Treasury Contrarian View: Real-Time Payments — Do We Really Need Them in Treasury?
Real-time payments (RTP) are being touted as the future of finance. Fintechs are building around them. Banks are promoting them. Regulators are encouraging them. But here’s the question treasury professionals need to ask: Are real-time payments really necessary—or even useful—for treasury operations, or are we chasing a trend that solves problems we don’t have? The Case for Real-Time Payments in Treasury The Case Against Real-Time Payments in Treasury A Practical View: Real-Time Where It Adds Value Rather than jumping on the RTP bandwagon for everything, treasury teams can: Let’s Discuss We’ll be gathering insights from treasury leaders and payments experts to hear where real-time fits—and where it doesn’t. Join the conversation and share your view! Comments Richardo Schuh, Treasury Masterminds board member, comments: I’ve seen firsthand how real-time payments have made a real difference—especially here in Brazil and across Latin America. Since the launch of PIX in 2020, treasury teams have gained a new level of speed and efficiency. The cost of an instant PIX transfer? A fraction of traditional methods (and way cheaper than some legacy wires that still feel like they’re being sent by carrier pigeon 🕊). From an operational perspective, instant payments have been a game changer, enabling order releases 24/7, improving cash flow agility, and solving edge cases (judicial or regulatory-related payments, for example) that used to be a nightmare under the old systems. Sure, not every treasury transaction needs to be real-time—but when speed does matter, having the rails makes all the difference. Let’s just say… we don’t miss the old banking hours. Royston Da Costa, Treasury Masterminds board member, comments: The role of real-time data in treasury decision-making Pros: 1. Better Risk Management Market Volatility: Real-time FX, interest rates, and commodity price data allow treasurers to react immediately to market fluctuations. Counterparty Risk: Continuous monitoring of counterparties’ credit ratings and financial health helps mitigate potential exposure. 2. Liquidity Optimization Cash Positioning: Instant visibility of global cash balances enables more efficient cash pooling, sweeping, and funding decisions. Intraday Liquidity Management: Banks charge based on intraday usage—real-time insights allow treasurers to optimize cash deployment. 3. Faster Decision-Making Automated Hedging: With real-time data, treasury teams can automate FX and interest rate hedging to lock in optimal rates. Dynamic Forecasting: Real-time cash flow and collections data improve the accuracy of short-term forecasts. 4. Fraud Prevention & Compliance Payment Monitoring: Real-time tracking of payments helps detect anomalies and prevent fraud. Regulatory Compliance: Many jurisdictions require real-time transaction reporting for transparency. 5. Cost Efficiency Optimized Borrowing & Investing: Real-time access to short-term borrowing rates or investment opportunities ensures the best return on idle cash. Reduced Operational Costs: Automated processes reduce manual interventions and errors. Cons: 1. Data Overload & Noise Too Much Information: Real-time data streams can create excessive noise, making it difficult to focus on critical risks. False Alarms: Frequent updates may lead to overreaction to minor fluctuations rather than strategic decision-making. 2. Integration & System Complexity Compatibility Issues: Legacy systems may not support real-time data processing, requiring costly upgrades. Multiple Data Sources: Consolidating real-time data from banks, trading platforms, and internal ERPs can be challenging. 3. Cost Considerations Infrastructure Costs: Maintaining real-time treasury requires investment in technology, connectivity, and cybersecurity. Transaction Fees: Some banks charge for real-time payment and liquidity updates, increasing costs. 4. Operational Challenges Resource Dependency: Continuous monitoring requires skilled personnel to interpret data and take swift action. System Downtime & Latency: Even a minor delay in data feeds can impact decision-making in volatile markets. 5. Behavioral & Strategic Risks Short-Term Focus: Real-time visibility might push treasurers toward short-term fixes rather than strategic risk mitigation. Alexander Ilkun, Treasury Masterminds board member, comments: My take on Instant Payment is that these are solving a problem that doesn’t exist in the Treasury space for the most part. There are some very specific circumstances where instant payments may be useful and that are not connected to operational efficiency within Treasury – for example, M&A transactions. In these circumstances urgency is substantiated and is valid. However, so many of the other circumstances are either outside of the Treasury’s domain or are related to operational inefficiencies. A few examples. Treasury doesn’t play a part in vendor relationships for the most part – that is something Procurement and AP teams should handle and make sure the invoices are paid as they are due, not earlier, not later. If, as a Treasury Cash Manager, you’re about to miss your settlement, be it interest payment, principal, derivative, or spot settlement, you rarely find out about this kind of a transaction at the last minute. The list can go on, but the key consideration is that all of these occasions are known and should be planned for so as not to occur at the last minute. If they do, the process needs to be improved. Another nail in the coffin of instant payments would be their cost. Are Treasurers really prepared to pay the premium for the privilege of making an instant payment? I doubt so – when we can, we will select the most cost-efficient method of making a payment. The increased costs can come from multiple sources. One could be setting up and maintaining the infrastructure to make it all work. Another could be the increased costs of liquidity management by the banks that need to balance their books – with instant payment it becomes a more difficult task, so it’s not unreasonable to expect the bank to pass the bill. What Treasurers really need is clarity and transparency of cut-off times for making payments as well as certainty that when the payment is sent, it will actually arrive. On cutoffs, there is currently a spaghetti of times, depending on the bank, branch, currency, and method of delivery of instructions that may or may not be visible even on the bank portal, not to mention the other systems – ERP or TMS – that the payments can originate from. Payment confirmations could also be improved. Receiving ACKs means that the bank received…
