Emerging trends in treasury software solutions

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What is global treasury solution?

A global treasury solution can track a company’s ability to turn assets into cash to meet financial obligations. Cash management, investment & debt management, cash forecasting, and risk management are just a few treasury operations that can be automated with treasury management system software. Furthermore, treasury software solutions smoothly integrate ERP, accounting software, bank accounts, trading platforms, and other systems.

What is the scope of treasury management?

The scope of treasury management is relatively broad and continues to grow. Treasury management tools and techniques entail managing cash flows, banking, money-market, and capital-market transactions, effectively controlling the risks associated with those activities, and pursuing optimum performance despite the risks. 

Treasury is responsible for finding and investing in new revenue streams, risk management, optimizing cash flows, and developing financial strategies and policies that assist CFOs in planning for the future. New and disruptive treasury technologies are transforming treasury today. Robotic Process Automation, for example, automates low-value and repetitive processes, whereas Artificial Intelligence allows robots to conduct cognitive tasks based on historical data and learning.

Challenges faced by the modern CFO

• Lack of accuracy in data
  The treasury department relies on spreadsheets for data collection, but they may not always have the time to conduct manual periodic cash forecasts to ensure data accuracy. The spreadsheet has several drawbacks, for example:
  • Entirely manual and takes a long time
  • Prone to errors
  • Inability to compare and contrast data
  • Manual modifications and human interaction are required regularly
  • Obtaining and aggregating suitable datasets is frequently difficult
• Poor decision-making
  Decision-making confidence is lowered when precision is lacking. CFOs are unable to make good decisions because they rely on outdated data. The following factors reduce accuracy:
  • Inefficiencies in the process, such as:
    • Unpredictability in A/R and A/P forecasting
    • Several data sources
    • Manual systems
• Elements that change with time, such as:
  • Foreign exchange rates 
  • Seasonality and business cycles
  • Variations in the macroeconomic environment
• Inaccurate reports
  Financial reports include crucial information about a company’s health, and internal and external stakeholders must be able to trust its veracity to make informed management and investment decisions. Inaccurate reporting occasionally happens through inadvertent error or, in the worst-case scenario, fraud. Inaccurate reporting can result in costly consequences, such as poor business and investment decisions, regulatory fines, and brand damage.

The emerging treasury technology trends and their role in optimizing treasury

According to a Treasury Market Report, 89% of treasury professionals feel that technological advancements would increase team efficiency. In recent years, the technology available to treasury leaders has become more advanced. As a result, identifying the appropriate treasury software solutions has become much more challenging. With new treasury technology trends and fintech offerings, the promise of rethinking traditional approaches is on the horizon causing major shifts in the treasury function.

APIs and AI will be used to automate 70% of all IT tasks by 2025, as per Gartner’s 2022 predictions. Aside from the increased efficiency that Artificial Intelligence brings to corporate processes and user interfaces, AI technology can also help organizations protect themselves against the inevitable cybercrime that they encounter.

Treasury departments have experienced massive regulatory, economic, and political changes. When these disruptive factors combine with increased stakeholder expectations, treasury teams are under more pressure than ever to achieve results. Vendors have invested money throughout the years to develop products that cater to various treasury tasks- while some focus on making it simple to manage cash, others focus on data collection, bank integration, or forecasting.

Four emerging trends in treasury software solutions

The four most inventive and promising trends in treasury software solutions are:

• Software-as-a-Service (SaaS) technologies:
  SaaS and cloud deployments are becoming increasingly common, allowing treasury departments to consolidate their functions in a single off-site location and modify the software to match their individual needs. By 2025, 80% of all enterprise tasks will be in the cloud/SaaS.
  The following are the benefits offered by SaaS:

1. Faster and easy access to data
2. Easier and less expensive to maintain than in-house treasury management systems
3. Speedier forecasting because data collection is automated
4. Easy access for users from any location with the internet and accessible via different devices
5. Deployments are easier and more secure, resulting in increased scalability

• AI, analytics, and big data:
  Self-learning algorithms are used by Artificial Intelligence to discover patterns and changes in them and to advise treasury departments on what to do. It can detect and stop irregularities in transactions and identify and recommend better solutions to alter patterns in operations.
  The following are the benefits offered by AI and analytics:
  
  
  
