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Four Things Every CFO Should Know About Treasury

06-01-2022 | treasuryXL | TIS | LinkedIn |

This article is intended as a precursor to TIS’ latest whitepaper that highlights how CFOs can use their knowledge of the treasury function to spearhead initiatives that drive higher revenue, better financial decision making, and greater process automation and control. After reviewing how modern treasury groups typically operate, we will analyze the main benefits that a fully-optimized treasury team can provide to the CFO and an organization at large. To assess the full suite of data, insights, and commentary, download the whitepaper.

A CFO’s Summary of the Treasury Function

Although most CFOs will (or should) have a robust understanding of how the treasury function operates, let’s start with a quick synopsis for those who may be newer to the role.

At the highest level, treasury is a subset of the finance department that is responsible for safeguarding their organization’s most important asset (cash) as well as providing transparency and control over the day-to-day processes necessary for the company to meet its financial obligations (i.e. payments). This means that at its core, the treasury function most commonly performs:

Cash and liquidity management
Payments and bank account management
Financial Risk, Fraud, & Compliance Management

Of course, certain treasury teams will have additional duties levied onto them depending on the size, complexity, and structure of their organization. For instance, cash flow forecasting, FX trading, debt and investment activity, and cash pooling or netting are all functions that commonly fall under treasury’s purview, but it ultimately depends on the specific makeup of their organization.

Moving beyond these core roles, however, it’s also important to note that treasury groups, even those at multibillion-dollar, multinational companies, often consist of five or fewer individuals. In fact, data from 2020 showcased that the average treasury size for U.S. organizations, regardless of company size or complexity, was just four personnel. Further data from 2020 shows that the majority of these teams are accustomed to working remotely, with team members often located across entirely different regions and time zones.

But while treasury staffing might be kept to a minimum, the best teams still manage to optimize their processes by relying heavily on technology automation instead.

In order to function at the highest level, modern-day treasury teams utilize a variety of digital technologies that range from bank portals and Excel spreadsheets to cloud-based ERPs and TMS platforms, payment hubs, business intelligence solutions, and many other specialty systems. In 2021, the majority of solutions that treasury teams use are SaaS-based and connect via APIs with other SaaS solutions in their company’s environment, including other back-office solutions as well as external partner, vendor, and 3^rd party platforms.

Thus, for organizations that are smart about their hiring decisions and that leverage finance and treasury technology in a strategic and efficient manner, even the smallest of treasury teams can excel at their roles and boost financial productivity.

However, on the opposite end, organizations that either ignore or underutilize their treasury group can end up with significant gaps in their financial processes, particularly from a payments, liquidity, and risk management standpoint.

Four Things Every CFO Should Know About Treasury

Download our latest whitepaper to gain additional data, graphics, and commentary!

Access the whitepaper.

About TIS

TIS is reimagining the world of enterprise payments through a cloud-based platform uniquely designed to help global organizations optimize outbound payments. Corporations, banks and business vendors leverage TIS to transform how they connect global accounts, collaborate on payment processes, execute outbound payments, analyze cash flow and compliance data, and improve critical outbound payment functions. The TIS corporate payments technology platform helps businesses improve operational efficiency, lower risk, manage liquidity, gain strategic advantage – and ultimately achieve enterprise payment optimization.

Visit tis.biz to reimagine your approach to payments.

International Mass Payments for Growing Businesses

23-12-2021 | Xe | treasuryXL | LinkedIn |

Streamline your payment processes, and improve international business partner relationships. Spend more time delivering on your clients’ needs.

Business process outsourcing and business process automation are not new business models. Yet traditionally, they have been targeted at high-volume, manual tasks like data entry, document processing, and bookkeeping. Delegating international transactions to a mass payments service provider like XE saves your business, and often your recipients on each completed transaction.

