Cash visibility is essential, there is no alternative in today's dynamic global marketplace

Much has been written about the need for corporate treasurers to have visibility of their cash positions and yes, whilst an end of month financial report may have sufficed in the past, today the need is much more immediate.

The ease of access to the global marketplace and the pace of change offer wonderful business opportunities.  Conversely, they also present challenges not just from a technological point of view. The dynamic economic, geo-political and environmental changes in today’s world can have an immediate and sometimes devastating impact on business.  For this reason, having a clear and as near to real-time understanding of the financial position of an organisation is vital.

Agility is a necessity! Every business must be able to respond quickly to effectively manage changes whether planned or thrust upon their organisations.  The flexibility of an organisation is very often dependent upon the ability to access cash or at least having a very clear understanding of the financial flow in and out of the organisation today and in the foreseeable future.

Long term planning, investment and M&A activities rely on trustworthy financial reporting data which then empowers management to make timely and effective decisions.

An integral part of having control, and therefore visibility of cash, is the system where you manage your cash flows and the processes that are embedded into an organisation’s financial infrastructure. This includes the connectivity to banking partners. 

If we start with the end game in mind, there are some important considerations for corporate treasurers who are evaluating whether their cash visibility system is fit for purpose.

1. Connectivity with banking partners

Organisations with multiple bank relationships, which may range from half a dozen to several hundred different banks with multiple accounts and currencies, must ensure their multi-bank reporting is automated. Implementing a treasury management system is not the complete answer as there are technology and legal challenges in varying degrees from one bank to another.  A reliable technology partner is essential. One who has a proven track record of enabling corporate-to-bank connectivity can help smooth the process and assist with on-boarding issues.  Whilst SWIFT has one of the most robust and secure networks for bank connectivity, there are other options such as host-to-host and EBICS, and each organisation needs to consider the best alternative for their operational requirements.

1. Reconciliation of data

Once bank connectivity is achieved, and reporting between the bank and an organisation is automated, in its simplest form, it may provide end of day bank statements, which will then have to be reconciled against the organisation’s transaction records.  Again, reconciliation processes, once very manual, can also be automated for efficiency and reliability.  Once end of day statements are confirmed as accurate, then cash pools can be identified, as can cash shortfalls. It is possible to extend automation to manage the movement of cash to fund shortfalls and direct excess funds to pre-determined accounts for efficient liquidity management.  The entire process can be automated, however it is no small task and often the most successful implementations of automation have been managed in phases so as not to adversely impact business operations.

Tracking and reconciling payments is no small task.  As part of its commitment to supporting the industry and helping banks and their corporate customers with their international business expansion activities, SWIFT launched the global payments innovation initiative (gpii) in December 2015.  The gpii will dramatically improve the customer experience in correspondent banking by increasing the speed, transparency and predictability of cross-border payments.  With more than 73 banks now signed up to the initiative, corporates will receive an enhanced payments service from participating banks, offering them a number of benefits including same day use of funds, transparency and predictability of fees, end-to-end payments tracking and the transfer of rich payment information.  This will most certainly help corporates to improve the visibility of their cash and enhance their relationships with their international customers and suppliers whilst removing many of the challenges associated with reconciliation of payments.

1. Reduced forecasting risk

With the automation of cash management, reconciliation and liquidity balancing, the treasury team can be confident that they are providing management with data that is reliable and up to date.  This provides a powerful base from which decisions can be made to deal with short term cash requirements and also help with longer term planning for investment, as well as helping to minimise the risks involved.

Forward thinking treasury teams now have access to a number of examples of how to achieve automation and improve their cash management systems and processes for a clear view of their organisations cash position. A number of excellent examples of success stories can be found on the SWIFT for Corporates website.  They demonstrate the value of collaboration between treasury teams, technology partners and banks in order to deliver practical solutions and develop best practice. 

The projects are not for the faint-hearted however with careful planning, an understanding of how others have succeeded and what pitfalls to avoid, they help to create a robust financial infrastructure and bring confidence to the forecasting and decision making process for management. 

In today’s ever-changing world, the ability to respond to change with confidence, knowing that your financial infrastructure is not only fit-for-purpose but also a strong platform for the future, will give you and your management a restful night’s sleep!