5 Benefits of Treasury Centralisation
This article is written by Kantox In the dynamic landscape of global finance, companies are constantly seeking ways to optimise their operations and enhance financial control. One key strategy to achieve this objective is treasury centralisation. This approach involves consolidating treasury functions to streamline financial processes and achieve a multitude of benefits. In this blog post, we will explore the significant advantages that treasury centralisation brings, focusing on enhanced control of the FX workflow, complete visibility of the group’s exposure, lower banking costs, consolidated FX policy, and more efficient treasury operations. What are the 5 benefits of Treasury centralisation in FX management? Implementing consolidated treasury operations has many benefits for multinational companies that need to manage their FX exposure across many subsidiaries around the world. The following benefits of treasury centralisation are the most important ones that organisations can realise: Treasury centralisation empowers organisations with greater control over their foreign exchange (FX) workflows. By centralising treasury functions, companies can establish standardised processes and protocols for managing currency risks. This enhanced control allows for better monitoring and management of currency exposures, reducing the impact of market volatility on the organisation’s financial performance. With a centralised FX workflow, companies can implement timely and strategic hedging strategies to mitigate risks effectively. One of the fundamental advantages of treasury centralisation is the achievement of complete visibility into the group’s exposure. When treasury functions are consolidated, organisations can aggregate data from various business units and subsidiaries. This holistic view enables treasurers to identify and analyse the entirety of the group’s financial exposure. Armed with comprehensive information, companies can make informed decisions, optimise cash management, and proactively address potential risks arising from currency fluctuations or other market uncertainties. Treasury centralisation often leads to lower banking costs, a crucial aspect for organisations looking to optimise their financial operations. By consolidating banking relationships and centralising cash management, companies can negotiate better terms and fees with their banking partners. This not only reduces the overall cost of financial services but also enhances efficiency by streamlining banking relationships. Lower banking costs contribute directly to improved financial performance and increased profitability. Maintaining consistency in managing currency risks across diverse business units can be challenging. Treasury centralisation addresses this challenge by facilitating the development and implementation of a consolidated FX policy. A standardised policy ensures that all entities within the organisation adhere to the same risk management principles. This uniformity not only enhances risk control but also simplifies compliance and reporting processes. A consolidated FX policy is a key element in creating a resilient financial framework for the entire organisation. Efficiency is at the core of treasury centralisation. By consolidating treasury functions, organisations can streamline their operations, reduce duplication of efforts, and eliminate inefficiencies. Automated systems and centralised processes enable treasurers to focus on strategic decision-making rather than administrative tasks. This increased efficiency not only saves time but also enhances the overall agility of the organisation in responding to changing market conditions. Should you implement a centralised Treasury function? There’s no simple answer to this question, and it will always depend on the business model, the level of control that the CFO wants to have and the size of the Treasury function to handle this. But one thing is sure, it should be a strategic decision aligned with the organisation’s goals. To identify whether Treasury centralisation is the right solution for you, you should carefully evaluate your current processes: what is working and what could be improved? And think if some of the above-mentioned benefits make your operations more profitable by controlling the organisation’s cash centrally? Of course, you may already have a good solution in place, but if you have business units and subsidiaries globally you may want to consider the option of implementing a centralised Treasury function in the near future. Moreover, with the help of automation solutions to support you in this complicated task, you could benefit from centralising your FX management process. Achieving enhanced visibility and control In conclusion, treasury centralisation emerges as a strategic approach to financial management, offering a myriad of benefits to organisations navigating the complexities of the global financial landscape. With enhanced control of the FX workflow and complete visibility of the group’s exposure to lower banking costs, consolidated FX policy, and more efficient treasury operations, the advantages are clear. As companies continue to seek ways to optimise their financial processes, automated treasury centralisation stands out as a powerful solution to achieve greater control, efficiency, and resilience in today’s competitive business environment. 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 to get more information. Notice: JavaScript is required for this content.
Franklin
Do You Have a Contingency Plan in Treasury?
