From AI to APIs, new technology is poised to transform treasury processes. But how can you decide which developments are really relevant for your organisation – and is there still an argument for a spreadsheet-based approach to treasury?

Choosing the right technology has long been part and parcel of the treasurer’s job. But with the technologies available becoming increasingly sophisticated and diverse, some of the developments on the horizon may be more valuable than others. Given the pace of development, how can treasurers best identify which areas of innovation can provide real value for their organisations? And conversely, is there still scope for treasuries to operate effectively without embracing the adoption of sophisticated technology – or even by sticking with the humble spreadsheet?

Rise of technology

Thomas Stahr, Interim Treasurer and Managing Partner of Stahr GmbH – Treasury Consulting, notes that the landscape for treasury technology has evolved considerably in recent years. While the market for ERP is large, he says, “the market for treasury technology was dominated for many years by just a few market players, with solutions for large and very large corporates.” Even today, Stahr says, “there are just about 50-60 vendors of professional treasury software – and just a handful of them are real market players with global distributed customers.”

At the same time, treasurers themselves have become increasingly focused on technology. “Treasury as a whole is facing a revolution in terms of technology,” says Leonardo Orlando, an executive in Accenture’s Finance and Risk practice. He notes that while this applies to both the corporate world and to financial services, the two areas are moving at different speeds, not least because of the regulatory pressure applied to banks. “In the corporate world, the focus is more on how organisations can embed technology to become more efficient,” he adds.

And Erik Åkerlund, Head of Sales at Treasury Systems, argues that there is a bigger emphasis than ever on the role of technology in treasury. “Technology is essentially solving the same kind of problems as 20 years ago, but it’s much more autonomous and easy to use today,” he says.

Areas of opportunity

So where are the most interesting areas of development? Research carried out last year by the Economist Intelligence Unit (EIU) on behalf of Deutsche Bank asked treasurers which technologies they believed would be most beneficial for their organisations moving forward. In first place was big data analytics systems (56%), followed by AI/ML systems (42%) and instant payments (34%). At the other end of the scale, blockchain and open APIs were cited by only 13% and 8% of respondents respectively.

That’s not to say these developments lack promise. Nick Armstrong, CEO of Identitii, outlines some of the benefits arising from developments in blockchain and tokenisation. “The benefits of blockchain have been proven – unalterable, completely auditable and time-stamped,” he says. “What treasurer wouldn’t want a completely auditable record of all activities, payments and documents at the push of a button?”

Armstrong also says that tokenisation – in the form of “unique identifiers that can collect, connect, reconcile and report on payables and receivables” – offers numerous benefits, such as reconciling incoming payments more rapidly and simplifying reporting by providing regulators “with secure access to parts of those records on the blockchain.”

Likewise, Armstrong notes the opportunities arising from open banking. “Platforms that enable settlement data to travel along with clearing, remittance and regulatory reporting data are now able to link into payment engines, banks and networks,” he says, noting that this can “improve data integrity and create direct sharing of information between buyers, sellers, banks, regulators and payment networks.”

What problem are you trying to solve?

Of course, any new technology has to have a purpose. Aurélien Viry, Global Head of Cash Management at Societe Generale, says that when seeking out new technology, treasurers typically focus on achieving specific business objectives. He adds, “Nobody embraces technology for technology’s sake.”

According to Viry, the goals that treasurers are focusing on have evolved considerably in recent years. “At a recent industry event, everyone was talking about change – and treasurers increasingly see change management as the centrepiece of their jobs,” he says.

Consequently, he says that the goals treasurers are looking to meet with new technologies include addressing areas such as fraud and security, which might be tackled using developments in data analytics or biometrics. But he says treasurers are also looking to leverage developments like SWIFT gpi to gain more transparency over their international payments.

The benefits of blockchain have been proven – unalterable, completely auditable and time-stamped. What treasurer wouldn’t want a completely auditable record of all activities, payments and documents at the push of a button?

Nick Armstrong, CEO, Identitii

Barriers to adoption

While the benefits can be attractive, treasurers aren’t always in a position to embrace technology wholeheartedly. Åkerlund points out that the need to change routines and processes to fit a standard technology can lead to some resistance. He adds, “There is also a fear amongst the treasurer’s team colleagues that technology is rationalising their job away, when in fact it should be appreciated as a better way of working and not necessarily taking jobs away.”

Other barriers to adoption include cost – as Stahr notes, not every treasurer has the budget for a system that could range from €20,000 for implementing a small tool to over €1m for a comprehensive system. “Even treasurers have to show the return of every investment before they get the budget,” he says. “Fortunately, it is easier for treasurers to calculate such a return than it is for other departments, such as accounting.”