One of the many benefits of working with a payment service provider which specialises in international money transfer is that we provide services based on transaction volume. A small business will often just need help to expedite the fundamental payment administration and remittance processes. a large business with significantly more concurrent transactions will typically prioritise access to a scalable payments platform that can integrate with their core financial systems.

The executive appeal of subscribing to a mass payments API through a financial services business like XE is that it provides measurable benefits, such as:

Cost containment by streamlining payment tasks
Greater efficiency and reduced errors
The ability to focus full-time employees on more strategic, high-value tasks
Reduced training and technology overhead
Opportunities to take advantage of volume-based discounts

Is your business looking to find savings opportunities by paying multiple international suppliers, contractors, or employees? Simultaneous payments triggered at optimal exchange rates minimises the impact of unpredictable currency value fluctuations on your bottom line. You can also initialise bulk payments when you feel the time is right, be it after business hours or on weekends.

The Right Payee, in the Right Currency, at the Right Time

XE Mass Payments services are can be made securely to beneficiaries in over 220 countries and territories, in any of 139 currencies. One of our clients increased the efficiency of their international remittances from two days to a mere five minutes.

Consider all the productive work, collaboration, and planning which can be done in those rescued hours which would have been otherwise spent filling out forms, routing payments, and reconciling accounts.

Are you ready to streamline your payment processes, and improve your relationships with your business partners overseas? Do you want to minimise administrative tasks, and spend more time delivering on your clients’ needs?

XE Mass Payments: A Proven Platform from the World’s Trusted Currency Authority

XE Mass Payment API and related services:

Are on par with the banks in terms of security, privacy, and regulatory compliance.
Rival or exceed bank services in terms of speed. We work to avoid intermediary banks wherever possible.
Are less costly for your business, and generally don’t carry recipient fees.
Are an excellent way to reduce manual keying errors.
Are available to your business on your schedule, during the week or on weekends.
Can help you qualify for discounts for prompt payment (such as 2% within 10 days)
Can be contracted as a stand-alone online managed service, or as an integrated API solution to interface with your company’s financial ERP and accounting applications.
Are a great way to avoid pitfalls many companies make when doing business with trading partners in emerging markets. Late or inaccurate payments to employees, contractors or suppliers are bad for your company’s reputation and can be disruptive to the natural flow of your business.

Here are some additional details about our Mass Payments offering.

Mass payments services are packaged for your company based on:

The countries where your suppliers, employees, and other beneficiaries are located
The volume of payments you manage per month
The channels through which your business payments flow, be it through our APIs or our managed service
Any advisory or foreign exchange services which your company needs, be it expanding your payments to emerging markets, risk management, market orders or forward contracts.

2022: A new start?

21-12-2021 | treasuryXL | Cashforce | LinkedIn

Nicolas Christiaen of Cashforce looks ahead to a year of challenge and opportunity for treasury.

If there is one constant in business, it’s the fact that change will always happen – whether we like it or not. And the past half decade has seen more transformative disruption than much of the previous half century. Markets, models, economies – all have seen seismic shifts. And that’s before we were hit with a global pandemic.

It doesn’t take a soothsayer to predict that the coming year promises to throw up a whole new set of challenges for treasurers across the UK. How they address those challenges may determine how well positioned their businesses are to capitalise on the eventual recovery.

Clearly, the volatility that has characterised the previous two years isn’t going anywhere. What we have seen is that, while many treasurers and their teams have adapted to the new world we are now living in, COVID-19 is not over yet and there is a constant flow of new variables. COVID variants emerge periodically, and the different approaches to containing the virus will continue to cause volatility in the markets.

It’s fair to say that the treasury teams most likely to prosper in the coming year will be those that have not only demonstrated operational transformation or transactional excellence, but those that have also focused on continual improvement and the nuts and bolts of treasury activities – whether that means reviewing risk management processes or implementing new technology.

There’s little doubt that there remains the potential for further disruptions in global supply chains, which will inevitably bolster the demand for more visibility into cash. So, what will that mean for treasurers? From the conversations we’ve had with our clients across a range of sectors, our belief is that scenario analysis will continue to be top of mind for treasury teams over the next 12 months as new macroeconomic variables drive the need for multiple forecasts.