Franklin
The Role of Treasury: From Operational to Strategic Leadership
The role of treasury has transformed dramatically. Treasurers have emerged as strategic leaders, pivotal in steering the strategic direction of their organizations. In this article, I’d like to touch base on a few of the critical aspects of strategic treasury leadership and stakeholder management, offering a few insights into how treasurers can cope with their expanded roles. Strategic Treasury Vision and Roadmap I firmly believe that a compelling vision is the cornerstone of any successful treasury team. It aligns the team’s efforts with the broader business strategy, ensuring a unified pursuit of common goals. Developing a strategic vision involves a deep understanding of the current operating model, active engagement with team members, and a clear definition of long-term business and human priorities. This vision must be translated into a detailed roadmap, outlining key initiatives, required resources, and timelines for achieving the desired outcomes. Creating a strategic vision is an ongoing process, necessitating regular reviews and updates to remain relevant amidst changing market conditions and business needs. Engaging the team in this process fosters a sense of ownership and commitment, enhancing the likelihood of successful implementation. It is therefore advisable to involve all team members in building this vision together, for better engagement. Building Relationships Effective relationship management is at the heart of successful treasury leadership. Treasurers must cultivate strong relationships with internal and external stakeholders, including colleagues, management, and business partners. This involves regular communication, active listening, and a genuine interest in the professional and personal well-being of team members. Building trust with stakeholders ensures better collaboration and support for treasury initiatives. Treasurers should strive to comprehend the needs and concerns of their stakeholders and work collaboratively to address them. This might involve regular meetings, informal catch-ups, and participation in cross-functional projects. By being approachable and responsive, treasurers can build a network of allies who support their initiatives and help drive the treasury function forward. It can be daunting sometimes, with this feeling of being in endless meetings constantly. Whenever you have that feeling, remember that it is part of the job: being present (actively, not multi-tasking on your phone or answering Emails on your computer) and listening to others, being in that moment, is a big part of a treasurer’s assignments. This is maybe why sometimes, you have this impression of never stopping for a minute during the day, while you come back home wondering what you actually achieved. You achieved more than you think! Mastering Change Management in Treasury Change is an inevitable aspect of any organization, and treasurers must be adept at managing it. Successful change management involves clear communication, stakeholder involvement, and addressing the human aspects of change. Treasurers should focus on the three main phases of change management: ending the old era, navigating the transition phase, and establishing the new era. By acknowledging the challenges and providing support, treasurers can facilitate smoother transitions and ensure the successful implementation of new processes and systems. Make sure you understand the feeling of the people who have to say goodbye to their current operating model. It can be hard for them and whoever is in charge of a change management phase must ensure it is being discussed openly with them. They must see that you are aware of that and of the current model, of what they are letting go. Change management is not just about implementing new systems or processes; it’s about managing the impact of these changes on people. Treasurers should be empathetic and supportive, helping their teams navigate the uncertainty and stress that often accompany change. This might involve providing training, offering reassurance, and being available to answer questions and address concerns. If you find that you are repeating yourself a lot, it is normal! Continuous Evaluation Treasury teams must continuously evaluate their processes and seek innovative solutions to stay ahead. This involves leveraging technology, exploring new tools and systems, and fostering a culture of continuous improvement. By staying proactive and open to change, treasurers can drive efficiency, enhance decision-making, and contribute to the overall growth and success of the organization. Innovation in treasury is not just about adopting the latest technology; it’s about finding new ways to add value to the business. This might involve automating routine tasks to free up time for more strategic activities, using data analytics to gain insights into cash flow and risk, or exploring new financial instruments to optimize liquidity and manage risk. Treasurers should be curious and forward-thinking, always looking for opportunities to improve and innovate. In short, strategic treasury leadership and stakeholder management are critical components of modern treasury functions. By developing a clear vision, building strong relationships, effectively managing change, and continuously seeking innovation, treasurers can elevate their roles and make significant contributions to their organizations. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Benjamin Defays
Do You Have a Right to a Bank Account? Here’s How It Works for Individuals and Businesses