In the fast-paced world of Treasury management, the unexpected can happen at any time. Whether it’s losing access to your banking portal, an office-wide internet outage, or a fire breaking out in your workplace, having a robust contingency plan is essential. Treasury operations are critical to an organization’s liquidity and financial stability, making it crucial to prepare for disruptions that could impede your ability to operate smoothly. A recent example highlights the importance of being prepared: on September 2, 2024, the Lloyds Banking app went down, leaving thousands of customers unable to view transactions or manage their accounts. This incident underscores how vulnerable Treasury operations can be when technology fails, emphasizing the need for a comprehensive contingency plan. This article will guide you through key considerations and actions you can take to develop a contingency plan for your treasury operations, using real-life scenarios like the Lloyds Banking app outage as a foundation. 1. Assess Potential Risks The first step in developing a contingency plan is to identify potential risks that could disrupt your treasury operations. These risks can be categorized into different areas: Understanding these risks helps in prioritizing and preparing for them. 2. Develop Backup Access for Bank Portals Bank portals are the backbone of daily treasury operations, used for executing payments, monitoring cash positions, and reconciling accounts. The Lloyds Banking app outage demonstrates how vulnerable organizations can be to disruptions in access. Here’s how you can mitigate these risks: 3. Prepare for Office Internet Outages An office internet outage can bring your treasury operations to a halt. To avoid this, consider the following strategies: 4. Develop Response Plans for Physical Disruptions (Fire, Natural Disasters) Physical disruptions like fires, floods, or other natural disasters pose significant risks. Here’s how to prepare: 5. Cybersecurity Measures Cyber threats are one of the most significant risks to treasury operations, with potential financial and reputational damage. A strong cybersecurity contingency plan should include: 6. Staff Training and Cross-Training Staff are the backbone of your contingency plan. Ensure your team is well-prepared to handle disruptions by: 7. Testing and Reviewing the Contingency Plan A contingency plan is only as good as its execution. Regular testing and review are crucial: 8. Establish Communication Protocols Effective communication is critical during any disruption. Establish clear communication protocols to ensure that all stakeholders are informed and can respond appropriately: Conclusion The recent Lloyds Banking app outage serves as a stark reminder of the vulnerabilities in our treasury systems. Contingency planning in treasury is not just about having a backup system; it’s about having a comprehensive approach that covers every aspect of your operations. From technical failures to physical disruptions, a well-thought-out plan can mean the difference between a minor hiccup and a major operational failure. Regularly reviewing and updating your contingency plan ensures that you remain prepared for whatever challenges come your way, safeguarding your organization’s financial stability. Take the time to invest in your contingency planning today, because when the unexpected happens, being prepared is your best defense. 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.
Currency Markets: Hedgers, Capital Markets and Investors
This article is a contribution from one of our content partners, Bound One of my first lessons in hedging When I first started working in fintech, over a decade ago, I saw these videos on CME. I think the page might have changed a little in the past 10 years, but I think the videos are the same. Haha. I didn’t really understand hedging at the time, but this was one of my first lessons on how trading and capital markets work. Role of Hedgers Role of Speculators How I think of the market structure Today, I generally think of the market in 3 big segments. 1. People who have risk, but don’t want it—hedgers 2.Capital market and financial market participants that make everything work These roles are varied and different, but as a group they play the broad role of helping buyers and sellers find each other at efficient prices. Some examples of these are: 3. People who don’t have exposure, but want it—investors/speculators What role do you want to play? Anytime you have future cash flows in foreign currencies without corresponding hedges, you’re exposed to exchange rate movements between now and the time of that future cash flow. By doing nothing with future foreign cash flows, you’re running currency exposure similar to a currency investor/speculator, albeit for a different reason. Are you purposefully trying to take EUR risk? 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. Recommended Reading Notice: JavaScript is required for this content.
