For any business, the ability to manage cash flow and maintain visibility into expenses is a must. But according to new research, treasury management officials in the Asia Pacific region are naming cash flow visibility and predictability as their top priority for the coming year.
When taking a closer examination into the treasury management practices among APAC businesses, however, some confounding patterns emerge. While seemingly contradictory, these trends likely signal a potentially lucrative market for cloud-based software service providers to fill demand in a region that appears ready to adopt more sophisticated treasury management technology.
A Progressive Approach
Researchers conducting the second-ever Asia Pacific Treasury Management Barometer Survey, published last week by Bank of America Merrill Lynch and SunGard, found striking patterns among treasury officials in the Asia Pacific region. The survey found that about one-third of treasury managers reported plans to use cloud-based or hosted treasury management solutions, which, according to SunGard senior vice president of corporate liquidity sales Ash Khalek, suggests “treasurers recognize the role of these solutions to ‘leapfrog’ legacy technologies and achieve rapid implementation of a best-in-class treasury technology infrastructure.”
Cross-border trade conducted by companies in the Asia Pacific region was found to be on the rise. According to the survey, 35 percent of treasurers said they are implementing Results-Based Management to conduct cross-border trade – a significant increase from the 16 percent that reported doing so in 2013. Further, 78 percent of the corporations surveyed said that they conduct payments with three or more countries. Researchers also found that 41 percent of treasurers reported use of a mobile device, up from just 14 percent in 2013.
Such findings suggest that treasury officials in the Asia Pacific region embrace innovative technology and welcome a global approach to their business. But the remaining results from the survey provide another side of APAC treasury management.
Like so many treasury management officials around the globe, many of those surveyed in this research revealed an ongoing dependence on outdated tools. The study found that 66 percent of treasury management officials said they aren’t using treasury tools to forecast cash flow. Instead, 69 percent of officials in both emerging and developed economies across the Asia Pacific region reported relying on spreadsheets to manage finances.
The survey suggests significant shortcomings within the workplace that prevent Asia Pacific companies from adequately managing their finances. According to researchers, internal platforms, policies and procedures were highlighted as the reason so many treasury officials are unsatisfied with their cash flow visibility capabilities.
It is this mix of acknowledging the power of global and technologically advanced tools like mobile devices, but the continued use of outdated methods like spreadsheets, that create a potential for treasury management Software-as-a-Service and cloud-based solutions providers to meet rising demand across the Asia Pacific market.
According to researchers, cash flow visibility stands as 60 percent of APAC enterprise treasury officials’ No. 1 priority for the next one-to-two years, above rationalizing bank accounts, mitigating counterparty risk, or yield enhancement and interest expanses. Yet only 14 percent of respondents said they are completely satisfied with the tools available to gain visibility into and predict cash flow.
How To Fuel Change
While the study concluded that a lack of internal support, namely a lack of adequate internal platforms, policies and procedures, are to blame for this dissatisfaction in cash flow forecasting capabilities, respondents are voicing a need for change. While just 7 percent already have cloud-based technology in place within their treasury operations, that figure is expected to spike to 34 percent in the near future. More than half of those surveyed plan to boost their investment in treasury-focused technologies in the next one-to-two years.
The rise in cross-border operations, for example, emphasizes “the need for sophisticated cross-border payment solutions,” the research concluded. And while the use of spreadsheets is not likely to subside anytime soon, “the growth of TMS and cloud-based technology systems continues to rise and demonstrates that treasuries across the region are beginning to embrace change at an acceptable level,” according to Bank of America Merrill Lynch Global eCommerce executive Cindy Murray.
The findings not only reveal a need for businesses across the Asia Pacific region to strengthen their adoption of treasury management tools, but also present a potentially lucrative market.