Opening a bank account is essential — whether you’re an individual managing day-to-day life or a business trying to operate and grow. But is it actually a legal right to get a bank account? And what happens if a bank says “no”? Let’s break it down — covering individuals and businesses and what the rules look like in the EU, UK, and US. For Individuals: A Basic Right in the EU (But with Limits) In the European Union, individuals have a legal right to open a basic payment account, thanks to the EU Payment Accounts Directive (2014/92/EU). What Is a Basic Payment Account? A no-frills bank account that lets you: There’s no credit or overdraft, and some limits may apply. Who Can Get One? You qualify if you: You can apply even if you: Why Can Banks Refuse You? Only for specific reasons: The bank must give a written explanation for the refusal, and you have the right to complain. What to Do If You’re Refused in the EU EU Country Examples 🇫🇷 France 🇩🇪 Germany 🇳🇱 Netherlands 🇮🇹 Italy 🇬🇧 UK Perspective (Individuals) In the UK, you don’t have a “right” to a bank account, but banks must offer a “basic bank account” if: Banks can still refuse you if you don’t meet ID requirements. 🇺🇸 US Perspective (Individuals) There is no federal law requiring banks to open accounts for individuals. Banks can refuse based on: Some states encourage access, but there is no guaranteed right to a bank account. For Businesses: No Guaranteed Right Anywhere Unlike individuals, businesses do not have a legal right to a bank account in the EU, UK, or US. Banks Can Refuse Without Explaining Why Banks are free to decline a business account based on: They are not required to justify the refusal in most cases — especially for corporate clients. What Can Businesses Do? Prepare a complete application: Choose the right bank: Try alternatives: EU Country Hints for Businesses 🇬🇧 UK & 🇺🇸 US: Also No Legal Right for Businesses In both the UK and US: Final Word If you’re struggling to get an account — either as a person or a business — there are routes, remedies, and alternatives. Just knowing your rights can be half the battle. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Top Five KYC Data Points Your Bank Needs
This article is a contribution from one of our content partners, Avollone No matter the bank or its region, when they are collecting KYC information, there are always specific pieces of data that they will want to see. And if you are prepared with this knowledge, then your response and its processing can be that much faster and easier. Why are banks so keen on KYC requirements? Banks and financial institutions around the world are all subject to the many and variousstrict and comprehensive legal requirements –to collect KYC information to make sure that criminals do not misuse the financial system for money laundering and other financial crime related activities. Banks want to protect their reputation at all costs. History has shown that being involved in money laundering has a detrimental effect on a bank’s reputation. Most banks and bankers are decent people and do not want to be part of laundering money that comes from terrible crimes such as extortion, drug trafficking, illegal arms trading and human trafficking. So what are the 5 basic data points that banks collect as part of KYC? 1. IDENTIFICATION The bank needs to be sure they are conducting business with the right counterparty, just like you as a person identify yourself with a passport or a national identity card. The bank will ask the company for all the information needed to make that identification. This is often the easy part of the process, since it is mostly about documenting the company’s incorporation. The banks typically don’t pull the information themselves from the public register, since they want companies to deliver the latest, most up-to-date information and confirm its validity themselves. 2. BUSINESS MODEL AND PURPOSE OF THE RELATIONSHIP An essential part of KYC is understanding a customer’s business model. It helps banks to understand the risk of your business model and assess if the use of their products and services is valid. Banks are obligated to assess all customers’ risks and adjust their own risk setup according to the customer risk. This is to ensure banks are using the needed resources to identify potential money laundering and terrorist financing risks. Often companies do not use enough time to explain their business model to the banks. However, you are the most reliable source of a clear and correct description of your business model. With a little effort, you will avoid many ongoing questions from the bank regarding your use of the bank’s services and products. 3. OWNERSHIP AND CONTROL There is an increasing (regulatory) request for transparency when it comes to the ownership and control structure of companies. The goal is that Ultimate Beneficial Owners (the individuals who actually own or control the company, UBOs) should not hide behind complex company structures and shell companies. It can be difficult for companies to have complete oversight of owners and voting rights, since they also have to consider indirect ownership and control. But they should always have an updated ownership and control structure illustration. Banks will often ask for an illustration to visualize and better understand the structure. Once this is in place comes another cumbersome part of the process, which is collecting relevant information and documentation from the various Company Officers, being the UBOs from the ownership and control structure, along with the board and executive members of the company. If you’re located in the EU, you are required to proactively share information about changes in your Beneficial Owners. You are also legally responsible for the correctness of the information you share with the banks. Unfortunately, many companies do not have updated ownership and control information ready. This can be a delaying factor when it comes to the KYC process. 4. INTENDED USE Banks are required to understand the customer’s use of their products and services and need to make sure that it aligns with the company’s business model. In addition to that requirement, they must monitor their business to make sure that the customer is using the products as expected. This is to identify unusual use of the products, such as transactions that are not according to expected behavior. To perform this monitoring, banks need relevant information that can be used to monitor deviations from the expected behavior. If you do not deliver realistic information about your intended use of the bank’s products, you will experience that banks often come back and ask specific questions about transactions. They do that since they did not expect these transactions and need to understand the reason for them. When companies do not give realistic information about their expectations, that makes future cooperation more time-consuming for both parties. The better information you deliver regarding your business model and your expected use of the bank, the fewer follow-up questions you will receive. 