Technology for treasurers

The key to surviving the uncertainty will be to adopt technology that fits acute needs within a treasury’s view and then to implement it. On the adoption side, it amazes us that in 2021 we still see critical treasury processes and information housed in spreadsheets.

The good news is that the funds available for ‘Office of the CFO’ software as a service solutions (including cash management, treasury and forecasting solutions) have increased and are still growing. Even better is that ‘best-of-breed’ solutions, which typically have lower barriers of entry, are surging, as the ‘one-size-fits-all’ type of solution is shown to be excellent in some areas but simply not viable in others.

Finally, it is also worth noting that the longer we have to live with COVID-19, the more normal it will become to acquire technology in front of a computer screen (rather than meeting face to face).

On the implementation side, internal IT processes and architecture alignments are still a roadblock to implementing even niche solutions. The reason is simple: there is not enough IT capacity, due to a general lack of IT skills in the marketplace. A war for IT resources results in increased internal costs and pushes out project time frames. Digital transformation programs, while beneficial in the long term, seem to guarantee that business users of technology won’t realise tangible benefits for many months. Therefore, more focus should be put on quick wins or proof of concepts and building further from there.

While there are certainly challenges to adopting and implementing technology effectively, the need for visibility (and the automation to support scaling that visibility up), security, validation and auditing has not decreased. We feel that the above will continue to drive conversations with treasury technology providers.

Ultimately, treasurers occupy a unique position: they are, in many ways, the first line of defence in protecting businesses from the headwinds that can buffet them in stormy times. We firmly believe that by adopting the right approach to technology investment, they will continue to play their vital role.

Nicolas Christiaen

Managing Partner at Cashforce

Tame the ghost! Cancellations & currency management in Travel

20-12-2021 | treasuryXL | Kantox | LinkedIn |

How to automate the FX treatment of cancellations

It is no secret that the wave of cancellations following Covid-imposed travel restrictions has been a nightmare for travellers, airlines, hotel chains and tour operators alike. In the United States alone, cancelled domestic flights peaked at 137 thousand in April 2021. Largely due to cancellations, air traffic in Europe in 2021 was barely equivalent to 43% of the level seen before the pandemic.

Given the amount of time and resources devoted to adjusting their refunding policies, many players in the industry are still scared by the ghost of cancellations. But is that fear warranted? Not when it comes to FX management. This is because Currency Management Automation gives travel companies the tools to minimise the P&L impact of cancellations.

When it comes to FX management, the message is crystal clear: the ghost can be tamed.

Cancellations and FX exposure

FX risk management is a process in three phases: the pre-trade, the trade and the post-trade phase. Cancellations are an important element of the pre-trade phase, when the exposure to currency risk is collected and processed. Now, the type of exposure and the way it is managed depends, crucially, on each business’ pricing dynamics (see: “The hidden secret behind the different types of FX exposure”).

In the Travel world, dynamic prices are the norm (see: Currency Management Automation in Travel Distribution). OTAs, Bed banks, Hotel chains, DMCs and others frequently update their FX-denominated prices, and their cash flows are at risk from the moment of the bookings till settlement. For this reason, most Travel distribution firms apply micro-hedging programs that take those ‘firm commitments’ as the key FX exposure item.

This is where cancellations kick in. A cancelled FX-denominated booking diminishes the exposure to currency risk if the corresponding hedge has not been executed, or if an already executed trade is closed out at the same FX rate. Otherwise, there would be a situation of over-hedging. Manually adjusting hundreds or thousands of individual pieces of exposure to their corresponding hedges can quickly become an impossibly complicated task.

