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Five ways automated treasury solution empowers mid-market companies


  • Common challenges faced by mid-market companies
  • How automated treasury solutions help mid-markets overcome those problems

Contents

Chapter 01

What are the challenges faced by the mid-market treasury?

Chapter 02

What are the most effective ways to overcome mid-market treasury problems?

Chapter 03

How HighRadius’ automated treasury solution empowers mid-market firms?
Chapter 01

What are the challenges faced by the mid-market treasury?


The following are the common challenges faced by the mid-market treasury :

  1. Inability to have complete visibility over cash and risk: 
    Poor visibility results from data being spread across TMSs, ERPs, bank portals, and sales order systems. Non-standard processes like currency fluctuations can also contribute to poor visibility. Not having complete visibility into cash flow can lead to many problems, such as:

    • Inadequate return on investment
    • Lack of confidence in corporate treasurers and missed KPIs
    • Expensive borrowing fees
    • Bank charges
    • Poor hedging choices 
    • Absence of a reserve to cover unforeseen costs
  2. Time-consuming data mining:
    Data mining is the most stressful task for mid-markets. Data mining through spreadsheets is
    time-consuming due to the following reasons:

    • Completely manual and error-prone process
    • Inability to compare variations
    • Needs frequent manual changes and human interventions
    • Difficulty in acquiring and aggregating the relevant datasets
  3. Handling major risks:
    Mid-markets must ensure enough cash and develop strategies to mitigate any financial risks. Forecasting risk factors impacting working capital can be challenging. Businesses should use have proper risk controls in place to prevent vulnerabilities. Here are some significant risks faced by mid-market companies:

    • Liability risk is a risk where an insured company is liable to a third party as a result of or caused by any act, error, omission, representation, or statement by the insured.
    • Security risk is the threat of financial loss, disruption, or reputational damage to an organization due to the failure of its IT systems.
    • Business interruption risk refers to a company’s financial loss when its operations are disrupted.
    • Credit risk is the possibility of a loss resulting from a borrower’s failure to repay a loan or meet contractual obligations.
    • Strategic risk is the risk that failed business decisions may pose to a company.
  4. Inefficient or delayed reporting:
    Treasurers face challenges in obtaining accurate and timely reports. The following are some issues faced by mid-markets:

    • Inaccuracy in the cash forecasting process causes a delay in data-backed reporting, making it challenging for treasurers to get reports on time.
    • Decentralization also leads to delayed reporting and ineffective decision-making.
    • Manual processes for cash management can make it more difficult for treasury, resulting in inaccurate reporting and auditing.

    Manual methods result in ‘dead-on-arrival’ reports. This results in high turnaround time and low bandwidth. This obstructs timely decision-making and prevents teams from focusing on high-value tasks.
    As the reports are based on assumptions and are based on stale data, firms overborrow and end up in financial distress because they are ill-prepared for macro-level fluctuations.

  5. Difficulty in choosing the best treasury management solutions that meet the expectations and budget:
    Revenues of small and mid-market businesses (SMEs) are often restricted to leveraging AI-based solutions. Here are some difficulties in choosing the best treasury management solutions:

    • Lack of funds for hardware and IT setup requirements
    • Lack of regular enhancements and adjustments
    • Inaccessibility and lack of data availability due to budget constraints
Chapter 02

What are the most effective ways to overcome mid-market treasury problems?


Treasury solutions give CFOs clear visibility into managing liquidity, bank accounts, investments, and loans while reducing risks (operational and financial). Moreover, treasury software solutions integrate smoothly with ERP, accounting software, bank accounts, trading platforms, and other systems. The following are five ways automated treasury solutions can help overcome mid-market treasury challenges:

Five ways automated treasury solution empowers mid-market companies:

An ideal treasury management solution allows treasury professionals to take complete control of treasury functions and help support the company in meeting its business goals. Here are some benefits provided by automated treasury solutions to counter the above challenges:

benefits of treasury

  • Global cash visibility: Cash visibility enables businesses to invest money while cutting costs and debt. Accurate visibility also lowers a company’s exposure to risk while enabling growth. Treasury management solution uses a bottom-up approach to offer detailed cash visibility. Accurate cash flow visibility is the key to financial success in any organization, as it helps treasury:
    • Invest money proactively and wisely
    • Effectively use cash management
    • Reduce debt and interest expenses
    • Make better-informed hedging decisions
    • Calculate the future cash flow available
  • Automated data mining and cash forecasting: Treasurers can implement data-driven decisions to manage capital and risks and enhance corporate treasury management solutions with automated reporting, continuous data access, and improved data quality. CFOs can make data-driven decisions based on accurate cash forecasts and reports with accurate data. Here are some of the benefits of automated cash forecasting:
    • Automate data aggregation from many sources with the help of APIs and RPA
    • Analyze the extracted data from the bank and the ERP system along with the historical data 
    • Provide up-to-date information with granular visibility
  • Accurate scenario analysis to prevent risks: Treasurers can capture ‘what-if’ scenarios by incorporating customer-specific variables and the ability to detect trends and patterns. This enables them to plan ahead of time and avoid any financial problems. Treasury software solutions help to proactively analyze scenarios and risks, which allows CFOs to manage risks. As a result, cash flow analysis is improved, which enables decision-makers to avoid and manage risks.
    Managers use scenario analysis to determine or invent various courses of action to pursue so that the organization can lower its total risk and increase its value.
    Here are the benefits of a treasury management solution to mitigate risks:

