Cash Forecasting Treasury

How AI is Reshaping the Role of the Treasurer

What you’ll learn

KPIs of a treasurer
Upskilling treasurers roles to more valuable ones with AI
Discover how AI helps treasury to be more productive and efficient

What a CFO expects from a treasurer

Treasury usually focuses on liquidity planning and forecasting and releasing trapped working capital, making informed decisions on borrowing, investing, and managing financial risks. However, during the pandemic, the focus has shifted towards managing working capital. Cash surplus companies are monitoring cash very carefully and taking mitigating strategies, whereas cash deficit companies are striving to maintain liquidity, extend credit lines, and collect A/R faster.

Objectives of a treasurer

Treasurers focus on four key areas of cash forecasting which include:

1. Forecast Accuracy

2. Decision Making

3. Variance Analysis

4. Scenario Analysis

These four subprocesses become highly challenging and difficult to handle when there is no technology in place. Here are some of the challenges they face with the subprocesses due to the lack of technology:

Forecast Accuracy: There is a huge spike in inaccuracy due to high variance and due to the lack of consistency with FP&A. This affects decision-making.

Decision Making: Lack of accuracy lowers the confidence in making decisions like making projections against quarter-ending cash, using mitigating strategies, mergers and acquisitions planning, and working capital management. CFOs depend on unreliable data, thus can’t take effective decisions.

Variance Analysis: Variance calculated is often high due to the lack of proper models, or the use of an improper algorithm. But, the biggest concern is that the root cause causing the variance can’t be identified due to lack of granular visibility.

Scenario Analysis: It’s not feasible to prepare well for “what-if” scenarios with poor analysis of risk scenarios, or make the most out of peak seasons. The decisions are supported by a lot of unknowns so an accurate analysis can’t be done.

Effect on the role of the treasurer

Treasurer makes reactive decisions due to ground-level assumptions instead of taking proactive decisions to plan for the future. A newer approach can be taken with proper and scalable technology to improve accuracy and planning.

Forward-looking treasury department

To not fall behind, the first thing that treasurers should focus on is:

Digital adoption: Initially, technologies used to be adopted by larger companies due to high upfront costs. But, with new technologies emerging, even the small and mid-sized companies have started adopting them to automate the tasks that don’t necessarily require human involvement or are very labor-intensive, so that their staffs can emphasize more on high priority tasks.

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. Being a techie has become crucial at times like these for treasurers to stay on top of the curve.

How automation improves four key areas of cash forecasting

Forecast Accuracy: Automation builds more accurate forecasts and allows you to update your forecasts frequently.

Decision Making: Real-time data helps in taking confident decisions around borrowing, investing, quarter-ending cash, M&A, and working capital. CFOs take data-driven decisions and long-term decisions smoothly.

Variance Analysis: Variance analysis can be performed frequently over multiple horizons and variance drivers can be tracked.
Scenario Analysis: Accurate and up-to-date forecasts are relied on to understand the impact of certain scenarios. Running scenario analysis is easier by changing multiple parameters and checking how they impact cash flows to get early warning signals and to take precautionary/ recovery steps in cases of distress.

Reshaping the role of a treasurer

How technology adds value to the role of a treasurer

Generates highly accurate long-term and short-term forecasts, which helps in identifying the implications of multiple scenarios proactively and taking corrective measures.
Makes it possible to report real-time data to the CFOs periodically, hence building more trust.
Helps in identifying opportunities for borrowing at low-interest rates, investing at the right time, and taking decisions for expansions and FP&A.

With technology, the treasurer makes decisions based on an accurate and aerial view and becomes a high-value employee.

The skillset of the modern-day treasurer

The modern treasurer needs to have the following skills in the age of AI:

Strategic and innovative mindset
Business acumen
Relationship management
Data savviness
Agility in adapting to changes

To dig deeper into the skillsets of the modern treasurer and learn about the latest KPIs, watch this webinar.

Click for full HighRadius webinar on how AI is reshaping the role of a treasurer.

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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.