The Realities of Strategic Treasuries – Managing Complexity and Stakeholder Impact
Introduction Building on our previous discussion, we now focus on the operational realities and stakeholder impacts of strategic treasuries. Note: This article dives into the complexities of organisational structures and their impact on strategy and performance. If these topics are new to you, consider revisiting this article later when you’ve covered other foundational concepts. However, if you’re already working with strategic treasuries or are keen to talk to your treasury or help a client evolve to a strategic level, this deeper understanding will be key. Operational Complexities in Strategic Treasuries Strategic treasuries are inherently complex, requiring advanced systems, highly skilled personnel, and a nuanced understanding of both the organisation’s financial needs and the broader organisational context. This complexity introduces significant challenges: Strategic Treasuries and their relationship to Traditional Finance Functions Strategic treasuries are results- rather than control-oriented. The implications of this are profound. Naturally, it’s hard for CFOs and other stakeholders to adopt different mindsets when comparing treasury to other finance functions. In control-oriented treasuries, cash forecasting is usually based on information sourced from finance functions or at least presented in an accounting format. This changes in strategic treasuries. All strategic treasuries focus on dynamic cash flow management rather than the end-of-month, -quarter or -year snapshot-oriented approach of accounting. Value-adding external-oriented treasuries are more-or-less separate businesses, so the relationship and the data transferred between them and other finance functions is not a major issue. Company-orientated ones, on the other hand, are normally still part of finance, which can be confusing for all parties, treasurers and non-treasurers alike. It’s difficult to know which lens to use, or whether to use both, when looking at or working with this kind of treasury. Accounting’s primary use is to show and explain past performance. Strategic treasuries look forward. They manage cash in real-time to ensure long-term solvency and support profitability. To do this, they use controls based on today’s value of future cashflows (i.e., what an external bank would pay or receive to take over these future cashflows, theoretically). They do not use an offset of future assets and liabilities sourced from monthly and longer accounting time-buckets. Assets and liabilities are approximations for cashflows, not actual cashflows, so the first method is more accurate. In complex strategic environments, lower levels of treasury personnel are typically controlled using these present-value-of-future-cashflow measures, while higher levels are controlled both by these and by accounting-based measures. This, by the way, is one of our tells: If the normal language used by everyone in the treasury is ‘value at risk’ or variations of this such as ‘risk-adjusted value at risk’, or ‘variance analysis’, the treasury is more likely to be a strategic treasury. But, warning, some companies produce reports with value at risk and variance analysis figures and then don’t use them. It is their everyday use that tells you whether the treasury is a strategic one or not, not whether they are in a report. Accountants – and most CFOs who started as accountants – are trained to value prudence over a balanced-view early on in their careers. This can be a double-edged sword. For example, as we mentioned in the previous article, Tesco used its consistent cash surplus to create a banking line of business, offering customer loans and banking services that drove more business back to its core retail operations. In contrast, Morrisons, another UK supermarket chain, took a more conservative approach, using its cash surplus to buy out property leases, a move that reduced costs but didn’t provide the same financial advantages as Tesco’s strategy. This difference made Morrisons a target for private equity restructuring, ultimately leading to its sale to a private equity firm in 2021. Those of you who are accountants wanting to understand and work with treasury must internalise and accept this difference, and treasury must do the same, for both sides to work effectively together. Prudent CFOs should ask, “Am I getting the best results possible from the core company’s financial advantages and my treasury function?” You have the hard job. You need to view Treasury through both lenses – the balanced-view and the prudent one. This is especially challenging in large and complex operations. Summary of Benefits Many companies with over 2 bn$ in sales can financially justify having a strategic treasury. Others have to have one anyway. Structured and run properly, they provide material value-add to organisations including to non-treasury stakeholders. More importantly, they make the organisation resilient, ready for black swan events which all companies eventually face. The benefits of strategic treasuries—enhanced profitability, improved risk management, and increased organisational flexibility, especially during times of crisis —were explained in the previous article. They are substantial but they do come with the challenges outlined above. Still, if you have roughly over 2 bn$ in sales, less if there is a strategic imperative, in my opinion, it’s worth moving towards becoming a strategic treasury. If you feel put off by the complexities, re-review the benefits listed in the last article. The benefits are existentially worthwhile. Every company will eventually face a black-swan event. Only a strategic treasury can buy management enough time to sort the problem out. Impact on External Stakeholders Strategic treasuries impact external stakeholders as well, including but not limited to those of you who are suppliers, customers, and financial partners. Unlike the internal benefits discussed before, the impacts on you are different: Conclusion Strategic treasuries are complex, more like independent businesses than traditional finance functions. Accepting this and being willing to take on the associated complexities is difficult. Despite this, those organisations who do find them to be existentially worthwhile, materially valuable and, in best case situations, strategic differentiators. Non-treasurers need to look at these functions differently from operational treasuries to understand and make the most out of them. Strategic treasuries are complex functions that can significantly enhance an organisation’s performance, but they come with their own set of challenges. From managing high operational costs to maintaining alignment with broader strategies, the stakes are high. Knowing about…
Nicholas
Visa to acquire fraud detection company FeatureSpace?