5. TAX INFORMATION As a part of the KYC process, you are often asked to deliver tax information. The request is mainly related to FATCA (US tax regulation) and CRS (EU’s Common Reporting Standard) and ensures that banks can share relevant tax information across countries In summary Banks aren’t asking for KYC information to annoy you or waste your time, although it can often feel that way. But armed with this insight, you can be prepared and have all the right pieces of information systematically organized, so you can quickly provide complete and correct information to the bank. With this, you’ll avoid unneeded interactions and save time for everyone – most importantly, yourself. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
Target balancing optimized with a cash management system
This article is written by Nomentia Making every cent count Idle cash is costly, and target balancing offers a powerful solution to keep funds active and optimized. It’s no surprise that global companies are investing in cash management systems to enhance target balancing and to make global cash management smoother and more effective. By automating fund transfers to maintain optimal cash levels across accounts, target balancing minimizes unnecessary borrowing and maximizes liquidity where it’s needed most. But how exactly does target balancing work in corporate treasury? What essential functions should a cash management system have to support this strategy effectively? And what best practices can help your team make the most of target balancing? From real-time tracking to streamlined reconciliation, this article breaks down the core features of cash management systems that support target balancing and shows how they help reduce costs, boost efficiency, and ensure every dollar is working toward business growth. No more idle cash—let’s make every cent count. Meet Jouni Kirjola Jouni Kirjola is the Head of Solutions and Presales at Nomentia, bringing nearly 20 years of expertise to the role. Specializing in payments, cash forecasting, in-house banking, and reconciliation, his extensive experience and deep knowledge of financial solutions make him a key expert in delivering tailored solutions. Making global cash management effective Imagine a multinational technology firm with subsidiaries in North America, Europe, and Asia. The company has been experiencing inefficiencies in its cash management process. Each regional subsidiary maintains separate bank accounts to handle local operations, but cash flow requirements vary significantly across regions. For example, the European subsidiary often has excess cash due to slower product cycles, while the North American subsidiary faces frequent cash shortages due to high operational expenses. This discrepancy leads to idle cash sitting in European accounts while the North American subsidiary needs to borrow short-term funds to cover its daily expenses, incurring unnecessary interest costs. The company’s treasury department struggles to manage these imbalances manually, and reconciliation across multiple accounts becomes a time-consuming task. “In a complex, decentralized operation, target balancing becomes even more crucial. It gives treasury teams real-time control over cash positions across multiple jurisdictions.” – Jouni Kirjola, Head of Solutions & Presales To streamline cash management and reduce costs, the company decides to implement target balancing using a cash management system. The system allows the company to set target balances for each subsidiary’s account based on anticipated cash flows, operational needs, and historical patterns. For example, the European subsidiary’s target balance is set higher to account for slower cash cycles, while the North American subsidiary has a lower target balance to match its higher liquidity needs. By integrating the CMS with its bank accounts and ERP system, the company is able to automate fund transfers across its subsidiaries. Excess cash in the European accounts is automatically swept into a central treasury account, while the North American account is topped up when needed. How does target balancing work in corporate treasury? In corporate treasury, target balancing is a cash management strategy used to maintain specific balances in bank accounts based on anticipated cash flow needs. The objective of target balancing is to ensure that funds are available where and when they are needed while minimizing idle cash across accounts. By setting a “target” amount for each account, companies can strategically allocate resources within their banking structures to optimize liquidity, reduce interest costs, and simplify cash flow management. Target balancing mechanisms Target balancing involves establishing a predefined cash balance (target) for each account, which aligns with a company’s projected cash flow requirements. This target can be fixed or adjusted dynamically, depending on operational needs and market conditions. If an account exceeds its target, excess funds can be moved to a central account, while accounts that fall short of their targets can be topped up from a central pool. This balancing process typically occurs at the end of each business day and is often automated through treasury management systems. “A key advantage of target balancing is its ability to reduce the need for costly external borrowing. If funds are already in-house and properly allocated, borrowing costs can drop significantly.” – Jouni Kirjola, Head of Solutions & Presales Target balancing is especially useful for businesses with decentralized operations or those operating in multiple jurisdictions, where cash needs vary significantly across entities. It allows corporations to optimize liquidity without the need for constant manual transfers. Types of target balancing Comparing target balancing with other cash pooling techniques Compared to zero-balancing and notional pooling, target balancing offers distinct advantages and limitations. Optimal