The future of treasury management: Digital technology gives treasurers a boost

Eileen Dignen
Posted by Eileen Dignen
Cash Management

It amazes me how much artificial intelligence (AI), robotics, and application programming interfaces (APIs) have changed the corporate treasury 3-D rendering humanoid robot with AI text in circuit pattern.function over the last five years.

The pace seems to be accelerating as treasurers seek better data insights and look to improve transparency, efficiency, and free up resources. The new report Journeys to Treasury 2018-19, a unique collaboration between BNP Paribas, PricewaterhouseCoopers (PwC), software giant SAP and the European Association of Corporate Treasurers (EACT), confirms this trend.

Virtual accounts
Optimizing liquidity management remains a priority for many treasurers. One way to achieve this is through virtual accounts, which are a way for companies to reduce the number of external accounts while maintaining a high level of information reporting for each flow. These accounts enhance reporting and process automation, such as reconciliation.

As payments accelerate, both domestically and cross-border, treasurers need to consider the liquidity implications. At the same time, the move towards open banking gives treasurers the ability to use APIs to access banking services, offering new ways to achieve visibility and control over cash.

“Treasurers need to consider the implications of round-the-clock flows from an operational, cash and liquidity management perspective, and work with their banks to manage the need for on-demand or real-time reporting,” said Bruno Mellado, Head of Payables, BNP Paribas, our parent company.

The great thing is that treasurers can set up an unlimited number of virtual accounts with account numbers, which can be used to more easily reconcile incoming payments.

Real-time payments proliferating
I see another trend that will reshape how treasuries operate: It’s the global move towards real-time payments systems. Real-time and instant domestic payment solutions are proliferating around the globe.

As Mellado puts it, “Treasurers need to consider the implications of round-the-clock flows from an operational, cash and liquidity management perspective. And they need to work with their banks to manage the need for on demand or real-time reporting.”

While these initiatives enable companies to manage time-sensitive outgoing payments more precisely, the bigger impact for many treasurers will be on collections. It’s not out of the question that a company could see incoming flows credited to its account on a 24/7 basis.

The staffing firm PageGroup has been looking at the implications and potential advantages of real-time payments with its accounts receivable team. At a basic level, there will be an impact on its debt collection processes. “We don’t want to chase invoices that a customer has ‘just’ paid,” said Joanna Bonnett, corporate treasurer at PageGroup. “With real-time payments, we need far more dynamic and flexible information flows within the business to achieve this. Therefore, with real-time payments, it is important to look at the wider business impact, not just on the treasury and finance function.”

The continuing trend of a truly digital treasury operation is changing the way that corporations run their businesses. While a complete back office re-engineering for real-time payments seems daunting, the truth is that companies have been moving in this direction with their own operations. Optimal digital treasury practices are an important part of realizing corporate efficiencies. Banks are uniquely positioned to partner for success in the digital landscape.

For more information, check out the third edition of Journeys to Treasury.

Learn more about Bank of the West’s Treasury Management solutions.

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