Three Pillars Of Intelligent Treasury Management: Process, Visibility, And Analytics

Ido Shamgar

Part 2 of the Finance Transformation” series that explores how finance can take the lead in driving their companies towards an intelligent enterprise

Imagine this: You’re the treasurer of a fast-growing company. To accelerate growth even more, your firm has recently made several acquisitions.

While traveling overseas, top executives from your firm meet with leaders of a company that fills a critical white space in the corporate portfolio. But competitors are knocking at the same door, so moving fast makes all the difference. You get a call from the CEO. Financing may take too much time, she tells you. Maybe a direct purchase is the thing to do. Then, when she asks you how much cash on hand is available, you do something quite incredible: you give her an answer.

No delays, no consolidation of spreadsheets, no endless rounds of meetings with all the lines of business throughout the organization. The answer is there, right in front of you, available in real-time.

The strategic role of the treasurer

This is fortunate, of course, because as corporate liquidity becomes increasingly important for taking action fast, your role as treasurer is becoming increasingly strategic.

Real-time finance gives organizations a tremendous advantage. Competitors can’t match you. What they have are spreadsheets and outdated reporting solutions that take time to generate. What you have is access to the financial health of your business in real-time.

This is intelligent treasury management. The idea is to consolidate your view of financial data across all relevant business units on a common platform – creating a single source of financial truth that cuts across all business units. Here are three pillars to intelligent treasury management to think about as you move forward.

End-to-end processes: integrate and execute

As the finance function cuts across all business units, so too should finance- and treasury-related processes. Business units, for example, should be empowered to manage payments according to a standardized process – one that leverages a common digital core to which all treasury-related processes can connect. Ultimately, all finance-related activities for business units should roll up into a single view of cash flow accessible by the treasurer and the office of the CFO. Ideally, you should be able to:

  • Manage bank accounts for the entire company centrally and implement robust controls on account opening, closing, and signatory management
  • Set up cash pooling structures, perform intercompany netting, and run payment-on-behalf-of (POBO) processes
  • Optimize costs associated to bank services through bank-fee analysis applications
  • Quickly initiate cash movements from within the cash-position management process to avoid overdrafts, minimize banking fees, and reduce borrowing costs
  • Get detailed liquidity forecasts to plan future cash flows and get long-term guidance on your treasury operations

Visibility: understand your positions and manage your risk

When finance and treasury processes are integrated end-to-end across the enterprise with data views consolidated on a common platform, the outcome is greater visibility. This puts you at a strategic advantage. Now you can see your cash position in real-time. Now you can make decisions quickly and operate with agility in a fast-moving business environment.

This visibility also helps minimize risk and the cost of managing it. Take, for example, the increasing financial risks originating from fluctuations in foreign exchange rates, interest rates, and commodity prices. With real-time visibility into transactions, market trends, and your current positions, you can quickly access an up-to-date view of your financial exposures. And with end-to-end process support, you can quickly execute trades that hedge against that exposure.

Analytics: see what’s happening now and what’s coming next

When it comes to real-time finance, the ultimate analytics capability comes in the form of real-time dashboards. When your CEO calls you to find out your cash-on-hand position, a dashboard can give you an at-a-glance view of exactly the right answer right away.

But sometimes you need to go deeper than the KPIs on a dashboard. Sometimes you need to drill down into numbers and transactions in back-end systems that drive the dashboard KPIs. Based on what you discover, you might also want to generate a report. In that case, a slim selection of canned report formats will likely fall short of your needs. Instead, you’ll want robust ad hoc reporting – the kind that enables you to communicate whatever it is you need to convey.

Simulation capabilities are important, as well. As treasurer, for example, you might want to understand the ramifications of taking certain positions in the market. The ability to run what-if scenarios and evaluate where particular decisions may take you can be indispensable when it comes to financial execution.

Add to this list the power of predictive analytics using machine learning. By training machine-learning algorithms on high volumes of financial data, you can identify patterns that can help you anticipate what’s coming next – for example, spotting increased liquidity risks based on recent market developments. By taking action now based on what you see developing down the road, you can better manage your financial portfolio and keep your company on proper financial footing.

Get intelligent

Intelligent treasury management isn’t science fiction. Many finance organizations are moving forward today to build end-to-end finance processes with the visibility and analytics needed to improve financial performance.

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Ido Shamgar

About Ido Shamgar

Ido Shamgar is SAP’s global lead of Product Marketing for SAP S/4HANA, focusing on the Finance Line of Business. In his role, Ido develops compelling marketing programs, messaging, and content on the next-generation intelligent ERP. He is a seasoned business executive who works with companies around the world to market, sell, and deliver innovative technologies for pressing business needs.