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How to make treasury solutions your strategic planner?

What you’ll learn

  • Understand the value of a treasury solution.
  • Understand the characteristics that make a good treasurer.
  • Learn how to use a treasury solution to optimize cash flow.

What is a treasury management system?

A treasury management system automates the process of managing a company’s financial activities, such as assets and liabilities.

What is the purpose of a treasury solution?

Treasury solutions provide high visibility to the CFOs to manage liquidity, bank accounts, investments, and debts and mitigate risks (operational and financial). A treasury solution tracks a company’s ability to convert assets into cash to meet financial obligations. Cash management, investment & debt management, cash forecasting and risk management are the treasury functions that can be automated with treasury management software. 

What are the challenges faced by the treasurer?

The following are the common challenges a treasurer faces daily:

  • Risk management
  • Treasurers are responsible for developing a holistic value of business risk exposures such as foreign exchange, interest rates, liquidity risk, credit risk. They also are responsible for identifying and managing the occurrences of the risks. 

    Challenges in risk management:

    • FX Management
    • Tax Compliance
    • Liquidity
    • Fraud
  • Cash flow management
  • Treasurers are in charge of developing a strategic banking structure that is both efficient and cost-effective, optimizing cash resources, and maintaining access to short-term financing to boost working capital and cash visibility. 

    Challenges in cash flow management:

    • System redundancy and bank volume
    • Manual processes are time-consuming and prone to errors
    • Many currency settlements or transactions
    • Manual bank reconciliation
    • Regulatory changes
  • Cash flow forecasting
  • To improve accuracy, treasurers must maintain a well-structured cash flow forecasting method supported by validated data sources.

    Challenges in cash flow forecasting:

    • Manual data aggregation and spreadsheet-based cash forecasting
    • Time-consuming collaboration between teams to gather data
    • No or minimal variance calculation between forecast and actuals
    • Lack of accurate scenario analysis
    • Inability to create timely reports 
  • Regulatory changes
  • The updates made to laws and regulations are regulatory changes. Treasurers must be aware of the most recent regulatory changes, such as: 

    • Basel III and Payment Service Directive II (PSD2)
    • Anti-money laundering (AML)
    • Hedging and Credit Value Change
    • Mutual fund reform and knowing the KYC. 

    These keep changing and it can be difficult to keep track of them.

    Challenges in regulatory changes management:

    • Increased human error by manual documentation and process management
    • Tracking upgrades to ensure compliance with the latest standards and rules is difficult
    • Poor management of processes and workflows
    • Policy and procedure content is not disseminated and communicated across the organization
  • Changes in agenda
  • Treasurers are expected to play a larger role in advising the CFO on complex investments, taking into account country-specific risks, expanding the company’s debt portfolio, funding strategies, impediments from restrained cash, preparing for a potential market downturn, and continuing to support the development of the capital agenda and dividend payout. But this can be difficult due to some challenges.

    Challenges in changing agenda:

    • More responsibility and monitoring
    • Less bandwidth due to a lean team
  • In-house banking
  • Treasurers are primarily focused more on identifying and managing internal funds to reduce their organization’s reliance on banks for public investment. But some issues lead to poor in-house banking.

    Challenges in in-house banking:

    • Balance sheet management
    • Unhedged forex exposure
    • Inability to keep track of capital adequacy

What are the priorities of a treasurer?

The following are the key priorities of treasurers today:

  • Managing liquidity risk: 
  • Liquidity risk can be reduced by:

    • Planning and analyzing finances carefully
    • Forecasting cash flow regularly
    • Monitoring and optimizing net working capital
    • Managing existing credit facilities
  • Getting access to the financial market for growth financing:
  • Financial markets play a critical role in the economy’s efficiency and growth. Treasurers need to pool capital, select projects, track and enforce contracts, manage risks, and mobilize savings. Moreover, information gathering, processing, and management are essential for well-functioning financial markets.

  • Becoming a strategic advisor to the company:
  • A strategic advisor oversees every aspect of a business to ensure that it operates at optimal efficiency. The strategic advisor monitors every area of a company to ensure that it is running well. Communication with high-level management on ways to move outcomes forward, ensuring that all internal functions are performing at the highest level, and suggesting smart business tactics are all part of the job of a strategic treasurer.

