How Treasury Technology Empowers Financial Efficiency
The finance world is rapidly changing, and treasury technology is key in making organizations more efficient and strategic. This area helps treasurers overcome major challenges like cash forecasting and managing money despite growing demands for fast and integrated solutions.
Mike Hewitt, the co-founder of Adaugeo Media, brings valuable insights into this field. With a background in marketing, publishing, and leading projects for financial professionals, he offers a unique look into the latest treasury technology trends.
Based on the yearly Treasury Survey and the Treasury Dragons method, this article highlights key areas in treasury technology. It shows how technology shapes cash management and the changing role of treasurers in the digital age.
In this article, we look at the latest trends, problems, and solutions in treasury technology. We base our discussion on the annual treasury survey and input from top professionals. You will learn about the impact of AI on cash forecasting, how treasurers deal with digital changes, and how vendors and users interact.
Treasury Dragons Approach for Evaluating Treasury Technology
The “Treasury Dragons” concept draws inspiration from the UK’s “Dragons’ Den,” a show where experts evaluate entrepreneurs’ business plans. This idea adapts to the treasury technology market, offering a platform for scrutinizing and selecting the best technologies.
Annual Treasury Survey Overview
The annual treasury survey aims to capture treasurers’ priorities, with a keen focus on Treasury technology. Over three years, the survey has grown, engaging more participants each time. It seeks to understand treasurers’ technology preferences and priorities for the upcoming year.
Key Findings from the 2024 Treasury Survey
- Cash Forecasting Dominates Priorities: Cash forecasting remains the top priority for treasurers, with 68% highlighting its importance. It significantly surpasses other areas like cash pooling and working capital management.
- Survey Approach and Anonymity: The survey ensures anonymity to encourage open feedback. It gathers data on treasury technology budgets, the importance of treasury functions, and automation levels. This information helps both vendors and treasurers in decision-making and benchmarking.
- Global Participation and Insights: With 159 participants in 2024, the survey has a global reach. Responses mainly come from EMEA, including Asia Pacific and the US, providing a comprehensive view of treasury priorities.
Challenges and Solutions in Cash Forecasting
- Persistent Accuracy Issues: Treasurers struggle with cash forecasting accuracy despite technological advances. This challenge stems from the reliance on various internal inputs and the inherent difficulty in predicting future cash flows.
- The Role of Technology: Advances in AI and machine learning offer hope for improving forecasting. However, the accuracy of forecasts heavily depends on the quality of input data from various departments.
- Current Practices and Potential Improvements: Many treasurers still rely on spreadsheets for cash forecasting. Technology can streamline data collection and analysis, reducing manual efforts and improving accuracy. Yet, the final judgment on forecasts remains a treasurer’s responsibility.
This survey sheds light on treasurers’ struggle with cash forecasting accuracy and their search for better solutions. It also highlights the potential of technology to improve treasury operations despite the limitations imposed by data quality and the need for human judgment.
Treasury Technology Trends in Cash Management
Treasury surveys reveal cash management as the top priority for treasurers. Cash flow forecasting leads, followed by cash pooling and working capital management. Financial risk management, FX, and commodity risk management rank lower. This focus reflects the survey’s technology angle, where platforms offer solutions.
Treasurers prioritize areas with less automation. Highly automated areas receive less focus. This trend suggests technology vendors should target less automated areas, like cash forecasting, to meet treasurers’ needs.
Vendor Response to Treasury Needs
The treasury technology market has evolved, becoming responsive to treasurers’ needs. Software as a Service (SaaS) models dominate, replacing on-premise installations. Treasurers now combine treasury management systems with specialized solutions for tasks like cash forecasting. This multi-solution approach addresses various treasury challenges efficiently.
Challenges with Treasury Technology Vendors
Treasurers face two main issues with vendors:
- Overpromising: Vendors sometimes promise more than they can deliver, especially concerning new features like APIs.
- Service Levels During Mergers: Mergers and acquisitions can temporarily distract vendors, affecting service quality.
Evolution of Treasury Priorities
Cash forecasting remains the top priority, with increasing emphasis over the years. The pandemic and rises in interest rates have heightened the importance of working capital management and cash optimization. Treasurers focus on ensuring liquidity and managing costs amid economic shifts.
Treasury Investment Strategies
The survey does not specifically address investment strategies. Treasurers remain cautious, sticking to conventional investments like money market funds. Cryptocurrencies are not widely adopted for investment, indicating a conservative approach to treasury investments.
Investment Trends in Treasury Technology According to the Treasury Survey
According to the Treasury Survey, Treasurers dedicate more of their budget to technology, focusing on enhancing cash and working capital management. The trend is towards comprehensive treasury management systems (TMS) and modular, best-of-breed solutions. This approach reflects a desire to optimize technology investments based on specific needs and challenges.
Budget and Spending
- Most treasurers allocate $50,000 to $250,000 annually on technology.
- About 32% have increased their technology budget, driven by the need for better cash management tools.
Preference for Technology Solutions
- 50% prefer to enhance their existing TMS or add new features.
- 44% opt for best-of-breed solutions for specific treasury challenges.
- The choice often depends on the company’s size and specific needs.
Integration and Reporting
Treasurers face challenges in integrating multiple solutions and seek more seamless connectivity. They also express a strong need for improved reporting tools to make data more accessible and understandable for non-specialists.
