3 Ways Corporate Treasurers Can Meet the Digital Age Expectations

28 December, 2021
5 min
Brett Johnson, AVP, Global Enablement

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13.13 mins

Table of Content

Key Takeaways
Introduction
What does a corporate treasurer do?
Challenges faced by corporate treasurers
Evolution of Corporate Treasury Expectations
How can a corporate treasurer adopt and embrace automation?
Leveraging AI for real-time cash flow forecasting and cash management

Key Takeaways

  • A corporate treasurer’s primary goals revolve around efficient cash flow forecasting, low-cost funding, and effective risk management.
  • Lack of global cash visibility, lack of accuracy, dependence on spreadsheets, and lack of funds to consider technology are some of the significant challenges faced by corporate treasurers.
  • Treasury management systems (TMS) and AI can help with accurate cash forecasting for confident borrowing and investment decisions.
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Introduction

Are you a corporate treasurer feeling like a dinosaur in the digital age? Don’t worry, it surely wasn’t 165 million years ago when spreadsheets and calculators were not just yours, but every treasurer’s best friends. The digital age has brought upon a wave of changes and challenges for almost all corporate treasurers.

With the rapid development of technology, businesses are facing increasing pressure to keep up with the changing times, and the corporate treasury is no exception. The impact of the digital age on corporate treasury is profound, as it presents both challenges and opportunities.

On one hand, technology has made it easier for corporate treasurers to manage finances and monitor their cash flows. On the other hand, the use of digital currencies and new payment platforms has also made it more difficult for treasurers to keep up with changing regulations and risks associated with it.

Furthermore, the digital age has created a shift in customer expectations, with an increasing demand for speed, convenience, and security. Corporate treasurers must adapt to these changing expectations in order to remain competitive and relevant in today’s market. 

In this blog, let’s deepen our understanding of the roles and responsibilities of a corporate treasurer, challenges faced by them, and the ways in which they can keep up with the evolving digital age of treasury management.

What does a corporate treasurer do?

Corporate treasurer roles and responsibilities

A corporate treasurer is responsible for managing a company’s finances and financial risks. They oversee the organization’s financial operations, including cash management, debt management, risk management, and investment management. The corporate treasurer aggressively participates in public markets and with the company’s enterprises, investors, and regulators to raise profit. 

The corporate treasurer’s role revolves around efficient cash flow forecasting, low-cost funding, and effective risk management. They are a crucial decision-maker and strategic partner to the corporation and are often in charge of debt management, capital management, and regulatory reporting as well.

Overall, the specific duties of a treasurer can vary depending on the organization, but generally, the three main duties of a treasurer are:

  • Custody and management of financial assets: This includes managing the organization’s financial accounts, keeping accurate records of financial transactions, and ensuring that all financial statements and reports are accurate and up-to-date.
  • Budgeting and financial planning: The treasurer is responsible for creating and managing the organization’s budget, which involves estimating income and expenses, setting financial goals, and monitoring financial performance.
  • Reporting and transparency: The treasurer must report financial information to the organization’s board or executive team on a regular basis, and ensure that financial information is transparent and accessible to stakeholders such as members, investors, or donors.

Corporate treasury and its functions

Corporate treasury function within a company is responsible for managing the financial risks and liquidity of the organization. The main objective of corporate treasury is to ensure that the company has sufficient funds to operate its day-to-day activities, while at the same time minimizing any potential financial risks.

The division provides financial resources, raises finance and capital to support corporate activities, and manages the risk and liquidity portfolio dynamically. They work to optimize the company’s liquidity and financial performance while ensuring compliance with regulatory requirements.

Quick read

6 Tips for effective corporate treasury management.

Challenges faced by corporate treasurers

Let’s checkout the four common challenges faced by corporate treasurers today:

  1. Lack of global cash visibility
  2. Lack of accuracy
  3. Lack of funds to consider technology
  4. Dependence on spreadsheet
3-Ways-Corporate-Treasurers-Can-Meet-the-Digital-Age-Expectations_1_2023

1. Lack of global cash visibility

Any organization’s global cash visibility is critical to making timely business decisions. Visibility is hampered since data is dispersed across multiple organizations such as treasury management systems, ERPs, bank portals, sales order systems, etc. Low visibility can also be caused by non-standard processes which result in erroneous forecasts. 

Corporate treasury can face repercussions due to lack of global cash visibility, such as:

  • Insufficient cash return
  • KPIs that were not met and a lack of trust in corporate treasurers
  • Borrowing expenses that are higher than necessary
  • Bank fees and expenditures that are unnecessarily high
  • Poor hedging
  • Lack of a reserve fund to cover unexpected costs

2. Lack of accuracy

Lack of accuracy lowers the confidence in making decisions. CFOs depend on unreliable data, thus can’t take effective decisions. Accuracy suffers as a result of:

  • Process inefficiencies such as:
    • Top-down forecasting
    • AR and AP unpredictability
    • Various data sources
  • Dynamic elements such as:
    • Changing foreign exchange rates
    • Business cycles/seasonality
    • Variations in the macroeconomy

3. Lack of funds to consider technology

New technology is already applicable and in use in a variety of fields. The main motives for implementing new technology are risk reduction and process automation. Treasury management system (TMS) is a software that aids in the automation of repetitive, and manual treasury processes. 