use cases for target balancing Target balancing is particularly effective for companies with complex multinational structures or operations that experience fluctuating cash needs. For example, our example multinational corporation with subsidiaries operating in different time zones and regulatory environments might use target balancing to ensure that each subsidiary has sufficient cash for local obligations without relying on central funds constantly. Additionally, businesses with seasonal cash flow patterns, such as retailers with peak seasons, can benefit from dynamic target balancing to meet shifting operational demands. Role of a cash management system in target balancing A cash management system, or a CMS, plays a pivotal role in supporting target balancing for corporate treasury functions by providing automated tools to manage intercompany and inter-account transfers, monitor real-time balances, and forecast cash needs. Target balancing requires a sophisticated CMS that can seamlessly integrate with enterprise resource planning (ERP) systems and banks to provide efficient, accurate, and real-time oversight of cash positions. “Target balancing is about precision. With the right technology, you can automate the process of moving funds across accounts, maintaining balance with minimal human intervention.” – Jouni Kirjola, Head of Solutions & Presales. Core functions of a cash management system for target balancing The primary functions of a CMS that supports target balancing include automated transfers, real-time balance tracking, and cash flow forecasting. These tools work together to ensure that accounts are maintained at optimal levels according to the target balance criteria. Automation in…
5 Do’s and Don’ts When Hedging for the First Time
This article is written by HedgeFlows For finance executives, managing foreign exchange (FX) risk is critical to protecting your business from the unpredictability of currency movements. Yet, hedging—especially for the first time—comes with challenges. Successful hedging requires a well-thought-out strategy tailored to your company’s specific needs, risk tolerance, and exposure to currency fluctuations. While some mistakes are common for first-timers, so are proven best practices that can set the foundation for effective FX risk management. Below, we’ll break down five things you should NOT do when hedging for the first time and five things you SHOULD do to maximise your chances of success. 5 Things Not to Do When Starting to Hedge 1. Basing Decisions on the Current Rate Level Instead of Your Risks It’s tempting to make hedging decisions based on favourable exchange rates. However, this approach often leads to reactive strategies that don’t address the underlying risk. For example, if your business has limited risk due to natural hedges in your operations (e.g., revenues and expenses in the same currency), over-hedging to “lock in a good rate” could be unnecessary and costly. Instead, focus on identifying your actual FX risks and hedging to mitigate those exposures, regardless of market conditions. 2. Justifying Hedging with a Market View Hedging is about reducing risk, not about predicting where the market is heading. If your decision to hedge is based solely on your expectations for currency movements, you’re speculating, not hedging. For instance, if you think the GBP/USD rate is going to depreciate and choose to hedge simply because of that belief, you could leave your business exposed should the rate move in the opposite direction. Keep your hedging strategy disciplined and avoid making speculative bets. 3. Not Comparing Hedging Costs to Potential FX Risks Hedging comes with costs, from transaction fees to opportunity costs. Many first-timers overlook these costs or fail to weigh them against the potential financial impact of FX risks on their business. For example, paying a high premium for an option that provides minimal protection may not be worth it. Always calculate and compare costs relative to the potential risks and decide if the hedge is worth implementing. Conversely, don’t let hedging costs sway away from considering hedging – it is all about comparing these costs to how much currencies could move. For example, hedging many G10 currencies for several months costs a fraction of a percent and can protect from currency swings that can potentially exceed several percent. 4. Hedging Too Much or Too Little Finding the right balance is crucial. Hedging too much can expose your business to unnecessary costs, while hedging too little leaves your business vulnerable to currency swings. A common mistake is attempting to hedge every single transaction. Instead, focus on your key exposures – such as large contracts or regular currency flows—and use those as a starting point for your hedging programme. 5. Forgetting About Your Hedges Hedging isn’t a set-it-and-forget-it approach. Forgetting to monitor and manage your hedges can lead to mismatched coverage or missed opportunities to optimise your strategy. For instance, if your cashflows change or if market conditions shift significantly, your existing hedges may no longer align with your financial goals. Keep an eye on your portfolio and adjust as needed. 5 Things to Do When Starting to Hedge 1. Set Clear and Quantifiable Hedging Objectives Start by identifying what you’re trying to achieve with your hedging programme. Are you looking to stabilise cash flows, preserve margins, or protect against large currency swings? Defining clear and measurable objectives ensures your hedging strategy stays aligned with your business goals. For example, a good objective might be to “hedge 70% of our projected USD revenues for the next 12 months to ensure no more than a 5% deviation from budget.” 2. Periodically Review Hedging Needs Markets are dynamic, and so is your business. Changes in operations, sales projections, or market conditions may require updates to your hedging programme. Establish a regular schedule – monthly or quarterly – to review your forecasted cashflows and FX exposures. This review process allows you to identify additional risk areas, fine-tune coverage, and ensure your strategy remains effective over time. 3. Compare Prices from Two or More Providers Don’t settle for the first quote you receive. Different hedging providers – banks, brokers, or fintech firms – offer varying rates and products. Comparing pricing and terms ensures you’re getting the best deal. For example, shop around to find competitive pricing on forward contracts or options while ensuring the provider offers robust support and execution capabilities. Remember that lower fees shouldn’t come at the expense of service quality. 