  • Shifting from the transaction processing:
  • Transaction processing systems provide an environment for executing code that ensures data integrity, availability, and security. They also guarantee a quick response time and high transaction volume administration of the system.

What qualities make a good treasurer?

Here are some of the qualities that a treasurer should possess to improve their business processes and achieve their priorities in business: 

  1. Technical skills
  2. Treasury and technology are now inextricably linked. As treasury professionals, one must embrace these changes and recognize the benefits they may bring to the industry. Technical skills mean the capacity to complete tasks in a clear and unambiguous manner. These are the technical skills required from a treasurer:

    • Well skilled in accounting
    • Excellent communication skills
    • Presentation skill
    • Adaptability to the latest technologies and industry trends
    • Understanding of cash flow statement
  3. Business experience
  4. Treasurers should apply their treasury knowledge and experience to collaborate and communicate with various stakeholders to achieve the company’s treasury goals. For instance, they will need to follow these things:

    • When speaking with key stakeholders inside and outside the firm, be a confident communicator
    • Be the main point of contact when dealing with banks, credit agencies, investment analysts, consultants, and regulators
    • Collect, analyze, and translate data into easily understandable information to aid in problem-solving and decision-making throughout the organization
  5. Performance skills 
  6. Treasurers should have influencing skills, and know-how to track the team and the business performance. For instance, they have to:

    • Convince others in the company to back a specific idea or plan of action that could add value to the company
    • Work closely with people from all company parts to ensure they have the funds they require to complete projects
    • Collaborate with others to achieve both team and business goals

But their qualities can only make a significant impact if they have a proper treasury solution in place. A robust treasury solution can help them make the best decisions to maintain healthy liquidity.

How to optimize cash with a treasury solution?

These are some benefits of using a treasury solution that can help increase cash flow:

  1. Reconciliation and cash positioning
  2. Treasury solutions use AI exceptional handling algorithms to reconcile their cash. And identify discrepancies in their reports and APIs to get real-time cash positions.

  3. Tracking and improving bank account relationships
  4. They use integrated platforms that connect to banks and receive data in real-time. SaaS and cloud-based platforms allow the company to store unlimited data with no restrictions.

  5. Data repository and connectivity
  6. These solutions use APIs as a connector to gather data from:

    1. Banks
    2. ERP systems
    3. Data Lakes
    4. Cloud

  7. Visibility of global cash
  8. Cash visibility enables a business to invest cash while reducing debt and expenses. Accurate visibility also reduces a company’s risk exposure while allowing it to grow. A treasury solution provides granular cash visibility with a bottom-up approach.

  9. Cash forecasting in real-time
  10. Real-time forecasting is the process of creating accurate and up-to-date forecasts using all available data, both historical and current. Treasury solutions generate real-time forecasts that enable the treasury department to make decisions based on current and expected business conditions.

How can a treasury solution be a strategic planner for your company?

Many responsibilities come with owning a company. Management of financial assets is one of them. Cash management necessitates thought and can directly impact other aspects of your company.

Treasury management services are popular among business owners because they provide customized solutions and simple financial tools for companies of all sizes. Treasury solution can be a strategic planner for a company because of the following benefits provided:

  1. Decreased processing delays
  2. Treasury management system enables business owners to automate some tasks, resulting in shorter processing times. This helps to free up the bandwidth of the treasury department so that teams can focus on high-priority tasks.

  3. Improved risk management
  4. CFOs can better control risks because the software helps to monitor scenarios and risks proactively. This leads to improved cash flow analysis that assists key decision-makers in preventing and managing potential risks. Moreover, FX fluctuations can be identified to make better hedging decisions.

  5. Increased efficiency
  6. Treasury management system leads to improved efficiency and simplified operations. It provides quick and easy access to digital resources for electronic banking instead of manually initiating and authorizing payments. Having data at their fingertips can help treasurers speed up the end-to-end process.

  7. Timely decision-making
  8. CFOs can make confident and timely data-driven decisions based on reliable cash forecasts and reports with accurate data. This helps them to improve borrowing and investing.

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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.