Future Directions
While there’s interest in emerging technologies like AI, treasurers are currently more focused on practical cash forecasting and system integration solutions. They balance the benefits of comprehensive platforms against the flexibility of specialized solutions, with a clear preference for efficiency and simplicity in their technology stack.
System Vendors and Integration Efforts
System vendors, including treasury technology platforms, ERP vendors, and banks, are working towards better integration. The goal is to achieve interoperability, making it easier for treasurers to connect various systems without complex arrangements.
APIs play a crucial role in these efforts, aiming to provide a standard connector for diverse systems. While true seamless integration remains a work in progress, the industry moves towards greater vendor cooperation.
Insights from Treasurer Interviews
Key takeaways from interviews with treasurers highlight cash forecasting as a paramount concern. Treasurers are also focusing on the strategic aspects of their roles, including:
- Resource Optimization: Automation in treasury operations is freeing up resources. Whether this leads to cost savings or allows staff to engage in more strategic tasks is debated.
- Evolving Role of Treasurers: The role of treasurers is shifting towards being “cash consultants” within their organizations. This change emphasizes the need for a company-wide cash culture, where cash management is a collective responsibility.
- Strategic Influence: Treasurers are increasingly involved in advising on cash management across the company, promoting a holistic approach to liquidity and working capital.
- Challenges in Role Transition: Adapting to this evolving role can be challenging for treasurers, especially those accustomed to traditional, back-office functions. The shift requires new skills in persuasion and business-wide collaboration.
These insights underscore the critical nature of cash management and the strategic evolution of the treasurer’s role in modern corporations. As technology automates routine tasks, treasurers are poised to take on more advisory functions, driving a culture of cash awareness across their organizations.
Treasury Technology Adoption
Some companies prioritize basic operations over investing in treasury technology, particularly those facing financial challenges. A case study from Avrameni in Greece illustrates this point, with the treasurer acknowledging other priorities before investing in technology.
This scenario is not unique, as companies often manage spreadsheets and manual processes until the complexity or scale of operations necessitates a more sophisticated solution.
The Turning Point for Technology Adoption
Companies reach a tipping point where the manual effort becomes too burdensome, prompting a technological shift. This change is often dictated by:
- The level of operational complexity.
- The need for efficiency in cash management.
- The realization that manual processes consume significant time.
The Case for Automation
Despite initial resistance, the benefits of automation are clear, offering:
- Time Savings: Technology can reduce the time to compile cash positions from hours to minutes, freeing up staff for more strategic tasks.
- Operational Efficiency: Automating routine tasks allows treasurers to focus on analysis and decision-making rather than data entry.
The Challenge of Change
The transition to technology can be daunting, with some treasurers hesitant to move away from familiar manual processes. However, the analogy of replacing square wheels with round ones underscores the inefficiency of sticking with outdated methods.
Embracing technology can significantly improve operational efficiency, even if the initial step requires overcoming inertia.
Engagement and Feedback
The treasury community is encouraged to engage with and provide feedback on treasury technology solutions. Disagreements or alternative views are valuable for enriching the discussion and tailoring solutions to meet better the needs of treasurers across different industries and company sizes.
While treasury technology may not be a priority for all, its efficiency and strategic focus benefits are undeniable. Companies at various stages of growth and complexity will eventually face the decision to adopt technology, balancing immediate challenges with long-term operational needs.
The conversation around technology adoption in treasury is ongoing, with input from treasurers crucial for shaping the future of the industry.
Conclusion
In conclusion, treasury technology is crucial for enhancing financial efficiency. Through the “Treasury Dragons” approach and annual surveys, we’ve learned about key trends and challenges in the field.
Despite issues like accuracy in cash forecasting, technology offers hope with AI advancements. Treasurers are embracing integrated solutions to streamline operations. Also, despite vendor challenges, the industry is moving towards better cooperation.
Treasurers’ evolving role as strategic advisors highlights the importance of technology. While some initially prioritize basic operations, the benefits of automation are clear. Engagement from the treasury community is vital for shaping future solutions.
In essence, treasury technology will continue to drive efficiency and strategic decision-making in organizations worldwide.
FAQs
How does treasury technology specifically contribute to financial efficiency?
Treasury technology streamlines financial processes, enhances accuracy in cash forecasting, and improves decision-making, ultimately leading to cost savings and strategic resource allocation.
What are the main challenges treasurers face in adopting treasury technology?
Treasurers often encounter hurdles such as vendor overpromising, integration complexities, and reluctance to depart from familiar manual processes, hindering seamless adoption and maximizing technology benefits.
How do emerging technologies like AI impact treasury operations?
AI presents opportunities to enhance cash forecasting accuracy and automate routine tasks, enabling treasurers to focus on strategic analysis and decision-making, optimizing operational efficiency.
How do treasurers navigate the transition toward technology adoption?
Treasurers transition towards technology adoption by recognizing the tipping point where manual processes become inefficient, embracing change despite initial resistance, and leveraging technology to streamline operations and enhance efficiency.
What are the implications of treasury technology trends on treasury operations?
Treasury technology trends underscore the importance of innovation, collaboration, and continuous improvement in optimizing treasury operations, driving strategic decision-making, and adapting to evolving financial landscapes.
How can treasurers leverage treasury technology to mitigate financial risks?
Treasury technology provides tools for proactive risk management, enabling treasurers to monitor and mitigate financial risks associated with cash flow volatility, market fluctuations, and operational uncertainties.