4. Align Hedges with Projected Cashflows Effective hedging matches the size, timing, and currency of your hedges with your anticipated cashflows. When your exposures and hedges are synchronised, you can better protect your bottom line without creating unnecessary risks. For example, if you expect a €500,000 payment in six months, a six-month forward contract for the same amount would hedge that exposure effectively. Misaligned hedges, however, could result in over-coverage or liquidity challenges. 5. Gradually Ramp Up Hedging While Fine-Tuning the Process Avoid implementing your entire hedging programme in one go. Start small with limited coverage, evaluate the results, and refine your strategy before scaling up further. This phased approach allows you to identify what works, learn from mistakes, and ensure your process runs smoothly. For example, you might begin by hedging 20% of your monthly exposures and increase gradually as you grow confident in your strategy. Take the First Step Towards Effective Hedging Hedging for the first time requires a careful balance of strategy, discipline, and flexibility. By avoiding common mistakes and applying proven best practices, you can build an FX risk management programme that stabilises your cashflows and protects your business from currency volatility. Remember, hedging is not a one-size-fits-all solution. Each organisation has unique needs, and your strategy should reflect your business’s specific goals and risks. If you’re ready to explore how effective hedging can transform your financial operations,…
The Evolution of Treasury: How Has the Role Changed in Recent Years?
The treasury function is rapidly transforming. Treasury Masterminds recently surveyed treasury professionals to uncover how their roles have evolved over the past five years. With over 100 respondents, the results highlight significant shifts in treasury priorities: Connecting the Dots: Identifying Broader Trends These findings complement last week’s poll, which highlighted financial strategy and forecasting as critical skills, closely followed by cash management and risk management proficiency. Interestingly, technology was viewed as a crucial but supportive enabler rather than a primary skill. Taken together, the results from both polls clearly illustrate an ongoing shift in the treasury landscape: technology and automation are rapidly becoming indispensable, enabling treasurers to dedicate greater focus to strategic and analytical tasks. A significant trend emerges: as technology handles routine transactional activities, treasury professionals have more capacity to engage strategically within their organizations. This reinforces the strategic significance of treasury and underscores the importance for treasury professionals to maintain robust risk management skills, financial forecasting abilities, and strong leadership and communication skills. Tech Skills of Treasurers: Essential but Enabling Although technology was identified primarily as an enabling tool rather than the primary skill set, proficiency in technology remains essential. Treasurers today must be comfortable using treasury management systems (TMS), ERP integrations, data analytics tools, and increasingly sophisticated automation technologies such as artificial intelligence (AI) and machine learning (ML). These skills allow treasurers to leverage data effectively, ensure accuracy in forecasting, manage risks proactively, and support strategic decision-making. Therefore, while not the highest-ranked individual skill, technology competency is integral to the modern treasurer’s effectiveness and efficiency. Overall, both polls underscore that treasury professionals today require a balanced, multifaceted skill set. Treasurers are becoming increasingly integral strategic advisors within their organizations, supported by powerful technological tools that enhance operational efficiency. Does this resonate with your own experience in treasury? We invite you to join the discussion and share your perspective! Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Cash Forecasting: Your Blueprint for Liquidity Performance
This article is a contribution from our content partner, Kyriba In today’s fast-paced financial environment, accurate cash forecasting serves as a blueprint for organizations aiming to maximize liquidity performance, reduce risk, and make strategic decisions with confidence. As financial teams navigate increasingly complex markets, political instabilities, and protectionist policies, predicting cash flows with precision is crucial for maintaining financial security, optimizing working capital, and supporting long-term business growth. In the context of global economic challenges such as tariffs, trade wars, and supply chain disruptions, robust cash forecasting empowers financial leaders to manage elevated costs, alleviate squeezed profit margins, and mitigate cash flow inconsistencies. This comprehensive guide offers an in-depth exploration of cash forecasting, emphasizing its critical role in treasury management and highlighting advanced strategies and technologies to achieve forecasting excellence and optimal liquidity performance. We will explore the challenges organizations face in achieving cash forecast accuracy and outline strategies to enhance these critical financial processes. By leveraging these insights, finance leaders can ensure their organizations remain agile and resilient in an ever-evolving economic landscape. Understanding Cash Forecasting Amidst the challenges posed by supply chain disruptions, regulatory shifts, and tariff uncertainties, cash forecasting equips organizations with the ability to anticipate and plan for financial needs. It is a critical process for maintaining financial stability, supporting strategic planning, and ensuring that an organization can meet its financial obligations. Cash forecasting has evolved from manual spreadsheets to sophisticated AI-driven models to address the dynamic