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Revolutionizing Treasury Management to Maximize Revenue Growth

What you’ll learn

  • Learn the factors that are revolutionizing treasury and its processes.
  • Identify how AI cash flow forecasting helps to accelerate revenue growth within a company

Evolution of treasure

Treasury has always played an important role in any organization, and in the last decade, it has become even more so. Treasury focuses on cash-related issues like cash forecasting and management, bank reconciliation, loans and borrowings, foreign exchange, and taxes. But with increased globalization, treasury also started focusing on identifying and investing in new income sources, risk management, identifying bottlenecks, and establishing financial strategies and rules. These are all critical functions that help CFOs plan the company's financial roadmap. A recent survey by the Association for Financial Professionals (AFP) found that four out of every five finance professionals think their company’s treasury function has become more strategic over the past five years. A large number of treasury teams have taken the lead in investor relations, mergers, and acquisitions (M&A), and business continuity planning, according to the survey, all of which imply an increase in responsibilities.
Evolution of treasury
The latest treasury solutions, like Cloud, Robotic Process Automation (RPA), Application Program Interface (APIs), Machine Learning (ML), and Artificial Intelligence (AI) are revolutionizing treasury functions today. They are being used for streamlining workflow, automating some processes, and assisting treasury in making better investment/borrowing and cash conversion cycle decisions. Alongside the evolution of treasury technologies, the role of treasurers is also evolving to meet the increased treasury expectations.

What’s causing the change in treasury management system?

Manual or obsolete systems cause problems in the following areas for treasury practitioners:

  • Manual methods result in ‘dead-on-arrival’ reports, obstructing timely decision-making and causing teams to focus on low-value tasks.
  • Inability to track FX volatility and fluctuating interest rates lead to poor FX risk management.
  • Lack of real-time and sufficient data leads to inaccurate cash forecasting.

Challenges with manual systems such as spreadsheet

Spreadsheets have been the most widely known treasury management tool, but it isn’t foolproof or fit for the future. The following are some of the difficulties encountered by the treasury department when forecasting cash flows using spreadsheets:

  • It is entirely manual and time-consuming
  • It’s error-prone
  • It’s difficult to gather and consolidate the right datasets
  • It requires a lot of input and frequent human adjustments
  • It leads to low visibility into individual entities to detect fluctuations

The forecasts generated by spreadsheets are inaccurate and unreliable, which can directly affect processes like identifying and investing in new revenue streams, risk management, optimizing cash flows, and establishing financial plans and policies, which fall under the treasury’s mandate and assist CFOs in planning for the future.

Today, treasury needs a treasury management system that helps with better working capital management, confident debt restructuring, proactive financial risk management, and seamless integration with various data sources. Having proper treasury management software helps treasury become efficient and maximize growth.

How can treasury maximize revenue growth through automation and AI?

The ACT (The Association of Corporate Treasurers) survey report in 2021 discovered that approximately 23% of treasurers are increasingly investing in automating treasury functions, with 47% beginning to invest in automation in 2021 alone. Automation has become more of a necessity than a desire because it frees up treasury teams’ time to focus on liquidity decisions.

Automation and AI help treasury become more strategic

By allowing treasury to focus on strategic and analytical operations that provide actual value to the business, automation encourages and reinforces treasury as a strategic partner inside the organization.

Emerging technologies, such as AI cash flow forecasting software aids in the prevention of losses in a volatile environment in the following ways:

  • Increased forecast accuracy: The scope of errors is reduced because the data is extracted directly from the sources and updated regularly. Accuracy is improved by capturing customer-specific variables as well as external factors such as raw material price fluctuations.
  • Granular visibility: Granular visibility into business cash flows is increased due to a single source of truth, where data is gathered from sources such as TMS, ERPs, banks, and FP&A systems automatically.
  • Improved decision-making: Treasurers can make data-driven, confident, and timely decisions for managing assets, enhancing funding, managing risks, and improving overall company treasury management.
  • Borrowing effectively and proactively: Cash-strapped businesses can forecast weekly or daily to make proactive borrowing decisions.
  • Fraud risk management: Treasurers can proactively detect and reduce risks before they become losses for the company because of real-time data visibility and accuracy in forecasting cash flows.

Business case of automating treasury processes

According to a survey by McKinsey, organizations that automated 50-70% of their processes had yearly cost savings of 20-35% and ROI in the triple digits. Forecasts are particularly critical for growth since they influence strategic financial and investment decisions, shaping the company’s future and increasing profit margins. HighRadius’ AI cash flow forecasting with high predictive capabilities for historical data analysis can offer better risk management insights. This ensures that the company has sufficient funds to meet its obligations through treasury digital transformation.

AI forecasting software for driving business growth

True success stories with AI forecasting software

A multibillion-dollar US company tackled liquidity shortages for 1800+ projects. These were the roadblocks in cash forecasting faced by the company:

  • They forecasted cash using spreadsheets, which was a time-consuming procedure that took about 20 hours every week.
  • Because of the low accuracy of the simplistic cash flow models and manual operations, they had to rely significantly on assumptions.
  • Visibility was poor in A/P forecasts. Besides that, forecasting could not be done on a daily, weekly, or monthly basis.
  • The data was collected manually. Additionally, the A/R data in their ERP was updated weekly, and the bank data had to be extracted from the website.
  • Long-term projections were made less frequently. Moreover, it was not possible to conduct variance analysis.

They were able to reach 94% cash forecast accuracy with the use of AI cash flow forecasting and gain other benefits:

  • They saved time and focused on high-value tasks by automating treasury processes, as well as boosted confidence in decision-making.
  • Forecasting accuracy increased by up to 95% for both A/R and A/P.
  • The visibility of all cash flows was improved.
  • All manual operations, such as data gathering were automated from end to end.
  • Drill-down functions allowed to perform variance analysis accurately. Moreover, they could perform variance analysis frequently over long periods of time.

AI is essential for creating accurate cash forecasts and it helps maximize your revenue growth with the digital transformation. If you’re seeking a simple and effective treasury management system that will not only fit your company’s needs but also help you get more returns in the long term, schedule a demo with HighRadius today.

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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.