Visa is reportedly in advanced discussions to acquire the fraud-prevention company Featurespace, with the deal potentially reaching a value of $925 million, according to a report from Sky News on Saturday, August 24. While some sources suggest the deal could be worth significantly less, the exact figure remains uncertain. Featurespace, whose clients include major financial institutions like HSBC, NatWest Group, and Worldpay, has experienced growing demand for its fraud detection services amid a rise in financial scams worldwide. The company’s flagship technology, Adaptive Behavioral Analytics, leverages machine learning to detect and prevent fraudulent activities in over 180 countries. Both Visa and Featurespace have been contacted for comments on the potential acquisition but have yet to respond. Featurespace’s Innovations in Fraud Detection The report also highlights Featurespace’s connection to the late tech investor Mike Lynch, who recently passed away in a tragic incident off the coast of Sicily. Featurespace paid tribute to Lynch, recognizing his significant contributions to the company. “It is a high statistical probability that Featurespace wouldn’t be a thriving technology company without Mike,” the company stated, acknowledging his role as an early investor and his decade-long tenure as a Non-Executive Director from 2008 to 2019. Lynch’s support helped drive the development of Featurespace’s innovative AI technology. Last month, Dave Excell, co-founder of Featurespace, spoke to PYMNTS about the rising prevalence of financial scams, exacerbated by new tools accessible to fraudsters. Excell emphasized that Featurespace’s solutions address multiple types of scams, including job-related scams that have increased by 118% year over year, according to data from the Identity Theft Resource Center. These scams often deceive job seekers by posing as legitimate recruiters or employment agencies. To help banks and financial institutions combat these growing threats, Featurespace recently introduced a new product called Scam Detect. This tool focuses on data sharing, allowing banks to better utilize existing information by integrating it into a cohesive intelligence framework to track and verify the movement of funds. As the talks between Visa and Featurespace progress, the potential acquisition underscores Visa’s commitment to enhancing its fraud prevention capabilities amid a rapidly evolving financial landscape. Insights from Treasury Expert We thought it would be valuable to get perspectives visa acquiring Featurespace from Treasury expert Baptiste Collot, CEO of Trustpair. Baptiste Collot, CEO of Trustpair, Comments: With 96% of US companies targeted by payment fraud at least once in 2023, it’s not surprising that all stakeholders – financial institutions, payment providers, and corporates – are getting more involved in fraud prevention. Banks are traditionally seen as the gatekeepers against fraud but payment providers and corporates also have their role to play, by adopting the right tools and processes.Having a collaborative approach that leverages the strengths of all involved is critical to safeguard effectively against increasingly sophisticated threats. It’s what Visa is doing with this potential acquisition of Featurespace and what we’ve been doing at Trustpair for years, thanks to innovative partnerships with banking leaders.This is all very promising: indeed, it’s only by aligning our efforts that we’ll be able to fend off the threat! Additional Resources 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.
