As CFOs, finance leaders and corporate treasurers set their sights on process automation, how can they achieve their goals – and what challenges will they need to overcome along the way? Christoph Dubies, Chief Strategy Officer at Serrala, sets out the role technology can play in supporting growth, the progress achieved so far and the developments worth watching.

What challenges are CFOs, treasurers and other finance professionals facing in the coming year?

I would note three challenges that CFOs are currently facing. The first is digitisation. CFOs are re-evaluating existing structures, processes and tools and are exploring how digital solutions can be leveraged to make their processes better and more secure. They are also working to achieve more transparency over what is happening within their organisations.

The second topic, which goes a little further, is about process automation. Finance leaders are looking to make processes as automated as possible, while removing manual tasks and the need for manual intervention. Rather than simply fixing specific issues, CFOs are proactively addressing topics such as fraud and increasing transparency over cash flow.

The third challenge, particularly for CFOs that are working for growing companies, is to determine how they can enable their organisations as they expand, and what technology they can put in place to support their growth.

To what extent can the technology used in treasury and finance overcome these challenges while supporting company growth?

Technology is on a lot of people’s radar. But the majority of companies are relying on a large variety and volume of legacy systems – so even though they may be aware of the challenge and the need to introduce new technology, only a few have been able to take effective action.

What levers can they pull to achieve this? Investing in technology can bring considerable opportunities. This might mean looking at whether there are any sub-processes that are still handled manually, such as cash application, and considering the alternatives. There are scalable options out there, particularly cloud solutions that can support inorganic growth by quickly integrating new companies. The challenge is how best to combine the old on-premise technology world with the new cloud world. Hybrid cloud solutions that have a deep connection with the core ERP system, while still offering full flexibility of scale, will be a major lever going forward.

“Cloud brings huge benefits. It addresses not only scalability, but also ERP independence: rather than bringing everybody onto the same ERP, companies can interconnect multiple ERPs via API.”

In many cases, I’ve seen CFOs adjust their mind-set as they begin looking more closely into the opportunities brought by a more integrated process. Instead of considering a variety of different vendors and solutions, which may be both specialised and siloed, CFOs are increasingly looking at the big picture and how to get more out of technology with an integrated approach. Take, for example, the order to cash (O2C) cycle. If you just automate and optimise, say, the credit management part of the O2C cycle, you can certainly make that part more efficient, but you still face the risk of losing efficiency in the following process steps such as cash application or collection management – so by optimising all the steps of that cycle, you can actually achieve world-class processes. That’s where a one-stop shop (like Serrala) can help CFOs implement the solutions they need to overcome these challenges.

So how do you feel treasury functions can harvest developments in technology in order to grow?

It is advisable to carry out a thorough analysis of the status quo and evaluate things that have ‘always been done like that’. Certain parts of processes may still be done via Excel or manual interference, and this can impede the company’s ability to scale up and efficiently avoid fraud. Whenever there is manual interaction, or an Excel-based process, the CFO loses control over what is really happening. From a technology point of view, there have been a lot of developments in recent years, and scalable tools that can help companies operate more effectively.

In terms of the technologies that have been developed over the last few years, which do you see as having the most potential for the treasury community?

Cloud brings huge benefits. It addresses not only scalability, but also ERP independence: rather than bringing everybody onto the same ERP, companies can interconnect multiple ERPs via API. They can even have the comfort of choosing whether to work from the ERP or a cloud solution, so they can rapidly improve processes without significant retraining, which is why the opportunities brought by hybrid solutions are so compelling.

The other technology development that is making inroads in treasury is what I would call intelligent automation. There is a lot of discussion around robotic process automation (RPA), but using robots to do the same tasks doesn’t bring true flexibility, because once you change something on the underlying layer you have to retrain the robot. Intelligent automation goes beyond that: it means that you identify ways for continuously enhancing processes to achieve end-to-end automation. With intelligent automation you can go beyond RPA and take away the need for a robot that imitates a single manual task, because you have automated the entire process itself.

Take outbound payments, for example: your invoices can be automatically posted within seconds of capture based on auto-posting criteria. If an invoice doesn’t meet these criteria, it will be automatically routed for exception handling to the appropriate user. Intelligent automation saves you a lot of time and makes the processes more secure, accurate and transparent at the same time.

Where we see even more use cases is in machine learning – in other words, the machine can learn how to improve processes over time, using historical data to become better at predicting the future. It’s important to be careful about where this really applies. For example, there is a good use case in cash management, where you can leverage historical data to get a more solid forecast on your cash and liquidity. But there are other areas where it is more difficult to apply this, such as in fraud detection.