    • Improve visibility of all types of risk
    • Enhance risk exposure management
    • Protect a company with best practice hedging strategies
  • Timely and effective reporting: Treasury management solution creates timely reports of high quality, complete with insightful details and drill-down capabilities. The CFOs can promptly obtain reports on cash flows, available bank balances, and funding needs leading to shorter turnaround times.
  • Higher ROI: To achieve higher ROI, automation helps in generating time and cost savings as a part of the gross savings component by reducing:
    • The effort and money spent on data gathering and creating models
    • The labor of updating spreadsheets manually and applying FX rates
    • Inaccuracy in data to improve debt/investment decisions
Chapter 03

How HighRadius’ automated treasury solution empowers mid-market firms?


A $266M lottery and gaming provider corporation faced these challenges:

  1. Excel-based process, which is very time-consuming
  2. Manual data consolidation from various sources
  3. Lack of visibility and reporting
  4. Decentralized process

HighRadius automated treasury solution provided the following benefits to the company:

  1. Accurate cash positioning
  2. Better investment decisions
  3. Time saved by automating forecasts and data consolidation
  4. Centralized process with detailed reporting
  5. Advanced variance analysis and visibility into individual accounts

The HighRadius treasury solution helps mid-markets in the following ways:

  • Processing data, making accurate forecasts, and spotting trends or deviations in consumer and transaction behavior.
  • Obtaining customer data for effective due date monitoring and a better understanding of payment terms.
  • Examining cash positions across various banks, organizations, geographies, currencies, and categories.
  • Understanding changes in stock prices, bank deposits, and withdrawals when recent patterns are prioritized above historical ones when forecasting cash flow.
  • Spotting differences between forecasts and actuals and keeping an eye on different scenarios.
  • Managing in-house banking, sweeps, intercompany transfers, and loans and investments.
Chapter 01

What are the challenges faced by the mid-market treasury?


The following are the common challenges faced by the mid-market treasury :

  1. Inability to have complete visibility over cash and risk: 
    Poor visibility results from data being spread across TMSs, ERPs, bank portals, and sales order systems. Non-standard processes like currency fluctuations can also contribute to poor visibility. Not having complete visibility into cash flow can lead to many problems, such as:

    • Inadequate return on investment
    • Lack of confidence in corporate treasurers and missed KPIs
    • Expensive borrowing fees
    • Bank charges
    • Poor hedging choices 
    • Absence of a reserve to cover unforeseen costs
  2. Time-consuming data mining:
    Data mining is the most stressful task for mid-markets. Data mining through spreadsheets is
    time-consuming due to the following reasons:

    • Completely manual and error-prone process
    • Inability to compare variations
    • Needs frequent manual changes and human interventions
    • Difficulty in acquiring and aggregating the relevant datasets
  3. Handling major risks:
    Mid-markets must ensure enough cash and develop strategies to mitigate any financial risks. Forecasting risk factors impacting working capital can be challenging. Businesses should use have proper risk controls in place to prevent vulnerabilities. Here are some significant risks faced by mid-market companies:

    • Liability risk is a risk where an insured company is liable to a third party as a result of or caused by any act, error, omission, representation, or statement by the insured.
    • Security risk is the threat of financial loss, disruption, or reputational damage to an organization due to the failure of its IT systems.
    • Business interruption risk refers to a company’s financial loss when its operations are disrupted.
    • Credit risk is the possibility of a loss resulting from a borrower’s failure to repay a loan or meet contractual obligations.
    • Strategic risk is the risk that failed business decisions may pose to a company.
  4. Inefficient or delayed reporting:
    Treasurers face challenges in obtaining accurate and timely reports. The following are some issues faced by mid-markets:

    • Inaccuracy in the cash forecasting process causes a delay in data-backed reporting, making it challenging for treasurers to get reports on time.
    • Decentralization also leads to delayed reporting and ineffective decision-making.
    • Manual processes for cash management can make it more difficult for treasury, resulting in inaccurate reporting and auditing.

    Manual methods result in ‘dead-on-arrival’ reports. This results in high turnaround time and low bandwidth. This obstructs timely decision-making and prevents teams from focusing on high-value tasks.
    As the reports are based on assumptions and are based on stale data, firms overborrow and end up in financial distress because they are ill-prepared for macro-level fluctuations.

  5. Difficulty in choosing the best treasury management solutions that meet the expectations and budget:
    Revenues of small and mid-market businesses (SMEs) are often restricted to leveraging AI-based solutions. Here are some difficulties in choosing the best treasury management solutions:

    • Lack of funds for hardware and IT setup requirements
    • Lack of regular enhancements and adjustments
    • Inaccessibility and lack of data availability due to budget constraints

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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.