  1. Makes predictions accurately by studying historical data trends and patterns
  
  
  2. Assists with scaling up to higher-value roles by taking over manual processes
  
  
  3. Identifies and tracks fraudulent actions to reduce risks
  
  
  4. Adapts from past behavior and enhances workflow by integrating with various systems and collecting and processing information
  
  
  5. Assists with cash management to maximize cash flow and avoid unnecessary debt
  
  

  The ability to effectively manage, evaluate, and process large datasets can aid treasurers in improving diagnostic and predictive capacities in a variety of areas, such as:

  • Liquidity planning
  • Cash forecasting
  • Foreign exchange hedging
  • Commodity and credit risks
• APIs:
  Open banking and APIs provide considerable advantages to treasury departments through real-time data access, particularly smaller corporate treasury teams. APIs allow the treasury department to keep track of all of their transactions without having to call their bank or pay banking fees.
  The following are the benefits offered by APIs:
  1. Real-time data retrieving from bank accounts, and transactions 
  2. Direct data transfer into the treasury management system software from multiple bank portals, ERPs, TMSs, and FP&A systems
  3. Account activity tracking and user entitlements to prevent unauthorized access
  4. Instant transactions allow interest debts to be reduced
  5. Credit risk reduction through the avoidance of intraday or overnight cash holdings with banks
  6. Detection of fraudulent payments
• RPAs
  A recent global survey by RIA Gmbh showed active use of RPA at 48% of firms, with 40% planning to implement it soon.
  

  RPAs are robots programmed to complete a set of activities with minimal human interaction. This allows treasury teams to focus more on higher-value jobs like cash forecasting by freeing up a lot of time spent on repetitive operations like data gathering and consolidating. 

  Treasury teams can access data anytime without having to sift through many spreadsheets and systems.

  The following are the benefits offered by RPAs:

  1. Automated data collection from several systems and applications and automatic creation of reports for different stakeholders
  2. Automatic payment and bank statement processing
  3. Helps CFOs focus on higher-value tasks
  4. Processes are more secure and less prone to errors because there is less human interaction

Ways to make the global treasury more effective

Here are some ways to improve the effectiveness of the global treasury

• 1. Leverage AI and automation for improving global treasury activities
  Automation frees team members to focus on strategic tasks by reducing manual labor. AI, on the other hand, provides for improved data storage and management, which can lead to valuable insights for other aspects of the business, such as financial planning and supply chain management. It aids by decreasing complexity and minimizing operational risk.
• 2. Centralize the cash forecasts
  Companies are adopting centralized cash flow forecasting in the new normal to gain an accurate perspective of their cash movements and produce timely predictions for making confident borrowing and investment decisions. 

The bottom-up strategy is used in centralized cash flow forecasting: forecasts are rolled up from the local/entity level to the global level. As a result, granular visibility and accuracy are much improved. 

The bottom-up forecasting approach has the following benefits:

• Long-term planning is much easier when the firm is reviewed at the micro-level.
• Individual item forecasts can be combined to provide higher-level forecasts.
• Provides more realistic and accurate results, as well as assists in the construction of a better financial picture.
• Helps businesses in making accurate budgeting decisions.
• 3. Increase working capital
  Working capital is, without a doubt, one of the strongest instruments for assessing a company’s overall efficiency and investment potential because it compares a company’s assets to its obligations to determine the money available for day-to-day operations. As a result, every action treasurers take to unlock or increase working capital will allow the company to reinvest in operational activities without constraining cash flows.
• 4. Proactive risk mitigation
  A business inherits a variety of hazards, including operational risk, commodity risk, liquidity risk, interest rate risk, foreign exchange risk, and so on. Effective treasury management system software can assist firms in reducing risks by implementing an effective risk management strategy through high cash visibility. Other than using software, treasury can track and  prevent risk by:
  • Creating a liquidity strategy
  • Increasing portfolio oversight
  • Increasing the ability to detect risks
  • Increasing the ability to understand the impact of potential risks
• 5. Automate bank reconciliations
  Automated bank reconciliation replaces manual monitoring and comparing a company’s bank statements to its accounting records. Humans have traditionally performed the bank reconciliation procedure, making it tedious and error-prone. Automated bank reconciliations allow treasurers to save time and money and minimize fraudulent transactions.