Ideally a company won’t have enough historical fraud cases to be able to learn based on those events, so the approach here needs to be slightly different. Rather, you can leverage the cloud and APIs in order to access additional data points and derive fraud-detection rules based on a far higher portfolio of information, potentially even from a larger set of companies. It’s always better for companies to leverage the knowledge and experience of a technology vendor, rather than trying to reinvent the wheel in-house. Only a technology company has enough data points to come up with the intelligent logic needed to monitor this and enable proactive fraud prevention.

Given the rise of instant payments, how can treasurers avoid exposing their companies to the associated risks?

The reality is that manual management is simply not possible when it comes to instant payments and higher processing speeds. Companies have to be able to proactively analyse big data volumes and detect payments that seem to have a risk of fraud. A real-time solution is therefore needed to track and trace any fraud attempts instantly. Possible solutions include blockchain, as well as the use of payment management technology that identifies certain patterns.

Each company must also understand to what extent instant payments create additional value for them or for their customers. There are some very clear use cases: retailers, for example, can gain immediate certainty that a customer’s payment has cleared, potentially meaning that orders can be fulfilled sooner. In other areas, the benefits of instant payments may be less clear cut.

When it comes to adopting new technologies, are there any particular barriers from the point of view of clients?

I think, generally, people are rather hesitant when it comes to change. As we all know, implementing new technology involves the business – but it also involves IT. So there are multiple stakeholders, and managing all these stakeholders can be a challenge.

“We are looking into all the different technology fields that are out there, including cloud, machine learning, artificial intelligence and blockchain.”

Another consideration is that when new technology is introduced, training may be needed to bring everybody onto the same page and tell the story of why this change is positive. Keeping the organisation up to date with technology can take a lot of effort and may require internal resources. Again, a hybrid cloud solution can provide a balance by enabling change without changing everything.

In a hybrid cloud situation, if companies reach a point where the new technology is overwhelmingly positive and beneficial, can they then get rid of their legacy technology?

Exactly. Typically new innovation would be focused in the cloud part of the hybrid cloud model. The more functionality there is in the cloud part of the hybrid cloud model, the more people will get used to it – and the more you will have a natural movement towards really leveraging cloud tools.

And how would you respond to those that really do persist in hanging onto legacy technology?

At Serrala, we only pursue innovation which creates real benefits for our users, whether that means managing risk more effectively or reducing process costs. These benefits can be considerable: by managing processes in a standardised way, companies can ensure there is no opportunity for an employee to take money out of the business, for example. The longer you wait to implement changes, the more difficult it will be to achieve best practice in these critical areas.

How does Serrala’s offering tap into the latest technologies and how are you pushing the envelope in terms of what’s available now?

We are looking into all the different technology fields that are out there, including cloud, machine learning, artificial intelligence (AI) and blockchain.

On the topic of cloud, we have recently launched our new solution group called Alevate, which is a whole set of cloud solutions which effectively form a B2B portal. With this cloud portal, our customers can manage their inbound and outbound payment processes through one central cloud solution. We also have a hybrid cloud model which connects the SAP world with the cloud, providing full transparency over the transactions that are happening in both worlds.

When it comes to machine learning, our solutions in areas such as inbound payments have historically been rule-based. We have been analysing whether we could replace the rule-based approach with AI for the matching of incoming payments. However, if you adopt a purely machine learning/AI-based approach, you may not understand why matching has taken place. And if you do not achieve 100% accuracy, you will have trouble explaining that to your auditor. We are therefore exploring how to achieve best results by combining a rule-based approach with rules derived from machine learning. In this model, the machine looks at historical matching data and comes up with a new rule, which is then approved by the user.

Regarding blockchain, there was quite some hype in the last months and now people have realised that a lot of investment is needed. It is therefore important to make sure that any solution developed using blockchain technology creates real business value. For us, our portal presents a natural use case, in that you can execute supply chain finance transactions that are derived from a vendor B2B portal and then execute these payments by leveraging blockchain technology. This can provide faster processing speed and lower transaction costs. We see real applicability for corporates that may be able to carry out supply chain finance or dynamic discounting by leveraging blockchain.

A second use case is that you can leverage blockchain over time to create a super secure audit trail of all the different transactions taking place. We are working on evaluating this more deeply, but it will take time for large organisations to adapt and implement these types of solutions on a large scale.

These are our expectations. Our mission statement says that we want to empower and protect our customers in order to avoid any risks that are out there, whether that’s the risk of fraud or the risk of insufficient liquidity. So, companies that embrace process automation will be better prepared to be above-benchmark, reduce their operational costs, and have positive customer relations on both sides of the payments process, such as when sending out invoices or collecting money.

Indeed, our own research into the future of finance asked about finance leaders’ priorities for the coming five years, and 98% of respondents referenced the importance of increasing automation. On the other hand, only 9% said their processes are already fully automated. So it seems clear that while finance professionals have identified this as an important topic, there is still mileage to be gained by organisations.