Why Treasury Technology Is Essential for the Future of Financial Operations
Treasury departments face rapid changes as businesses expand and financial operations become more complex. Treasurers now have to manage global cash flows, work with multiple banking partners, and stay on top of evolving technology.
To keep up, they need to adopt Treasury Technology, which automates routine tasks and helps them focus on bigger, strategic goals.
Jennifer Baker, Global Head of Treasury Services and Depositary Receipts at BNY, shares her insights on this important shift. She has more than two decades of client-focused experience and a comprehensive understanding of the treasury ecosystem. Her experience provides a clear view of how technology shapes the future of treasury operations.
In this article, we will explore how treasurers can use technology like AI, Treasury Management Systems (TMS), and ERP systems to improve their operations. We will also cover the importance of building strong partnerships with banks and tech providers and how to secure funding for tech initiatives.
The Future of Treasury Technology in 2024 and Beyond
The role of treasury is evolving from focusing on operational tasks to becoming more strategic. This shift, while necessary, presents challenges.
Treasurers work globally, interacting with multiple banking partners and technology systems. Much of their work remains manual, limiting time for strategic thinking.
To address this, treasurers must invest in technology that automates routine tasks and enhances decision-making.
Key Technologies for Treasury
- Artificial Intelligence (AI): AI Automates simple decision-making and enables advanced scenario modeling.
- Treasury Management Systems (TMS): Help treasurers manage cash flow, payments, and financial planning.
- ERP Systems: Integral for automating financial processes and integrating with TMS.
Treasurers must understand and implement these technologies to enhance efficiency, allowing them to focus on strategic advising for CFOs, management teams, and boards.
Should Treasurers Learn to Code?
Treasurers don’t need to become programmers, but they should stay tech-savvy. Understanding tools like Python and AI help treasurers see the potential for automation and enhanced data analysis.
While learning programming is optional, understanding how technology works and how it can be applied is essential.
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Essential Tech Skills for Treasurers:
- Awareness of Current Tech: Stay updated on market trends, including AI and machine learning.
- Collaboration with Tech Experts: Partner with data scientists to unlock the full potential of tools like Python.
- Strategic Technology Deployment: Know how to implement new technologies within budget constraints to improve treasury operations.
Building Strong Treasury Technology Partnerships
Treasurers must collaborate with various technology partners, including ERP providers, treasury management systems, and banking partners.
No single provider offers a complete solution, so treasurers need to understand the strengths and limitations of each to fill operational gaps.
Banks, in particular, can play a vital role by providing solutions like single API interfaces that streamline payment processes and reduce the technology burden on treasury teams.
Treasurers can drive innovation and adapt to the rapidly changing financial landscape by staying technologically informed and fostering strong partnerships.
Securing Funding for Treasury Technology Initiatives
Treasurers are critical in managing the company’s liquidity, ensuring funds are available for operations and strategic investments. However, obtaining funding for treasury automation or technological upgrades can be challenging.
To make a compelling case, treasurers must clearly link their proposals to business growth by improving the bottom line or creating opportunities to impact the top line.
Building a Strong Business Case
Treasurers can strengthen their case for funding by highlighting how their initiatives contribute to:
- Operational Efficiency: Automating routine tasks like payments, reconciliation of receivables, and forecasting cash flow.
- Cost Savings: Reducing bank fees, improving cash flow management, and cutting operational costs.
- Risk Management: Minimizing fraud risk, managing foreign exchange exposure, and optimizing interest rate fluctuations.
- Revenue Generation: Using available funds for strategic initiatives like acquisitions, research, or development.
Treasurers should also engage key stakeholders early, including the CFO and management team, to discuss treasury-driven projects’ potential long-term financial benefits. Aligning these initiatives with broader business goals will increase the likelihood of securing resources.
The Importance of Data in Treasury Technology
Real-time data access is essential for effective treasury management. Many organizations, however, lack the necessary infrastructure to provide timely information on receivables, payables, account balances, and foreign exchange rates.
Developing a robust data strategy helps ensure accurate cash flow forecasts and improved decision-making. By working closely with chief data officers and tech teams, treasurers can secure critical financial data in real-time, enhancing their ability to offer valuable insights and align with broader business goals.
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The Role of the Treasury in Risk Management
Treasurers manage cash flows and crucial financial risks, including foreign exchange, interest rates, and fraud. Their involvement in strategic planning and decision-making provides essential guidance on financial trends and risks, preparing the company for current challenges and future growth.
