Treasurers urged to head to the cloud

Published: Mar 2019

Treasurers in recent years have been coming round to the benefits of moving to the cloud and with the technology holding considerable promise for the future, especially in its ability to integrate new technologies like artificial intelligence (AI) and big data, finance departments are being advised to not get left behind in exploring its potential.

The history of cloud computing dates back to the 1960s but only in the last ten years has it gathered momentum, and only in the last five has its power begun to be leveraged for managing treasury operations. As a relatively recent phenomenon, its take-up by treasurers has naturally been cautious and measured – the cloud-based treasury remains far from being a ubiquitous feature across finance departments globally. Still, the signs are that it is only a matter of time.

According to studies by the respected industry analyst IDC, adoption of cloud-based services by firms and evolution of solutions has picked up significantly within the last five years and will continue to do so. IDC reckons 35% of businesses in the midmarket are expected to invest in Cloud ERP in the next 12 months, with 70% of CIOs expected to embrace a cloud-first strategy in 2019. Looking further ahead, it predicts 70% of enterprise IT spending will be cloud-related by 2020.

That certainly suggests a bright outlook for cloud-based treasury solutions, though a survey of over 100 major firms in the US and Europe last year by one leading provider, Kyriba, shows it could be tricky to wean many corporates off their beloved spreadsheets. According to the US-based firm, which boasts more than 2,000 treasury clients globally and is a leader in its space, global treasury teams are wasting an average of 4,812 hours per year – more than 600 days of full work – by using traditional spreadsheets to manage their cash, payments and accounting operations.

The biggest Excel time-waster, according to survey participants, was getting the daily global cash position, which takes up an average of 1,296 hours per year, followed by treasury-related accounting tasks (1,176 hours); payment fund transfers (960 hours); cash forecast generation (792 hours); and 588 hours per year for other key tasks.

“The lost productivity due to spreadsheets is a huge opportunity cost for organisations,” says Dory Malouf, Treasury Operation Value Engineer at Kyriba. “Instead of focusing on value-adding initiatives that help drive the business, treasurers and their teams, along with cash accounting managers, are stuck spending literally thousands of hours updating and manipulating spreadsheets.”

Kyriba’s survey of treasurers and senior finance professionals spanned multiple categories, including real estate and construction, retail, technology, manufacturing and financial services. In each case, participants were asked to estimate in detail how much time they spent using traditional spreadsheets to manage various key tasks. Their estimates were compared to the time required to complete the same task with Kyriba’s solution, which automates and streamlines manual reports, locks down data, and offers services beyond data crunching.

Kyriba believes the survey findings put a new spin on the perennial debate over whether finance professionals are overly dependent on traditional, labour-intensive spreadsheets to accomplish modern duties. “There is no question that finance professionals will not stop using spreadsheets in isolation, but what our numbers show, rather dramatically, is the cost of over-relying on spreadsheets to manage an entire finance function, like treasury,” Malouf says. “Spreadsheets are only effective to a certain extent, and cannot be counted on to scale to global requirements.”

Malouf believes the time treasurers save by embracing cloud-based automation via a treasury management system can be put to better use, for instance focusing more on working capital optimisation and strategic transformation initiatives generally. He points to other past surveys of Kyriba clients, showing that they recouped up to 80% of time spent on spreadsheets by employing cloud-based solutions.

“In the end, the debate is not so much about Excel as it is about freeing up finance staff from the shackles of burdensome data assembly and validation,” said Cheik Daddah, Global Vice President of Value Engineering at Kyriba. “The most valuable asset for finance is time. Freeing up time enables finance professionals to focus on strategic analysis to uncover data and insights that help drive decision making.”

Future proofing

The broader, positive growth trajectory for cloud-based treasury solutions cannot be denied however. Over at SAP, the German-based market leader in enterprise application software, Christian Mnich, SAP Head of Solution Management, Treasury and Working Capital Management, says several key drivers underpin prospects.

