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Corporate Treasurer Challenges in the Digital Age

What you’ll learn

  • Challenges and expectations  faced by corporate treasurer in the new normal
  • Best practices to evolve in corporate treasury with the digital age

What does a corporate treasurer do?

Corporate treasurer roles and responsibilities

The corporate treasurer is responsible for providing adequate money to sustain all firmwide activity while increasing net interest revenue. The division provides financial resources, raises finance and capital to support corporate activities, and manages the risk and liquidity portfolio dynamically. The corporate treasurer aggressively participates in public markets and with the company’s enterprises, investors, and regulators to raise profit.

The corporate treasurer’s primary goals revolve around efficient cash flow forecasting, low-cost funding, and effective risk management. The corporate treasurer is a crucial decision-maker and strategic partner to the corporation and is often in charge of debt management, capital management, and regulatory reporting.

Challenges faced by corporate treasurers

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

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
    • A/R and A/P unpredictability
    • Various data sources
  • Dynamic elements such as:
    • Changing foreign exchange rates
    • Business cycles/seasonality
    • Variations in the macroeconomy

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

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 here by helping with accurate cash forecasting for making confident decisions on borrowing and investments.

Changing times and changing corporate treasury expectations

Evolution of corporate treasury

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 A/P, A/R, 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

Routine and challenges of the treasurers with the traditional process

The traditional process routine portrays the company treasurer as a number cruncher, which portrays the treasurer as a low-value employee.

Challenges faced by the treasurer 
  • Data collection becomes the most stressful and time-consuming task.
  • Manually integrating spreadsheets takes a long time and increases the possibility of errors.
  • Due to time constraints, it is nearly hard to do variance analysis for more than one duration using manual techniques. As a result, it is done either weekly or monthly.

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 keep up with the changing times in treasury?

Ways to evolve in treasury

1. 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, 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

2. 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.

3. Evolving their skill sets 

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

  • 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.

4. 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.

Technology is playing an ever more pivotal role in the new normal. Learn how you can empower yourself by choosing an automated cash flow forecasting solution that works for you.

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The HighRadius™ Treasury Management Applications consist of AI-powered Cash Forecasting Cloud and Cash Management Cloud designed to support treasury teams from companies of all sizes and industries. Delivered as SaaS, our solutions seamlessly integrate with multiple systems including ERPs, TMS, accounting systems, and banks using sFTP or API. They help treasuries around the world achieve end-to-end automation in their forecasting and cash management processes to deliver accurate and insightful results with lesser manual effort.