A treasury management system is the ideal solution for dedicated treasury support due to the complexity of treasury demands, such as the need for:

  • High-level risk management analytics
  • Complex product coverage
  • Compliance with federal finance standards

4. Dependence on spreadsheet

Treasurers require the flexibility of spreadsheets to gather data, but they may not always have the time to implement frequent cash balances to assure spreadsheet accuracy. It also holds certain limitations such as:

  • Entirely manual and consumes a lot of time
  • Error-prone
  • Inability to compare differences
  • Needs frequent manual changes and human interventions
  • Difficulty in acquiring and aggregating the relevant datasets frequently

Technologies such as AI can make a significant impact for corporate treasury departments by helping with accurate cash forecasting for making confident decisions on borrowing and investments.

Evolution of Corporate Treasury Expectations

The traditional way of forecasting

The traditional way of forecasting is subjective and dependent on the instincts of treasurers. In the traditional way of forecasting:

  • Data gathering is done manually by a treasury analyst from AP, AR, and accounting teams.
  • Data entry is done in spreadsheets, making it prone to human errors.
  • Human intelligence is applied to make manual adjustments to the forecast due to limited data visibility and accuracy

New KPIs of the treasury department

KPIs help management measure how corporate treasury is performing and how the department contributes to the company’s bottom line. The treasury department must track these 20 must-have KPIs especially during economic distress when speed and efficiency are key.

How can a corporate treasurer adopt and embrace automation?

3-Ways-Corporate-Treasurers-Can-Meet-the-Digital-Age-Expectations_1_2023

Ways to evolve in treasury

Forward-looking treasury

The use of emerging technology facilitates the real-time flow of information and accurate cash flow forecasting. With treasurers working from home or in hybrid format, the cyber risks have prevailed significantly, so treasurers must take preventive measures to control cyber frauds and data breaches and mitigate them with stringent actions.

Risk management is a critical aspect of corporate treasurer roles and responsibilities because the stakes are extremely high. As a result, having automated cash forecasting software is critical for a corporate treasurer to identify the degrees of impact and mitigate risks in advance. Treasurers can use accurate cash forecasts to:

  • Anticipate cash needs
  • Improve capital allocation
  • Understand interest rate and commodity price movements
  • Manage credit and counterparty risks
  • Control FX risks through confident hedging and repatriation decisions

Embrace automation and AI

How can automation and AI help the modern treasurer overcome their challenges?

  • Automation helps treasurers to focus on high-value tasks instead of administrative tasks and helps them to gather accurate data timely.
  • Corporate treasurer roles and responsibilities also include data-driven proactive decision making, for which artificial intelligence is the best fit.
  • Larger data sets can be processed by AI. This allows it to recognize difficult-to-find patterns and present a consolidated view that would take a human analyst too long to create. AI can also help in long-term cash flow forecasting to detect potential risks early.
  • Real-time data generated with the help of automation helps a corporate treasurer make confident decisions around borrowing, investing, quarter-ending cash, M&A, and working capital.

Evolving their skill sets

Corporate treasurers can keep up with the changes in treasury by possessing the following skills:

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  • Strategic and innovative mindset: Corporate treasury should embrace the development strategy of deploying Minimal Viable Products (MVP) to quickly bring innovations to market, with the understanding that some solutions will succeed while others will fail, necessitating a fast response.

Using an MVP strategy makes sense since it is a low-cost, low-risk, and low-effort option to try out next-generation technological solutions safely and securely.

  • Business acumen: A large portion of a treasury manager’s work is administrative work, which is routine and repetitive and does not stretch their skill sets. Managers may release their business acumen and divert their emphasis to demanding and high-priority operations with AI handling routine duties.
  • Relationship management: For understanding which bank accounts to partner with to stick to the portfolio guidelines.
  • Data savviness: Treasury is supposed to use technology, and the corporate treasurer must deal with an ever-increasing amount of data to improve overall organizational efficiency. Accounting, ERP, and market information systems are just a few of the technologies available today.
  • Agility in adapting to changes: Agility to accept changes in treasury and evolve along with it leads to increased employee productivity and better working capital management.
3-Ways-Corporate-Treasurers-Can-Meet-the-Digital-Age-Expectations_1_2023

4E framework

  • Embrace: Embrace change and be open to new ideas and technologies.
  • Evaluate: Evaluate abilities frequently to see if they are appropriate for the present and future.
  • Empower: Learn new skills and work with cutting-edge technology.
  • Educate: Learn about the current and future technologies through webinars, training, and other means.

Leveraging AI for real-time cash flow forecasting and cash management

HighRadius’ AI-powered autonomous treasury solutions help corporate treasurers improve their cash flow forecasting and cash management capabilities.

Here’s how corporate treasurers can take advantage of HighRadius:

  • It integrates seamlessly with ERPs: HighRadius integrates with popular ERP systems such as SAP, Oracle, Microsoft Dynamics, and more. By integrating your ERP system, generate accurate cash flow forecasts.
  • You can train the AI model: You can train the AI model to recognize patterns and predict future cash flows. You can also set rules and thresholds to ensure that the AI model is accurate and reliable.
  • Monitor cash flows in real-time: HighRadius provides real-time visibility into your cash position. You can monitor incoming and outgoing cash flows and identify potential cash flow gaps. This allows you to make informed decisions about cash management and take action to prevent cash flow shortfalls.
  • Optimize working capital: HighRadius can also help you optimize your working capital by identifying opportunities to improve cash flow. For example, it can recommend which invoices to prioritize for payment based on their impact on cash flow.

Overall, by leveraging HighRadius’ AI-powered solutions, corporate treasurers can improve their cash flow forecasting and cash management capabilities, reduce manual work, and optimize working capital.

To see how HighRadius can help you transform your treasury operations, schedule a demo with our experts.

Hope this blog will help you adapt to the evolving digital expectations in treasury and thrive, just like how the dinosaurs in Jurassic series adapted to their changing environment.

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