“There is no doubt cloud computing holds enormous benefits for finance and treasury organisations,” says Mnich. “Its speed, efficiency and economy are widely acknowledged. Finance and treasury organisations also benefit from a shorter time spent in initial implementation projects; user interfaces are intuitive, allowing business users to get up and running faster and easier.

“The entry ticket cost to adopt cloud applications is also much lower than establishing large, complex systems inside the organisation. This smooths out IT investment over a longer period of time, with no yearly maintenance costs incurred, like in an on-demand set up.”

Mnich is also keen to stress the importance to finance departments of engaging with cloud if they want to leverage new technologies such as AI and big data. “With cloud they can access the latest technology innovations in finance faster than ever before, without any business disruption.”

Drilling down into the types of cloud solution, he explains that two types have evolved to become the most adopted globally: the public cloud, also called software-as-a-service (SaaS), and the private cloud.

In a public cloud set up, applications like financial management run on shared servers at the provider’s data centres. While each instance of the SaaS application and related data are made available only to the intended recipient, the system resources in the background are shared, providing economies of scale. Whenever an application is updated by the provider, all the end-users benefit from the same update instantly.

A private cloud set up is, in general, also located at the provider’s data centres, but the servers on which the applications run are not shared. That allows for more customisation and better control of systems upgrades.

Mnich says cloud deployments help to reduce the total cost of ownership and that those deployments in turn help drive faster innovations because they are easy to scale and consume. Corporates investing in cloud solutions also benefit from a lower dependency on IT resources, shorter upgrade cycles, and they get rid of associated hardware costs and challenges. And with public cloud, business processes are standardised following industry best practices, and individual customisations are mostly prevented, leading to a much more simplified environment.

When talking to treasurers considering a move to cloud, SAP’s initial priority, Mnich says, is to ascertain their specific requirements, look at their current technical IT infrastructure and organisational set up: “To evaluate the best solution for them, it is important to understand their broader system landscape. Many treasury organisations have a fragmented system landscape, in which data is spread across various sources. That is a big challenge as the fragmentation means firms don’t get a unified vision – what we call a “single source of truth” – and therefore are hindered in their ability to make fast and informed decisions.”

Consolidation of all the relevant data needed to make informed decisions can consume a lot of time using legacy techniques. As a result, Mnich says, organisations face the risk of not having the right information at hand to steer and control the business. The absence of relevant data when it is needed can affect their business results such as margin targets. “For such clients, a flexible cloud solution that helps to centralise certain treasury processes such as cash management, payment operations and exposure management, can provide significant business value. However, the biggest challenge for those systems, independent of the deployment option, is the level of integration. In short, everything within the system must work seamlessly with everything else.”

Security fears

Corporate treasuries seriously considering deploying cloud may well be persuaded by its merits. Yet at the same time, having previously had total control over commercially confidential data and operations via in-house IT teams and systems, they will likely be concerned about its security.

Mnich says cloud security used to be “a prime concern” for finance departments but such worries have eased over time: “In the past, treasurers were certainly sceptical about the cloud’s security credentials. That fear has largely fallen away as security today is virtually embedded in cloud and its applications. Today, cloud solutions are every bit as secure as those connected to a network and to the outside world. In fact, today, a trusted cloud solution provider has the resources and expertise to invest in the security of global data centres at a higher level than each individual client could achieve for a relatively small business function like treasury.”

Another drawback that might concern some treasury departments is that the high level of standardisation and relatively limited flexibility a public cloud solution offers may mean they have to live with certain limitations and challenges. For example, large companies, which have complex use cases or specific reporting capabilities needs, may find public cloud solutions to be too restrictive. Other companies, meanwhile, may still want to keep full control over their systems, without being tied to automated upgrades. “To cover those requirements, a private cloud infrastructure could be the solution,” says Mnich. “In such scenarios, customers – certainly SAP customers – can get the same benefits offered by public cloud, but in a dedicated, privately managed cloud environment. This deployment option is best suited for organisations with highly-customised requirements.”

He adds: “Many treasury organisations have been using cloud services for some time, such as online trading systems, e-banking systems or other cloud-based platforms. The opportunity ahead of us is to integrate those systems into the organisation’s finance landscape so they can provide a seamless experience for the users with a single source of truth.”