How do Banking Partners Facilitate Treasury Technology Integration?
A successful banking partner is crucial in helping treasurers manage their technological challenges. Any banking partner’s first step is to understand the treasurer’s goals and objectives fully.
While some goals are common across industries, each company has unique needs. Once these goals are clear, the banking partner’s role is to help treasurers achieve success by reducing the technological burden they face.
Key Areas of Support
- Seamless Integration: Banking partners help treasurers integrate their systems with various tools, such as ERP systems, treasury management systems, or even homegrown solutions like Excel. This reduces the need for treasurers to manage multiple complex systems themselves.
- Technology Maintenance: Real-time payments, ISO 222 updates, and other technological changes happen regularly. Banking partners, like BNY, are responsible for system updates, allowing treasurers to focus on strategic tasks instead of spending time on technology maintenance.
- APIs and Connectivity: APIs provide a seamless, single connection point for treasurers to manage payments and reporting. By offering a range of integration options—such as APIs, file transfers, and direct connectivity—banking partners ensure their clients can operate efficiently regardless of their current infrastructure.
Reducing Complexity with Smart Routing
In the payment processing world, treasurers often face the challenge of selecting the right payment rail for each transaction. To simplify this process, banking partners offer smart routing capabilities.
Smart routing automatically identifies the most efficient payment route based on factors like the recipient’s bank and payment type (e.g., FedNow, real-time payments, ACH).
This automation eliminates the need for treasurers to choose between different payment rails manually. By handling these technical complexities, banking partners enable treasurers to streamline operations and focus on more strategic aspects of their role, improving overall business performance.
How Variable Cost Models Are Transforming Treasury Technology Operations
The traditional investing model in large, upfront technology infrastructure is becoming less common in treasury. Companies are now moving toward variable cost structures, allowing them to pay only for the services they use.
This shift helps organizations avoid high capital expenditures and focus on scaling their operations without heavy upfront investments.
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Benefits of Variable Cost Models
- Cost Efficiency: Instead of investing millions in technology, companies can leverage existing infrastructures provided by partners like BNY, paying per-use.
- Flexibility and Scalability: This model allows businesses to adjust their expenses according to usage, making it easier to adapt to market demands without overspending on technology.
- Focus on Core Strategy: By outsourcing technology needs to partners, treasurers can concentrate on their core strategies, leaving the operational complexities to banking partners.
White Labeling and Banking as a Service
White labeling allows companies to enter new markets, such as the U.S., without building their payment infrastructure.
BNY offers ready-to-use payment systems, priced on a pay-as-you-go model, giving businesses access to robust technology without the financial burden of creating it themselves.
This approach also applies to services like virtual accounts, which reduce the need for multiple physical accounts and lower the associated costs and risks.
White labeling isn’t limited to payments—it can also apply to cash concentration, liquidity management, and other treasury services.
Payments as a Competitive Advantage
In sectors like the gig economy, the speed of payments can be a competitive differentiator. Companies that offer quicker payments (e.g., paying workers after every shift instead of bi-monthly) have a clear advantage.
Partners like BNY provide the infrastructure to enable this without companies needing to develop their systems.
Conclusion
In conclusion, treasury technology is critical in transforming how treasurers manage their operations. By adopting key technologies like AI, TMS, and ERP systems, treasurers can streamline routine tasks and focus on strategic decision-making.
Strong partnerships with banks and tech providers further enhance these capabilities, allowing seamless system integration and improved efficiency.
As the treasury continues to evolve, staying informed and making smart investments in technology will remain essential for future success. Treasurers who embrace these innovations will position their companies for growth in the dynamic financial landscape.
FAQs
How can Treasury Technology help improve cash flow forecasting?
Treasury Technology provides real-time data and advanced analytics, enabling more accurate and timely cash flow forecasts.
Is Treasury Technology expensive to implement?
The cost varies based on the scale and complexity of the system, but cloud-based solutions can reduce upfront expenses.
How does Treasury Technology enhance fraud prevention?
It uses automated monitoring, real-time alerts, and advanced algorithms to detect unusual patterns and prevent fraud.
What role do APIs play in Treasury Technology?
APIs allow different financial systems to communicate, streamlining payments and data reporting processes.
Can small businesses benefit from Treasury Technology?
Yes, small businesses can use scalable solutions that improve cash management, reduce risks, and enhance efficiency.
What skills do treasurers need to manage Treasury Technology?
Treasurers should have basic tech literacy, data analysis skills, and an understanding of how different tools integrate.