needs of modern businesses. This evolution reflects the increasing complexity and speed of business operations, requiring more advanced and accurate forecasting tools. Understanding the fundamental components of cash forecasting is essential for effective financial management. These key concepts include various forecasting methods, the strategic application of time horizons, and the integration of critical data inputs. Together, they form the foundation of a robust forecasting strategy, enabling organizations to anticipate financial needs, adapt to market changes, and make informed decisions that drive long-term success. Forecasting Methods Time Horizons Data Inputs By integrating these forecasting methods, time horizons, and data inputs, organizations can achieve a comprehensive view of their financial future, enabling them to make informed strategic decisions and maintain robust cash management practices. Benefits of Accurate Cash Forecasting Recent financial market fluctuations demonstrate the critical role of accurate cash forecasting in maintaining liquidity and strategic agility. Companies with precise cash forecasting can adjust their investment and financing strategies quickly, avoiding liquidity shortfalls and capitalizing on favorable market conditions. This agility allows financial leaders to maintain operational stability and pursue strategic opportunities even amidst economic uncertainty. The benefits of accurate cash forecasting enhance an organization’s ability to manage cash and liquidity effectively, while also supporting strategic financial planning and risk management. By leveraging these capabilities, businesses can achieve greater financial stability and strategic agility. Enhanced Cash Visibility and Liquidity Management Cenveo Unwraps $490K inValue with 93% Cash Forecast Accuracy By adopting Kyriba’s Liquidity Performance Platform, Cenveo achieved a remarkable 93% improvement in cash forecast accuracy and a 90% increase in productivity, unlocking $490K in value in less than three months. This transformation enabled on-demand liquidity visibility and streamlined cash management processes, saving significant operational hours monthly. This comprehensive transformation not only improved operational efficiency but also paved the way for evaluating new financial opportunities, such as a potential $17.7 million cash flow benefit from supply chain financing and an estimated $1 million from business interruption claims. Improved Financial Planning and Risk Mitigation Varsity Brands Wins with100% Cash Visibility and 90% Cash Forecast Accuracy By integrating Kyriba’s advanced cash forecasting tools, Varsity Brands achieved forecasting accuracy exceeding 90% and gained 100% cash visibility. The transition to Kyriba enabled Varsity Brands to efficiently reconcile bank transactions, optimize cash positioning, and enhance overall financial strategy. This improvement not only streamlined their financial operations but also empowered the finance team to make data-driven decisions with confidence. By achieving such high levels of accuracy and visibility, Varsity Brands is poised sustained growth and operational efficiency, demonstrating the critical role of precise cash management in driving business success. Qualitative Benefits: Strategic and Operational Advantages Bray International Opens the Valve to97% Productivity and 100% Cash Visibility By adopting Kyriba, Bray International achieved remarkable results, including 100% cash visibility and a 97% improvement in productivity. This transformation not only provided comprehensive insights into cash positions but also significantly reduced the time and effort required for financial management tasks. Bray International standardized forecasting processes and improved the accuracy of cash management, leading to substantial operational efficiencies. This strategic shift allowed the company to optimize liquidity performance and support better decision-making across its global operations. By leveraging advanced treasury management technology, Bray International has positioned itself for continued growth and operational excellence, demonstrating the critical role of comprehensive cash visibility and efficient treasury operations in driving business success. Quantitative Benefits: Financial Optimization and Growth Potential The Challenges of Cash Forecasting In the current economic landscape, cash forecasting has become increasingly challenging. The complexities of global events—geopolitical tensions, trade wars, and economic shocks—highlight the need for resilient cash forecasting processes. Addressing cash forecasting challenges requires a combination of advanced technology, strategic planning, and effective resource management to create a resilient cash forecasting process that can adapt to both internal and external pressures. Internal Challenges Data Accuracy: Ensuring the accuracy of financial data is crucial for reliable cash forecasting. Errors in data can lead to incorrect forecasts, which may result in poor financial decisions and unexpected cash shortages or surpluses. Integration Issues: Organizations often face difficulties in integrating data from multiple sources, such as ERP systems, bank statements, and other financial tools. Disparate systems and data silos can complicate the consolidation process, making it challenging to achieve a comprehensive view of cash positions. Resource Constraints: Limited resources, including time, personnel, and technology, can hinder the effectiveness of cash forecasting. Many organizations struggle to allocate sufficient resources to develop and maintain robust forecasting processes, often relying on manual methods that are time-consuming and error-prone. External Challenges Market Volatility: Fluctuations in market conditions can significantly impact cash flow predictions. Factors such as currency exchange rates, interest rates, and commodity prices can change rapidly, introducing uncertainty…
10 Ways to Optimise Your Cash forecasting
