Digitalization holds the promise of reshaping the management of treasury, with the power and potential to redefine and advance the role of treasury managers. This blog considers how automation frees treasurers from the burden of the mundane so they can contribute more to their business’ strategy and improved bottom line, and how banks can help them succeed.

The term “digital treasury” refers to a best-in-class treasury function, using secure, advanced, and cost-efficient technology and processes. Next generation treasurers will utilize a powerful, scalable means of accomplishing traditional treasury tasks such as cash management, as well as newer treasury tasks including cyber-fraud mitigation and systems security optimization. Digital treasurers will receive information in a way which minimizes manual manipulation, and automates and expedites decision making.

The COVID-19 pandemic has challenged businesses in innumerable ways, and has propelled risk, liquidity, and cash management into the limelight. As the old maxim goes: Money may not be the name of the game, but it certainly tells you the score. No business fails because it has too much cash, but a cash-rich company may miss opportunities if it falls prey to sloppy habits and is unwilling to pursue efficiency.

In practical terms, an efficient treasury department is essential to balance a company’s need for cash with its supply. Throughout the pandemic, companies with efficient treasuries have been able to make better use of their working capital and achieve more during this exceptional time. With an accurate and holistic picture of liquidity they’ve been able to raise capital and manage risk with greater precision.

Aside from the operational challenges of the pandemic, the crisis has put some treasury challenges into context and accelerated what was happening anyway. For many years the role of the treasury has been evolving from transactional to strategic. And, in some cases, treasury has shifted from service department to strategic partner. How is this possible?

Technology is creating a new world of possibility for treasurers, and the smarter use of working capital can generate welcome new revenues. But true transformation is multi-faceted; it requires more than technology on its own. Companies that are transformational leaders recognize that the integrated digital treasury is fast becoming a reality, enabling more to be done with less.

The Digital Treasury: Technology & Transformation

Like all areas of finance, treasury is becoming more open and connected. Digital technologies, such as artificial intelligence (AI), machine learning (ML) and robotic process automation (RPA) are changing how treasuries operate and to an extent redefine what they do.

APIs – Turning Data into Insight

As with all areas of digitalization, good data is crucial, and to add real value it must be accurate and real time. Data helps drive better decisions, and progressive treasurers are already using application program interfaces (APIs) to ingest data from an expanding array of sources to enhance decision making, liquidity management and reporting.  

APIs can also help reduce the potential for manual errors and facilitate:

• Reconciliation of global accounts and transactions in real time
• Consolidation of data in standard templates for analysis and forecasting
• Automation of fraud detection with a real-time view of activity

Data analysis will play an ever increasing role in risk management. With a single line of sight along the financial supply chain, treasurers can obtain a commanding view of what’s likely to happen next and take action to avoid disruption or to seize new opportunities.

With the right approach and technology, treasurers can spend less time on mundane, routine tasks and focus on activities that add more value. Next generation treasury is generally becoming more involved with key aspects such as the risk management of working capital transactions, and investing surplus cash in buyer and supplier transactions to generate new revenues.

Supplier financing initiatives that offer funding to a company’s suppliers through a payable discounting program are growing in popularity as they offer benefits to all parties. A company can maximize its working capital efficiency, while enhancing its relationships. To do this, connectivity is key.

The Treasury Ecosystem

Treasurers are at the heart of a vibrant financial ecosystem that enables the commercial treasury function to work smarter and adopt a tech-first approach. In this model, treasurers are much closer to suppliers, customers and potentially competitors. The rules of competition are being continually redrawn and today’s competitor may well be a partner of tomorrow. Shared technologies, such as blockchain, also have the potential to reduce a treasury’s reliance on its bank(s).

So, how should banks respond? Following are several ways banks can help treasurers succeed:

Streamline connectivity. Banks need to move away from proprietory communications channels and acknowledge that many treasuries require multi-bank connectivity and communications with third parties. This is likely to broaden and deepen the bank-treasury relationship.   

Share knowledge and experience. A bank can act as a strategic partner and trusted advisor in the treasury’s evolution. As technology creates new opportunities, the bank can share its unique insight of how the market is evolving and how to deal with new challenges and opportunities.

Regulatory reporting, risk management practices. As regulated entities at the heart of financial services, banks are ideally placed to advise treasurers on regulatory change and a best practice approach to compliance.

Future-proof the business. With business as usual rapidly becoming a thing of the past, corporate boards are looking to their treasurers for new ways to future-proof the business and profit from change. Banks can provide advice and suggest solutions that reflect the company’s risk profile and the bank’s practical experience.

Better Together

The days when the treasurer was a glorified cash manager raising debt are gone forever. Next generation treasury must drive strategy in addition to harnessing technology to perform traditional functions. With a wealth of practical experience, banks can – and should – do more to help treasurers shape the future of their function and the wider organizations they work for.