Optimising treasury systems and processes

Published: Jul 2021

For many treasury teams, the pandemic has highlighted the shortcomings of existing systems and processes. So where are the most significant opportunities for optimisation, and what should treasurers bear in mind when embarking on an optimisation initiative?

Ducks walking in a row

Ensuring that the optimal treasury systems and processes are in place is an exercise that requires continuous effort. Even if a treasury’s processes are efficient to start with, complexity and fragmentation can arise over time as a result of M&A activity or organic growth, leading to a collection of manual and inconsistent processes. Likewise, technology infrastructures that evolve over a number of years can result in a collection of disparate systems that may not integrate well with each other.

Outdated processes can make it difficult to move forward with other initiatives to improve treasury. The EACT’s 2020 Treasury Insights survey, which gauged the views of 200 treasury professionals across Europe, identified difficulties in standardising processes/controls as the top challenge when it comes to treasury centralisation, cited by 43% of respondents. And as well as being inefficient, suboptimal processes and systems can also leave treasury teams vulnerable to the risk of fraud and human error.

Added to this, the COVID-19 pandemic and the switch to working from home arrangements have prompted many treasurers to look critically at the systems and processes currently in place, and to ask whether these are robust enough to support treasury activities during this period of significant change.

Optimisation in a COVID-19 environment

Keeping on top of existing systems and processes requires time and effort from the treasurer – but as the pandemic continues, treasurers have been focusing squarely on the need for processes that are not only effective, but also flexible enough to serve them in a working from home environment. At the same time, recent developments in technology are bringing new opportunities for optimisation that may not have been available a couple of years ago.

Among the many implications of the COVID-19 crisis on treasury teams, the widespread adoption of home working has curtailed opportunities for in-person collaboration. As Paul Bramwell, Principal & Founder at Treasury Tech Advisory, explains: “One of the aspects of business life that was immediately impacted by Covid was the ability to scrum a problem in the office where a team could easily just jump into a meeting room and troubleshoot a problem.” He adds that while there are “some great tools” available, none is as effective as being able to collaborate in person – “and this has led to a greater reliance on systems to simply get it right first time.”

Likewise, says Bramwell, old paper-based workflows have “become somewhat obsolete and difficult to maintain” when treasury staff can’t readily step into someone else’s office to go through a report or analyse data quickly. “To cope with the fact everyone has been remote, and the Business Continuity Plan (BCP) became permanent, there has been a significant focus on improving systems, workflow and, just as important, controls,” he comments.

Carl Sharman, Head of Treasury Technology Advisory at Deloitte, likewise notes the impact of the crisis on treasurers’ optimisation efforts. When it comes to finding ways to reduce costs or save time, he says, “It’s now less about what a business can gain operationally, and more about protecting what a business cannot afford to lose.” Where specific examples are concerned, Sharman cites the inability to get fast, accurate and reliable decision-making data on cash positions, as well as the risk of unsecure processes – “especially regarding payments, as more and more staff work outside the office and on portable devices.” As such, he says, the decision is not only about the potential costs involved in optimising systems and processes, but also “whether you can afford not to invest.”

The goals of optimisation

When setting out to optimise processes, it’s important to have a clear understanding of what those processes are intended to achieve in the first place. “The goal of creating and documenting processes within the treasury function is to make sure data flow for decision making is consistent and holistic,” says Bramwell. “Processes are also a means of ensuring efficiency and adequacy of controls to prevent error and fraud.”

In the past, processes have tended to be paper-based with a heavy reliance on physical sign-offs – but as Bramwell notes, this is much more difficult to achieve in a working from home environment, which has pushed companies to “rely far more on their technology to manage the processes within treasury. As processes have been revisited in the new Covid environment, the technology underpinning them has needed to be agile to accommodate any changes,” he adds. “This is where a lot of companies have realised that what they have is sub-optimal.”

Optimisation in action

So what does optimisation look like in practice? Sharman argues that in the past, companies often focused on achieving a ‘world class’ approach – but today, the emphasis is more on adopting systems and processes that are ‘fit for purpose’, or the best fit for the organisation. “Treasurers want to sleep at night knowing that the assets of the business are secure, and threats are minimised,” he adds.