How payment hubs work in the Netherlands
This article is written by Nomentia Organizations of many sizes reach a point where payment technologies become inevitable. As organizations grow, the volume of payments rises, more bank accounts need to be opened (more e-banking tokens and manual payments), ERP systems start playing a more prominent role, and you’ll likely add new entities and users, only to name a few challenges. This results in highly complex and inefficient payment processes. In recent decades, companies have increasingly embraced modern technologies to address complex business environments. Payment hubs have become more prevalent, particularly in markets like the Netherlands, to address the challenges growing companies face. In this article, we will examine how payment hubs typically operate in the Netherlands, drawing on insights from industry expert Huub Wevers. How companies in the Netherlands commonly perceive payment hubs Payment hubs are becoming increasingly popular in the Netherlands and are considered the norm for larger enterprises. Small and medium-sized enterprises (SMEs) are also becoming more aware of the benefits of payment hubs. However, due to the different nature of organizations, such as their industry or business models, payment hubs can differ significantly, leading to varying expectations from key stakeholders. Additionally, there are multiple payment technology providers, each with solutions that may vary slightly from one another. As a result, we reached out to our expert, Huub Wevers, who has extensive experience in the banking and fintech industry for several decades, to offer additional insight into how companies view payment hubs. Huub regularly engages with various organizations, discussing their payment solution needs and challenges, which has made him an expert in understanding their typical requirements and how technology can effectively support them. “We have observed a pattern where larger companies increasingly recognize the necessity of a payment hub solution. This is not only due to the burden of managing multiple bank tokens or ERP system connections, but also because of the growing threat of security breaches involving payments and finance team members. Incidents of scams, phishing, and hacking are at an all-time high. These challenges can only be addressed through secure and automated processes.” – Huub Wevers, Head of Sales Typical starting points for implementing hubs in the Netherlands The situation Huub describes is a common one, and sometimes, it takes a scam or faulty payment for companies to realize that they need to improve their processes by adopting new technologies because their current processes are simply not scalable any longer. Usually, finance becomes more complex as companies expand. Depending on the organizational structure, employees in finance, accounting, or treasury may start to notice inefficiencies in payment processes. For example, manual payments from different bank accounts and time-consuming manual three-way matching procedures (common in B2C companies) can be problematic. Additionally, ERP file formats may not align with what banks require. And it doesn’t stop there; payment control is hard to maintain centrally when your company has multiple subsidiaries with their own local bank accounts (often with different ERP systems). As the Netherlands is a major international trading hub, this is the reality for many companies based there. These challenges are widespread among companies and have not gone unnoticed. Over the years, technology vendors have played a crucial role in addressing these challenges and have made significant developments. Huub, with a long history of working for banks such as ABN AMRO and NatWest Group, has firsthand experience of these technological advancements. “While working at ABN AMRO, our team was developing delivery channels, for host-to-host bulk payment systems, that we were delivering to global companies. Since then, payment technologies have evolved to become business-critical systems for many companies.” Huub Wevers. In his roles, Huub also partnered with B2B SaaS companies to roll out payment solutions to European companies. How are payment hubs set up in the Netherlands? The setup of typical payment hubs in the Netherlands can be likened to a spider positioned at the center of a complex web of systems, banks, entities, and users, efficiently overseeing everything. In terms of system and bank integrations, hubs are commonly linked to ERP systems, accounting systems, payment service providers, banks, and third-party data providers that offer market data for making informed decisions. ERP systems gather essential information about supplier payments, which can be linked with payment hubs to automatically match payments with outstanding items. The most commonly used ERP systems in the Netherlands are SAP, Microsoft, Exact, AFAS, and Oracle. Payment hubs are typically connected to all of the company’s bank accounts either immediately from the start of implementation or gradually, depending on whether new connections need to be established or how local entities, banks, and regulations operate. These bank connections allow the hub to centrally process most payment types, regardless of whether it’s a local entity in a specific country. The most commonly used banks for corporates in the Netherlands are ING, Rabobank, and ABN AMRO. Internationally, the choice of banks varies depending on where organizations have their operations. Accounting systems can contain useful information related to transactions. By automating payment processes with a payments hub, statements can automatically be sent to these systems for accounting purposes. Some common examples of accounting systems used in the Netherlands are QuickBooks, Microsoft Dynamics, Exact, Visma, and Oracle, among others. Companies must have the most up-to-date insights into foreign exchange (FX) rates and interest rate changes, especially when dealing with market fluctuations in FX or interest payments. Payment hubs can often connect to market data providers such as Reuters, Bloomberg, or other relevant platforms and automatically apply the latest rates to reports. There is a growing demand for integrating payment hubs with payment service providers. This is because payment hubs can share statements with the providers to analyze the expected flow of money into different bank accounts from debit and credit cards, as well as other electronic payments. This also provides an indication of the available cash for executing payments in the near future. Additionally, if clients require refunds, their payments can be more easily traced back centrally. Some of the biggest PSPs in the Netherlands…