SAP itself provides an integration either via application programming interfaces (APIs) in some instances, or natively built integration within the treasury applications that run on its cloud platform. A few services that have been recently made available on its cloud platform include bank and SWIFT connectivity, trading platforms and market data integration.

Much more to come

Looking at the state of play with treasury in the cloud and the kinds of advances corporates can expect going forwards, Mnich firstly notes that, currently, many of SAP’s own customers are consolidating their scattered data into an integrated digital platform. “That can help them unlock new potential in the day-to-day work; users get more transparency and real-time information. They also enjoy increased automation, improved security standards and are able to get rid of legacy systems. They are able to make better business predictions based on existing knowledge in real time.”

More specifically, Mnich says SAP remains focused on a number of areas to enhance its offerings for treasurers. They include increasing straight through processing (STP) by further automating processes, including via better analytics and provision of business-critical information in real-time. One example here is the SAP Cash Application, which provides reconciliation optimisations and uses machine learning capabilities.

Other major focal points for SAP include predictive analytics to help businesses get instant visibility into every aspect of their operation and so enable them “to move beyond automation to intelligent, predictive decisions”.

The provider is also committed to the integration of increasingly sophisticated machine learning and AI processes. These aim to help businesses not only gain access to next-generation innovations and eliminate low-value and redundant legacy processes, but also enable users to quickly identify areas requiring attention and action, for instance irregularities that could help signal and prevent fraud.

Mnich says the area that probably holds the “highest potential” for treasury in the cloud going forwards relates to the prediction of operational developments in areas such as cash forecasting; automated exposure management; and the generation of deal proposals that respect the treasury policy in place and can be traded automatically via the cloud-based platform. “Our key objective is to help businesses become intelligent enterprises with optimum visibility so that they can use their data assets effectively to achieve their desired outcomes faster and with less risk,” he says.

The message from cloud solution providers then seems clear: as well as offering immediate benefits such as speed, cost savings and productivity, migration to the cloud is fast becoming a strategic necessity as without it finance departments will be without the infrastructure needed for them to be agile, leaving them unable to benefit from real-time insights to inform decision-making.

Mixed messages

Yet, as a survey of 300 senior corporate treasury executives last year by the Economist Intelligence Unit on behalf of EY shows, firms have a lot more on their minds than just new technologies and cloud when it comes to assessing the drivers of change in their finance departments. Although 39% of survey respondents identified disruption due to new technologies as a major consideration for them, they do not deem it to be the clearest reason for change. Changing business models along the supply chain (38%), changing internal business models (38%), digitisation (36%) and regulation (35%) were also considered as drivers of change, suggesting to the researchers that treasurers may be regarding the notion of change as a “chicken and egg scenario”.

Moreover, the survey results suggest that treasurers are having difficulty in understanding what the “unknown unknowns” may be. When asked “What will be the most useful technology system for treasury?”, 36% of respondents did not even say “upgraded ERP systems”, believing instead that existing systems would suffice. It is therefore not surprising to the authors that 35% also said the same for “existing” rather than “upgraded” TMS systems.

The study, titled The Future is Now: How Ready is Treasury?, says: “The fact that moving to cloud-based solutions (cited by 30% of respondents as key) was seen as less useful to treasury than either existing or upgraded ERP and TMS systems implies either that these respondents view cloud as simply a place to move existing functionality for cost reasons rather than a technology that can provide fundamentally improved and new functionality; or that they have security concerns over using the cloud.”

The report authors echo Mnich at SAP, however, in arguing that moving to cloud ERP or TMS systems should be much more than a cost-based outsourcing decision, as cloud applications are developed continuously, responding to advances in hardware, software, the regulatory environment and new techniques, like AI. The net effect of that is it allows companies to create operational agility, freeing up resources for other areas.

“Although it is encouraging that a third of treasurers are interested in moving to the cloud, more should be considering it given the evident pace of technological change inside and outside business. Otherwise treasury risks not being able to fully benefit from technological innovations that could give it higher influence within the organisation,” says the study.

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