This article is written by Embat In the business world, effective financial management is critical to the success and sustainability of any organisation. An essential part of this management is cash forecasting, a process that allows companies to forecast their future cash flows. In this article, we will explore 10 effective ways to optimise your cash forecasting, ensuring more accurate and reliable financial planning. What is cash forecasting? Cash forecasts are a kind of financial roadmap that companies use to anticipate how much liquidity they will have in the future. These projections include estimates of how much money will come into the company (cash inflows) and how much will go out (cash outflows) in a given period, such as a month, a quarter, or a year. In conducting these cash forecasts, it is crucial to consider both accounts receivable and accounts payable, focusing on those with specific due dates. In addition, it is important to include all planned cash outflows, such as payroll, tax, and National Insurance payments. Other cash inflows, such as bank loans or grants, should also be considered. These forecasts allow business leaders to understand how much money is expected to flow in and out of the company in a future period. This information is not only essential to ensure that sufficient cash is available to cover day-to-day operations but also to plan investments, manage debt, and prevent liquidity problems. How to optimise your cash forecasting? 10 tips As with all other business and financial considerations, cash forecasting is generally a complex process, as it is influenced by many variables. Fortunately, there are a few tips that any treasurer can apply now to optimise their cash forecasting. Here are the 10 most important ones. 1. Analyse historical data The first step to optimising your projections is to carefully analyse your company’s historical and financial data. This retrospective review provides patterns and trends that are critical to formulating accurate projections. Using advanced analytical tools and statistical techniques, such as regression analysis and predictive modelling, reveals valuable insights that might otherwise go unnoticed by management. 2. Manage your receivables and payables efficiently Accounts receivable and accounts payable are the two most important elements of accurate cash forecasting. In essence, they are the trade debts that our company owes to suppliers and that our customers owe us for deferred payment of invoices. Nevertheless, they are not always adequately reported, and this can have a negative impact. If invoices do not arrive on due dates, it becomes unclear when the invoice amount will be received. In addition, it is important that invoices are clear and error-free and that it is not too late for an invoice to be acted upon. Follow up regularly on outstanding payments to avoid future problems. 3. Collaborate across departments Cash forecasting is not just a task for the finance department. It requires active collaboration between all agents and workers within the company. For example, the sales team provides information on market trends and revenue expectations, while the purchasing department may have data on future expenses and the tax team may provide relevant information on upcoming tax assessments. This cross-departmental communication ensures that all relevant variables are considered within these forecasts. It also ensures that they are always up to date. 4. Adequately monitor market conditions Market conditions can change rapidly, significantly affecting cash forecasting. A change in interest rates makes debt more expensive, while a tax increase reduces sales. Staying on top of key economic indicators, such as interest rates, inflation rates, and market movements, is critical. Adjusting your projections based on these indicators can help anticipate and mitigate the impacts of market changes on the financial health of your business. 5. Efficient inventory management Efficient inventory management plays a key role in optimising a company’s treasury. A well-managed inventory ensures that capital is not unnecessarily tied up in stock while also preventing shortages that could lead to lost sales. To optimise this important aspect of business performance, it is important to understand the demand patterns for your products and services, including seasonal variability. This allows you to anticipate when you will need more or less stock and resources, thus optimising purchasing and production. 6. Continuous employee training Continuous training and development of the finance team is essential to maintain and improve efficiency and accuracy in the management of corporate finances. A well-trained team is better equipped to meet financial challenges, adapt to market changes, and effectively use new technologies and methods. Training can range from basic accounting and finance concepts to sophisticated use of a treasury solution and financial risk analysis. Investing in professional training programmes and specific workshops, as well as access to online courses and conferences, can provide staff with the skills and knowledge necessary to effectively manage the company’s finances. 7. Efficient working capital management Effective working capital management is an important aspect of improving cash forecasting, as it focuses on optimising the management of cash, inventories, receivables, and payables. By managing these components efficiently, a company can ensure adequate liquidity and greater financial stability, resulting in better cash forecasts. The objective is to maintain a balance that allows the company to have enough cash available to meet its daily operations, such as payroll or tax payments, but without tying up too much capital in non-productive assets. 8. Tax planning Efficient tax planning is essential to optimise a company’s cash forecasting. Tax planning involves understanding and implementing tax strategies that help minimise the tax burden in a legal manner while ensuring compliance with all tax obligations. By taking advantage of available deductions, exemptions, and tax credits, a company can significantly reduce its tax liability, which in turn frees up more capital to reinvest in the business or to hold as a cash reserve. In addition, knowing in advance what the next settlement will be reduces uncertainty around cash projections. 9. Automating payments Implementing automated payment systems significantly reduces the possibility of human error, which can arise from manual data entry or the tracking of multiple installments. This can lead to problems such as duplicate payments, late payments resulting…