Why Treasurers Should Be Influencers Inside Their Companies
In today’s rapidly evolving corporate landscape, treasurers need to do more than manage cash flow, investments, and risk. They must step up as influencers within their organizations. Unlike the influencers you find on TikTok or Instagram, corporate treasurers need to wield influence across various departments—like Procurement, Sales, and Financial Planning & Analysis (FP&A)—to ensure the seamless flow of accurate and timely information. They must also know how to influence their own leadership, particularly the Chief Financial Officer (CFO), to secure the budget and resources needed for critical improvement projects and technological advancements. The Challenges: Information, Formats, and Timing Treasurers often find themselves navigating a sea of data that isn’t always suited to their needs. For example, departments like Sales, Procurement, and FP&A are typically more focused on profit and loss (P&L) statements rather than cash-based formats that are essential for treasury operations. While P&L data provides valuable insights into a company’s profitability, it doesn’t always align with the cash reality—when the money actually hits or leaves the bank account. Timing differences between revenue recognition and actual cash inflows can lead to misalignments in financial planning and decision-making. Why Treasurers Need to Be Influencers To mitigate these challenges, treasurers must adopt a more proactive role, akin to that of an internal influencer. Here’s why: Influencing the CFO for Budget and Resources A critical aspect of a treasurer’s role as an influencer is to also engage effectively with their direct boss, often the CFO. Treasurers may need to influence the CFO to secure budgets for improvement projects, new technologies, or additional resources that enhance treasury operations. Here’s how treasurers can achieve this: Strategies for Treasurers to Become Influencers Here are actionable strategies for treasurers to build their influence within their organizations: The Benefits of Being an Influential Treasurer By becoming influencers, treasurers can drive several key benefits for their organizations: Insights from Treasury Experts We thought it would be valuable to get perspectives from Treasury expert James Kelly, who is also a Treasury Mastermind Board member. James Kelly, Senior Vice President of Treasury at Pearson, Comments Influencing skills are particularly necessary to get buy-in for cross-departmental projects. Treasurers often won’t be able to offer direct benefits to other teams and so need to be able to influence others to get involved. That may require a quid pro quo from time to time where treasury prioritises projects for others. Treasurers often sit on the finance leadership team, but to justify that position, they need to show their worth beyond just treasury, showing commerciality, project management and technical skills Even internal promotions within Treasury may require advocation from other teams, meaning it’s important to build alliances. Conclusion Treasurers have a unique vantage point within organizations, but to maximize their impact, they must step out of their traditional roles and become influencers. By cultivating relationships, communicating value, leveraging technology, influencing their CFOs for resources, and standardizing processes, treasurers can influence the flow of information, ensure their involvement in strategic decisions, and enhance their organisation’s financial resilience. In doing so, they not only elevate their own role but also contribute significantly to the company’s long-term success. Additional Resources 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.
When is the right time to connect ERPs and other systems?
This article is written by Cobase In an era where businesses are expanding globally and financial operations are becoming more complex, the integration of ERP systems with banking platforms is crucial. Many finance departments struggle with limited bank connectivity, delayed end-of-day statements, and manual processes that hinder efficiency and accuracy. This blog explores these challenges and offers insights into how integrated solutions can address these issues effectively. Struggles with current ERP systems Limited bank connectivity Many ERP systems only provide connectivity to local banks or specific regions, which is insufficient for globally operating businesses. This forces finance departments to manage multiple bank portals and interfaces, each with its own requirements. The complexity of handling different formats and protocols can lead to significant delays and errors. For instance, a multinational company might need to maintain different connections for each of its banking partners, leading to a fragmented and inefficient financial management process. According to a report, up to 80% of global companies face difficulties in establishing bank connectivity due to varying protocols and standards across different regions. Delayed end-of-day statements End-of-day statements are essential for accurate financial reconciliation and cash management. Delays in receiving these statements can cause significant issues, such as cash flow problems and inaccurate financial reporting. Time zone differences, varied bank cut-off times, and processing