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Bringing Visibility To Treasury Management

A firm’s liquidity and risk are as strong only as its ability to manage its cash and other holdings in real time. Here’s why treasury management systems are becoming important to companies of all sizes, according to Reval.

The movement to globalization has its pluses when it comes to growth and sales but can be a bit of a pitfall for companies that expand without having the needed technologies in place to track far-flung operations and fund flows. That’s especially true in the case of treasury management, where a recent survey by Reval found that across 150 financial professionals, manual processes abound and so too do inefficiencies.

In an interview with PYMNTS, Tracey Ferguson Knight, director of solution consulting at treasury and risk management firm Reval, noted that cobbled-together systems and manual inputs tend to cloud real-time insight into cash positions. In fact, the firm’s survey revealed that 76 percent of respondents do not calculate their cash positions automatically.

That can lead to sizable consequences, said Knight, who added that “the mistakes that can be made manually setting a cash position can have a significant impact on the financial position of a company” when using Excel and other spreadsheets. “Or it can be the simple case of paper coming down the stack and being misplaced. And, in my own experience previously as a practitioner, I’ve found that can lead to a huge overdraft position if there’s a debit notice that is misplaced or not anticipated due to human error.”

Findings by Reval show that corporate treasurers are satisfied with their cash position tracking — despite the evidence that they lack the ability to visualize this most important data in real time. “It was surprising at first, but then again, people become comfortable with the way that they do things, and we find there is also comfort with manual processes, depending on the size of their companies. We find the reliance is on a lot of checks and balances and workarounds that hopefully catch errors, but that also leads to redundant processes and wasted time and effort.”

Even though the use of treasury management systems (TMS) are generally on the rise, using them to obtain real-time data and information (and thus optimize decision-making processes) is not. There’s a macro-component to this, Knight asserted, which has led to a state where “companies have been a bit lackadaisical in this extremely low interest rate environment — not really caring how long it takes to set a cash position. Many are leaving money in their bank accounts, taking earnings credit because they couldn’t do better elsewhere. Twenty years ago, it mattered whether you could set your position early and get into the market."

“That’s likely to change in an environment that is going to see rising rates; we are likely to return to that environment as rates rise, and that is something that can affect both cash flow and cash flow forecasting,” she continued.

Without cash visibility, relationships with suppliers and the very process of procurement can become rife with problems, said Knight. That’s especially true with companies operating across borders. “What winds up happening is that companies can become cash-strapped and, in a global sense, people on the ground in far-off locations tend to hoard cash and, at times, even under-report available cash. As a result, an accurate picture of how much cash is available for use is often inaccurate. The impact with suppliers and getting what you need is that the lack of cash visibility may mean you can’t forecast and people get paid late — or you may be paid late. Companies that are a bit cash-strapped may pay less of their payables … potentially damaging some relationships with suppliers.”

Against this backdrop, technology via automated treasury management systems becomes vital and cuts across segments.The movement to technology is not industry-specific; it cuts across all industries, with increasingly complex operations as companies become global. This extends across risk management and especially across FX and currency and hedging of those,” said Knight. “FX can be pretty volatile and may become even more so in the event of rising interest rates.”

Noting some concerns that some business owners may have over transitioning from manual processes to technology, Knight said that “for innovation, the movement to the cloud and SAAS means that security issues are well-addressed, and for some of the hesitations that companies have to adopt new technology in the cloud — specifically over security — proves unfounded."

“The best practice is to be technology-agnostic,” continued Knight, “allowing each company to choose the best methodology for cash visibility for their needs. Some might prefer to outsource to the vendor, while others may manage it internally.”



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.