greater its reliance on technology to facilitate business operations. “Previously, corporate treasurers were not in the picture, however, in the future, they will be noticeably influential and fundamental to the success of global companies.” Indeed, he concludes, “the role played by corporate treasurers has developed and is expected to evolve even further”.

Dr Christian Bartsch is an independent financial interim, project management and consulting expert.

For more on the subject of transforming treasury, why not view the Bank of America Merrill Lynch sponsored video series.

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