By Geralyn Frances
The treasurer’s role is one of leadership; demanding integration of company systems and full data transparency.
Today’s world of treasury management includes the ever-expanding challenge of controlling business risk across all operations of the corporation. This calls for treasurers to improve performance and add financial value enterprise-wide.
But to the rescue is the constant improvement in treasury technology, which is aiding treasurers in getting the critical information needed to be successful. Two technology trends that are helping in this regard are the development of solutions that help treasurers get faster and better access to realtime data and the integration of disparate systems.
Treasurers’ evolving role has come about due to a number of factors, but the financial crisis has really pushed it forward, elevating the need to identify and control global business risks. Treasury is now focused on counterparty and country risks in addition to the typical transaction-based currency, interest rate and investment risks.
SunGard has been active in this area with its AvantGard Receivables product and is just one example of how smarter systems are meeting treasury’s integrated needs. By combining SunGard’s robust account receivables credit and collection product with predictive analysis, the company has created one solution to support both the credit, collections and the cash forecasting of company trade receivables.
As C.J. Wimley, EVP, Trade Liquidity Solutions, SunGard’s AvantGard notes, “The marketplace has become more strategic, with treasury taking a more holistic approach.” Treasurers are naturally more “active with trade receivables, being that it is (typically) the largest source of cash.”
Technology Trends
Post-crisis, many treasurers are reassessing their systems requirements. According a Treasury Strategies survey of 150 treasurers taken in second quarter 2012, 44 percent of treasurers were planning on adding to or replacing their current systems in the next 18 months. This has also been seen in the various plans of treasurers in The NeuGroup universe, where most are upgrading systems or implementing new ones.
This tech challenge is being driven by two closely related trends: (1) demand for speedier, realtime data and (2) adoption of software-as-a-service (SaaS) cloud-based solutions. Clearly, the emphasis is on information, its availability, reliability and cost-efficient access. Strategic management and effective decision-making rest on the notion that data is current and all-inclusive. Full transparency and up-to-the-minute data are best achieved through full integration of corporate systems; cloud technology is helping to achieve that more efficiently, and at a lower cost.
Cloud-based applications are maintenance free and there often is little to no upfront cost—fees primarily consist of the annual renewable license. Sounds too good to be true, but as cloud services and the associated security behind it become more sophisticated and more acceptable, deploying a privately hosted, lean and secure environment to replace onerous and expensive on-site systems is now within reach.
But it is not all about the technology and information, as people and processes also need to be on board. Treasury operations’ alignment with business processes such as payables, receivables, supply chain, sales and contracting are critical to drive solutions. Frequent staff updates, dotted line reporting across corporate functions and multi-functional project teams can be employed so personnel stay knowledgeable and involved.
Functional To Collaborative
For years, treasury groups were criticized for working in a silo, not always communicating with the underlying businesses. The transactional and specialty nature of treasury deemed itself to be functional rather than collaborative in nature.
This changed starting with Sarbanes-Oxley and then again as a result of the recent credit crisis. Cross-functional processes and collaboration became necessary for effective risk control. Treasury first become more process-driven as it sought consistency and improvement, and then became more of a business partner, stepping out to identify opportunities to support operations and sales. By incorporating performance metrics, treasury started to measure and quantify its value-add to the corporation.
This has affected today’s treasurer, who is asked to provide integrated, enterprise-wide value to organizations, and go further. One manager, for instance, gets involved with strategic supplier and customer credit decisions, and also reviews the receivables and payables process.
Treasurers and their staff are also sitting in on major project reviews, working out trade finance solutions and/or reviewing counterparty bank and import country risks. One MNC placed the regional treasurer in charge of each of the local shared-services operations, which effectively put treasury and much of the operations under the same management umbrella, creating additional synergy between them. For instance, this treasury led a bank-sponsored purchasing card implementation with support from a team that included supply-chain and payables management.
As the treasury’s role evolves into that of a strategic leader, the demands for realtime data, integrated systems and full risk transparency will increase. Up-to-date, consolidated information will provide the full organizational transparency needed to act decisively to control risk. Statistical-based risk modeling, like that offered by AvantGard Receivables, will also enhance decision-making. As such, improvements in real-time data access and the continual development of SaaS solutions should be on your radar screen as treasurers look to improve current systems and solidify their role as a value leader.