Treasury information

Published: Nov 2014
Portrait of Martin Bellin
Martin Bellin, Managing Director, BELLIN:

If we turn the clock back ten years or so, traditional treasury functions typically operated with a standard approach: centralising everything at their headquarters and forcing subsidiaries to provide Excel-based reports. But it was gradually becoming obvious to more and more corporates that the centralised approach was no longer serving companies as well as they would have hoped. A new way of thinking – a new concept – was required.

At BELLIN, we call this concept ‘Load Balanced Treasury’. It is built on the idea that a central treasury application is provided to all group companies to support their local day-to-day work in the best possible way. The benefit is that both account statements and payments can be automatically uploaded into the system at the local level, allowing for all subsidiaries to have access to data in real-time. The results are tremendous. The platform contains complete, real-time data, important in running all global treasury operations. Furthermore, hedging and funding and an optimised distribution of cash have become much easier.

The implementation of the ‘Load Balanced Treasury’ concept does require certain technology, however. Only full web-based systems can serve this purpose well. It does not matter whether they are cloud-based or installed at any of the company’s data centres, but it matters a great deal that the chosen system can be provided on any device. It must be available on desktop computers, laptops and all kinds of handheld devices or smartphones without installation. Only then can the group companies and distributed users in different divisions all over the world start using the application simultaneously. The result is the availability of real-time information to the central treasury at any time.

SWIFT’s initiative to modify Alliance Lite2 for use in hosted- or cloud-based business applications has been a significant boost to this new model. Circa 30 different companies have already signed up for BELLIN’s SWIFT service – which embraces Lite2 – in order to reduce the amount of work in data collection and to optimise the concept of ‘Load Balanced Treasury’. This clearly illustrates how important changes in technology are to the treasury’s ability to collect up-to-date, accurate data.

And as technology continues to develop, the TMS landscape will be very different in five years’ time compared with today’s standard set-up. The secret is to embrace change, not fight it.

Portrait of Markus Hofstaetter
Markus Hofstaetter, Senior Manager, Financial Management, Head of Treasury Services, KPMG:

Today, treasury performance is not only judged on managing complex cash and liquidity processes, financing, and financial risks, successfully and in an efficient manner. Treasurers are also judged on the accuracy, speed, consequence and accessibility of their reporting.

Due to the trend towards enhanced centralisation and automation in treasury over the last few years, treasury-related know-how, significant financial processes (and thus data) have been pooled in centralised treasury functions with the help of professional treasury management systems (TMS). By doing so, financial control, transparency and efficiency have increased significantly, relieving operational business units from many treasury-related activities. At the same time, this has also enlarged the demand to act as an internal business partner and information provider – not just a data provider.

Access to such information places treasurers in the privileged position of having both control of the information with the unique bigger picture view, and the empowerment to act on it internally and externally. A group-wide view over cash positions, liquidity forecasts, debt service schedules, payments, financial risk exposures, hedging positions, risk simulations and treasury accounting are just a few of the key topics a treasurer should centrally manage and report on.

A considerable amount of the required information can be derived from a modern TMS – and this should therefore qualify as the ultimate reporting and analysis tool, even for smaller treasury units using SaaS-versions. However, reporting is still a critical element for all systems, from entry to high-end solutions, as system standard reports rarely meet the treasurer’s requirements beyond transactional information and thus, have to be tailored to a treasurer’s needs. This causes either high costs for system design and implementation, or ends up in a high manual workload for multi-tabbed Excel-spreadsheets and slide decks. Hence, more and more external solutions are being selected to transform big data volumes into valuable information and reports. The range of applied solutions varies from huge data warehouse solutions (SAP etc.) to lean, flexible and easy-to-use reporting tools (eg Qlikview) that are also available on mobile devices.

Nowadays, modern treasury IT strategies do not merely strive for straight through processing or homogeneous system landscapes, but also consider added-value through sophisticated and flexible reporting facilities (and therefore accept a certain amount of heterogeneity). Professional and automated interface management, high bandwidth for big data traffic volumes, cheap hardware, virtual server landscapes and sophisticated business continuity management approaches for critical processes allow heterogeneous system combinations. However, these new capabilities have not been integrated systematically in all treasuries and finance functions.

Leading treasurers are increasingly expected to be as much information dealers as idea lobbyists and strategic finance consultants to their CFOs and CEOs. They therefore need to advise the C-suite based on reliable information, which requires sophisticated reporting, presented in a comprehensive manner and available immediately upon request. This is very much the road we see modern treasury systems going down.

Portrait of Elaine N. Filus
Elaine N. Filus, CTP, Principal, Treasury Strategies:

The statement that information is key for the treasury function is certainly correct. Currently, our clients are placing a high priority on having 100% global cash visibility on a daily basis. This information is becoming increasingly important as corporations place a high priority on counterparty risk management and controls over cash assets. With this information a treasurer has full knowledge of worldwide exposures. From there, they are in a strong position to build risk and liquidity management strategies accordingly.

Tools such as ERP’s and TMS’s are being used more and more to automatically consolidate bank data in one place and massage it into something tangible that can be used by the business. Traditionally, a corporate would have to gather information from each bank individually and manually consolidate that information across banks, so this is a great improvement. Also, SWIFT for Corporates has had a big impact in recent times. The service that SWIFT provides has made it much easier for corporates to gather bank information from multiple banks globally, significantly improving the availability of information.

Despite the advent of this technology there are still many corporates that rely on traditional bank online platforms and Excel to collate and manage information. When it comes to managing the information, I have seen some fantastic spreadsheets that can do everything the corporate requires. However, there remains a large degree of inefficiency and risk in managing information this way; especially as the data becomes greater and the spreadsheets more complex. This approach can be very time consuming and there is significant risk of data entry errors, corrupted formulas, and broken links in the worksheet.

The rise of Software-as-a-Service (SaaS) is breaking down the barriers to entry for smaller corporates, by minimising the cost of an automated solution, and more companies are beginning to reap the rewards of using a TMS.

A challenge that comes with increasingly better technology, although a welcome one, is knowing how to fully leverage the new information that is available to best add value to the corporation. In the last few years, both ERP providers and off-the-shelf TMS providers have been working on developing more robust functionality that automatically pulls in simple bank data, and then transforms it into business intelligence. This can benefit the treasurer in areas such as risk management, bank relationship management, FX exposure management and others.

The presentation of this business intelligence to senior management is also important. The technology providers have, therefore, been working on developing dashboards that summarise key performance indicators, such as cash balances, total liquidity and FX exposures, down to the fundamental level and present this on one page, providing tangible business information that is clear and concise.

Even with these technological advancements, and the ability to manage vast amounts of data and present it concisely, the treasurer still has a key role in providing colour commentary and wisdom. We are seeing from conversations with our clients that this is something treasury is spending increasingly more time doing – not only reporting on the present for senior management, but also forecasting the future, and devising strategies to add value. There is currently no technology that can achieve this better than a skilled corporate treasurer.

The next question:

“I’ve recently heard talk about e-invoicing being integrated into supply chain finance platforms. Is this really happening? Also, what other developments in the e-invoicing space should treasurers be aware of?”

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