A further barrier that may need to be overcome is that of internal resistance from elsewhere in the organisation. “Treasurers have to convince and sell the technology investments in-house and are probably still facing a lot of resistance,” says Åkerlund. “They may get push back, with people asking: ‘Can’t you do this routine in Excel?’ or ‘Can’t we use existing tools to accomplish the same thing?’”

Sticking with spreadsheets?

Despite all these benefits, is there still an argument for a spreadsheet-based approach to treasury? “No,” says Armstrong, explaining that “reporting requirements alone make this untenable.” In addition, he says that spreadsheets inject too much operational risk in the form of human error or ‘fat fingered’ mistakes – and he notes that spreadsheets also lack automation, needing manual input “at almost every level.”

Others may be less emphatic when ruling out the possibility of a spreadsheet-based treasury. But while Orlando says that a spreadsheet-based approach to treasury “is always an option”, he also says the question is to what extent a treasurer can rely on their spreadsheets at a time when there is a growing need for real-time information.

“If you don’t have any FX risk because you are just trading your own currency, and you don’t have any interest rate risk because you don’t have any variable interest rate debt or investments – do you really need to be at the very top end of technology?” says Orlando. “Maybe you really don’t need that, and can still rely on your spreadsheets for cash management, or even outsource cash management to an external provider.”

Nevertheless, Orlando also notes that this is an extreme example, adding that a purely spreadsheet-based approach is unlikely to be the best option. “The ultimate driver must be competitiveness – in other words, how competitive you can make your business,” he says. “To be seen as an enabler of this, treasury needs to work in an efficient manner, and in a way that is optimal for the business.”

What about smaller treasuries?

Åkerlund does say there might be room for a spreadsheet-based approach in really small corporate treasuries – but he adds that this is slowly diminishing. “Even though the operation is small, the risks aren’t – and that calls for technology to manage the operational risks that come with using spreadsheets.”

But that’s not to say that spreadsheets are likely to die out any time soon. Stahr argues that spreadsheets are “still the number one tool in nearly all treasury departments”, other than insurance companies and banks.

He notes that even companies with a dedicated treasury management system often use spreadsheets for reporting purposes: “In larger corporates with big databases it is still a kind of ‘last mile’, making information visible, for instance, with power pivots out of very large SQLs.” He also says that adoption of a fully-fledged TMS is still rare in small and medium sized corporates, which still tend to use Excel as their “one and only database and calculating tool.”

Making the most

While most would argue that technology has much more to offer than spreadsheets, it’s also important to note that simply purchasing a new system may not be enough to achieve the intended benefits. Åkerlund says that new technology has to be easy to set up and use on a day-to-day basis – otherwise treasurers may find they end up with the same output as with older technology. “I would bet that there are so many corporates out there sitting on great existing technology today which may not be the latest – but they haven’t bothered to investigate the possibilities and benefits of starting to use it,” he adds.

And of course, the technologies available are becoming increasingly diverse. How, then, can treasurers weigh up the available options and choose the approach that is the best fit for their organisations? The experts have some suggestions to offer:

• Identify business goals. Pinning down the specific problems that need to be addressed is a prerequisite. “Treasurers first need to understand and prioritise their business goals – whether those relate to cost, fraud prevention, cash concentration or optimising payments,” says Viry. “They can then look for the right technology and the right innovations that will best serve their priorities. This includes being able to identify which technologies can further their goals – and which ones are more of a diversion.”
• Consider best-of-breed solutions. Likewise, Åkerlund recommends that treasurers should be open to the new API landscape and define exactly what kind of problems they need to solve. “Then look out for specific point solutions and their respective partners on what they can offer, since it will probably be the most cost-effective way to go. Basically I think you should consider best-of-breed over all-in-one.”
• Weigh up the benefits of the technology under consideration. Stahr advises that treasury “should carefully qualify and then quantify the benefits of treasury technology.” He adds that from a treasury perspective, these benefits may include having the various exposures and liquidity under control, reducing the risks of inaccurate reporting and reducing costs by introducing better efficiency.
• Get buy-in. Viry also notes the importance of getting buy-in from stakeholders and top management. “When I talk to treasurers, they always say this is an important task – and sometimes it’s more challenging than the implementation itself. So getting everyone on board should be a priority.”
• Minimise the impact on existing systems. Armstrong says that as well as focusing on the business benefit, companies also need to minimise the impact of new technology on existing systems. However, he notes that this isn’t always easy, with existing systems often interlinked with multiple other systems. “There are technologies and companies out there that are working to enhance the systems already in place for treasurers,” he says.

In conclusion, few would argue in favour of a spreadsheet-based approach to treasury. With many treasuries now having to get more done with fewer resources, technology has much to offer when it comes to efficiency and the ability to generate greater insights from data. And while the evolving technology landscape can be challenging to navigate, many treasurers will relish the opportunity. As Viry concludes, “I would tend to think that treasurers who are reluctant to embrace change will have long since made a career change.”