delays often contribute to these challenges. In practical terms, a company might find itself waiting hours or even days for transaction data to be updated, preventing timely reconciliation and impacting overall financial decision-making. A study revealed that 67% of finance departments experience delays in receiving end-of-day statements, impacting their ability to manage cash flows effectively. Manual payment processes Manual handling of payment batches is another significant challenge. Finance departments often have to download payment files from the ERP system manually and upload them to bank portals. This process is not only time-consuming but also prone to errors and fraud. Simple tools like Notepad can be used to alter payment files, increasing the risk of unauthorized changes. A real-world example involves companies where employees manually adjust payment files, leading to potential discrepancies and increased risk of fraudulent activities. According to research, manual payment processes can lead to a 25% higher error rate compared to automated systems. Insufficient capabilities Even when ERPs offer some level of bank connectivity, they often lack the full range of capabilities needed by large organizations. This includes inadequate support for multi-currency transactions, complex authorization workflows, and integration with various financial services. As a result, finance departments must manage multiple systems and manual processes, which reduces efficiency and increases the risk of errors. For example, a survey indicated that 73% of companies with international operations face challenges due to insufficient ERP capabilities, leading to reliance on manual interventions and external systems. Real-world examples of ERP connectivity challenges Integrating ERPs with banks is often more complex than anticipated. For example, the process of connecting a single bank to an ERP system can take six to twelve months and involve handling up to 500 different format variants for international projects. This complexity can lead to significant delays and increased costs. A survey conducted by PwC found that 54% of companies experienced significant delays in their ERP-bank integration projects due to the complexity and variability of banking formats and protocols. Solutions to improve ERP-bank connectivity and efficiency Automated and secure payment processing Cobase offers a centralized solution for handling payments, eliminating the need for manual uploads and downloads. Cobase automates the distribution of payment files to the appropriate banks in the correct formats, saving time and reducing the risk of errors and fraud. By automating these processes, companies can ensure that payments are processed efficiently and securely, reducing the workload on finance teams and minimizing the risk of human error. A case study showed that a company using Cobase reduced their payment processing time by 50% and decreased errors by 30%. Real-time cash visibility Cobase addresses the issue of delayed end-of-day statements by providing near real-time cash visibility. This integration ensures that data from all bank accounts is available as soon as it is released, allowing finance departments to maintain an up-to-date view of the company’s cash position throughout the day. This capability is crucial for making informed financial decisions and managing cash flow effectively. Companies can achieve a 40% improvement in cash management efficiency after implementing the solution. Comprehensive bank connectivity Cobase connects to a wide array of banks worldwide through multiple channels such as SWIFT, host-to-host (SFTP), EBICS and APIs. This global connectivity allows businesses to manage their finances efficiently, regardless of geographic location or the number of banks they work with. By leveraging existing connections and maintaining them, Cobase reduces the complexity and cost associated with building and maintaining individual bank connections. Businesses experienced a 60% reduction in integration costs using Cobase’s comprehensive connectivity solution. The ultimate guide for achieving efficient and safe multibank cash visibility and payments To optimise cash management processes you need to apply a number of key principles to increase the level of insight into how cash moves into and out of your organisation. Cobase has listed these key principles in ‘The ultimate guide for achieving efficient and safe multibank cash visibility and payments’. In this practical guide, Cobase divided the principles into four categories and within each category you’ll find questions that you can ask yourself to determine your current level of efficiency and spot the areas you need to improve. All the questions are related to the following topics: Reading and pondering the questions will form a starting point for conversations that lead to meaningful change and improvement. Download ‘The ultimate guide for achieving efficient and safe multibank cash visibility and payments’ and find out how your cash flow (management) processes can be optimized. 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…
What’s Treasury’s impact on business performance? (Part 2: Strategic Treasuries)