Where specific opportunities for improvement are concerned, Sharman cites back office-type operations which may previously have been outsourced to reduce costs – “either internally (shared service centres) or externally (outsourced).” He adds, “The opportunities for automated matching, reconciliation and posting are growing – therefore giving treasury departments the opportunity to improve and harmonise data and processes, and re-integrate ownership back to the centre.”

Bramwell points out that policies and procedures are typically signed off by a governance group, and audited for efficiency on a regular basis. “Whilst Covid has been incredibly disruptive, the underlying principle behind most firms’ processes has remained sound, whereas the technology supporting them has found to be lacking,” he says. “Technology, therefore, yields the greatest opportunity to optimise workflow, reporting and controls.”

He notes that most vendors, system integrators and advisory firms offer services to rationalise and improve the technology within a treasury function – “very often even managing to generate a positive ROI, while simultaneously improving the technology landscape, process adaptation and controls.”

Obstacles to optimisation

However, treasurers may have to overcome certain obstacles before optimisation can be pursued. According to Bramwell, the most common of these is budget: “There are external and internal costs associated with reviewing the existing landscape and putting into place any recommended solutions and actions.”

That said, one silver lining of the Covid work environment is that treasurers and CFOs have “a heightened awareness of the power of technology and, most importantly, the need to have the right solution, properly implemented and managed.” This, says Bramwell, “has released budget constraint.”

Deloitte’s Sharman adds that resistance to embracing change and new technology can also hinder companies’ optimisation efforts – and that leading the way by adopting the latest technology in an innovative way is rarely smooth. In addition, he says, “a simple ‘fear of the unknown’ of new innovations such as machine learning and Robotic Process Automation (RPA) leads to layered approval processes, and decision makers not willing or confident enough to release budget. This can limit treasury investment in innovation, or even as a ‘fast follower’.”

For George Dessing, Executive Vice President, Treasury & Risk at Wolters Kluwer, most of the challenges that arise in changes to systems or processes “can be explained by the people who use them being unwilling to change their behaviours.” He adds, “Some people fear optimisation, but we in Wolters Kluwer welcome it, and we embrace change. There is a great culture towards continuous improvement and innovation within Wolters Kluwer, which is more than half of the battle.”

The path to optimisation

When it comes to embarking on an optimisation initiative, Bramwell says his advice would be to take external counsel. “This external counsel can be obtained through peer groups, local treasury associations, and more specifically the many advisory and consulting firms that exist in the treasury space.”

The world of technology is continually changing due to new entrants to the market, developments to existing vendor solutions, and the wider acceptance of digital technologies such as BI, RPA and APIs – and as Bramwell points out, this makes it very difficult to stay on top of all the changes in the market. As such, he says, “there is significant value in taking counsel to think outside the box, evaluate options that you weren’t aware of, and even challenging existing processes and technology assumptions.”

Sharman, meanwhile, notes that it is “vital” at each stage of a project to analyse what is and isn’t working, and what can be learned for the future. He adds that any investment a treasury team makes should be viewed not as a one-off expenditure, but as the beginning of a rolling programme.

Above all, process and system optimisation needs to be approached with a clear goal in mind from the outset. As Dessing concludes, “I believe that every system or process change needs to enhance the collaboration between treasury and the rest of the business to help the entire company be safer, more streamlined and more efficient, as well as identifying opportunities that drive operational and financial agility.”

Optimising cash flow management at Wolters Kluwer

Wolters Kluwer logo

“It was a balancing act, but the global team’s agile response to the pandemic helped us deliver important financial, strategic, and ESG results last year,” states George Dessing, Executive Vice President, Treasury & Risk at professional information, software solutions and services company Wolters Kluwer. “While the pandemic diverted us from our original financial plan, especially in terms of organic growth, it has fully reinforced many elements of our strategy.”

In particular, says Dessing, the company is “more committed than ever to evolve towards digital and expert solutions” – the latter being the term the team uses for the company’s products that combine “our deep domain knowledge with advanced technology”. In addition, he notes that the pandemic has reinforced the trend towards cloud-based software platforms, as well as making clear the importance of strong internal systems and infrastructure.

“An example of an improved internal process is our cash flow management, which is a complex process – and increasingly so within the dynamic and continuously changing international environment that we deal with at Wolters Kluwer,” he comments. As such, Dessing explains that adopting one of the company’s products, CCH Tagetik, “will help us to receive information from our business in a more structured, transparent and efficient way, with automated updates and a central repository showing the impact of business changes on the company’s cash flow plans.”

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