Introduction Strategic Treasuries – entities that transform treasury into a core driver of business performance In the previous articles, we looked at basic and control-oriented treasuries, short- and medium-term-focus in maintaining solvency and managing financial risks. But what happens when a treasury goes beyond these operational levels? What if they transform into functions that not only manage risks but also actively drive organisations forward, dealing proactively with internal and external stakeholders and contributing directly to profitability and strategic goals? Welcome to the world of strategic treasuries—the rare but powerful entities that transform treasury from a back-office function to a core driver of business performance. As promised in the first article, where we said we’d explain why some treasuries are profit centres, we’ll now explore why certain treasuries make this leap and what impact they have on the organisation. The Evolution of Treasury: From Control to Strategy Strategic treasuries don’t evolve from control-oriented to actively seeking opportunities to add value. The business context forces the change. Let’s start by revisiting the journey of a treasury function. Basic treasury is about managing cash—ensuring that the business can meet its short-term obligations and avoid insolvency. Control-oriented treasuries take this a step further by improving forecasting and applying more professional solvency and risk control techniques, extending their focus from short- to medium-term, using information sourced mainly from other finance functions. Strategic treasuries operate on an entirely different level. These treasuries don’t just manage what’s already there—they actively seek opportunities to enhance profitability, go beyond ensuring solvency to adding value, and align with the organisation’s broader strategic goals. In other words, they transform cost centres into profit centres, directly impacting the bottom line. But—and this is important—they don’t evolve from a control-oriented treasury as a matter of course. The business context outside of treasury forces or opens the door to this change. We’ll talk about this later in this article. Strategic Treasuries and Their Impact on Business Performance If control-oriented treasuries are like the police, handling day-to-day issues, strategic treasuries are like the armed forces, handling unforeseeable, potentially existential financial risks. Being a profit centre is no longer just about creating profits, it’s about proving that the functions are good enough to handle crises, buying the board and giving management time to find a long-term solution So, how exactly do strategic treasuries influence business performance? The answer lies in several key areas: While all treasuries aim to maintain solvency, strategic treasuries focus on long-term financial health. This involves diversifying financing sources, managing complex cash flows, and ensuring that the organisation is prepared for future financial challenges. The result? A more resilient company, better equipped to navigate economic fluctuations and capitalise on growth opportunities. And, think of it another way! The above doesn’t do justice to just how much better they manage solvency. Think of control-oriented treasuries as being like the police – fine for managing problems day-to-day for the foreseeable future. But what about the unforeseeable future! That’s the job of the armed forces. You hope they won’t be needed but you want them there to counter any possible existential problem scenario. You do want them to train every day to be ready, even if you don’t think that scenario is likely. Strategic treasuries are like the armed forces of finance, staffed by more skilled and specialised teams, equipped with better infrastructure and granted the authority to act quickly and proactively. They are there to manage ‘black’swans’—unforeseen material adverse changes. Being profitable is now not only for the sake of increasing profits but, more importantly, to prove to the Board, C-Suite and everyone else that they’re ready to swing into action when needed. After all, if they can’t deliver solvency and make profits reasonably consistently, they’re obviously no good! So a wise CFO, still risk-control oriented, understands that a strategic treasury is not just a profit centre but also an extension of a control-oriented treasury. An extension that now manages unknown as well as known future risks. In a crisis, it buys time for management to find longer-term solutions. Whereas control-oriented treasuries are cost-centres, strategic treasuries contribute to profitability to prove their worth and make sure they’re not a burden on sales and procurement functions, reducing the need for higher core business profitability. By engaging in proactive financial management, these treasuries don’t just control risks—they take advantage of market opportunities to improve returns. Whether it’s by using more sophisticated foreign exchange strategies, better interest rate management, or innovative financial products, strategic treasuries significantly boost a company’s profit margins. Strategic treasuries also improve productivity across the organisation as well as their own. They not only provide value-adding services to internal stakeholders—such as financing solutions for sales or optimising payment terms with suppliers—they also provide systems to interface with internal and external customers, improving service-levels, streamlining operations and reducing costs. The impact is felt company-wide, as smoother operations lead to better overall performance. The most critical role of a strategic treasury is its alignment with the company’s broader goals. Unlike control-oriented treasuries, however, company strategy is affected by the strategic treasury’s strategy and vice versa. This alignment ensures that every decision made within the Treasury contributes to the overall success of the organisation – and vice versa. Types of Strategic Treasuries Not all strategic treasuries are alike. In fact, they typically fall into two broad categories: How can you spot these treasuries? As usual, look for a few key “tells”: Why Companies Invest in Strategic Treasuries Given the complexity and costs of strategic treasuries, and the fact that they are not part of the core business, why do organisations choose to develop them? The reasons vary, but they often boil down to a few key factors: Conclusion Strategic treasuries represent the pinnacle of treasury evolution, transforming what is traditionally a cost centre into a powerful driver of business performance, but also a safety net against unforeseeable financial risks. From enhancing profitability and expanding long-term liquidity (solvency requirements plus excess funds) to improving operational efficiency (productivity) in…