Taming the ghost in FX-related cancellations

Currency Management Automation provides treasurers with a number of tools to tame the ghost of cancellations. The first line of defence is to include —as part of business rules defined in the process of FX automation— an automatic cancellation rate. For example, if managers set an average cancellation rate of 10%, Kantox Dynamic Hedging® will hedge the remaining 90% hedge of the bookings.

As more information becomes available, this cancellation rate can be refined and adjusted by management when it so desires. While it is good practice to try and anticipate events, perfect accuracy cannot be expected in matters related to travel cancellations, especially in the current situation. This is why a second line of defence is provided by what our FX automation software takes as ‘negative entries’, a more efficient way to deal with cancellations. Let us briefly see how that works.

An entry is an individual piece of exposure. As part of the implementation phase of the software, risk managers establish a set of business rules that include —for each currency pair— the accumulated value of the entries they wish to hedge. These instructions also include a rule for setting negative entries from their own ERP, Booking Engine or Data Lake in the event of cancellations. API-transmitted negative entries automatically cancel the corresponding FX exposure.

But what happens when a negative entry is pushed after the corresponding hedge has been executed? Not much. Because travel-related FX exposure typically includes hundreds/thousands of individual transactions, new positions are constantly entered for the same currency pair and value date. The more granular the information included in these entries, the more accurate the FX hedging process, and the better the traceability of each piece of exposure.

Conclusion: speed is the name of the game

As the effects of the global pandemic still loom large, the ability to quickly process cancellations is a must for airlines, hotel chains and wholesalers in general. FX management is an integral part of this process — and it relies mostly on automated micro-hedging programs for bookings or ‘firm commitments”.

These micro-hedging programs, in turn, automatically treat cancellations as a key element of the ‘pre-trade’ phase of exposure management. If your aim is to tame the ghost of cancellations —while relieving the finance team from performing repetitive, resource-consuming and potentially risky manual tasks—, FX automation is the starting point.

The time to act is now!

Foreign Exchange Hedging – Putting More Flow into Your Cashflow

16-12-2021 | Xe | treasuryXL | LinkedIn |

Volatility in the market creates hedging opportunities. You can more accurately forecast margins, and have peace of mind knowing your costs won’t increase.

Any business that imports or exports goods or services have a foreign exchange requirement. Depending on how large the volume of their orders and/or sales, foreign exchange can significantly impact gross margins and has the ability to derail profit.

Importing costs fluctuate with the value of the local currency – for example, the New Zealand dollar (NZD). In the past 5 years, the NZD has moved by an average of 8% per year. In that same timeframe, if your suppliers either increased or decreased their prices by this amount, most people would do everything possible to try and mitigate the downside. This is a primary value-add of foreign exchange traders and brokerages that have the best interests of their clients in mind.

How to hedge

Volatility in the market creates hedging opportunities. By hedging, you are able to more accurately forecast margins, and have peace of mind knowing your costs won’t increase. This allows you to focus on your core business functions, be they manufacturing, distribution, or otherwise.

A forward exchange contract (FEC) allows you to buy or sell a defined amount of foreign currency on a given date in the future at a defined rate. The disadvantage of an FEC is that you may miss out on favourable market movements. However, since consistently accurate crystal balls aren’t standard issue for any ForEx advisor, the hard part is knowing where the market will go.

Experience, expertise, and depth of information resources are two of the differentiating factors between XE and our competitors.

What stops hedging?

Hedging challenges arise when your forecasts aren’t reliable, and you receive inaccurate information from sales or production advisors. Or perhaps you are running a lean supply-chain and don’t want to commit tying up cash flow to an FEC.

You can incorporate hedging into your budgeting to ensure your costed rates are covered. This prevents a situation where the currency is lower than what you’ve budgeted, and potentially a loss is being made each time you purchase FX.

For exporters, there is even less appetite to hedge. This is partly because the NZD has been strong over the past 5 years against most currencies.

The importance of interest rates

Every country wants their currency lower to attain more from exports. You will hear New Zealand’s Reserve Bank (RBNZ) say they want the currency lower. In their view, having the NZD/USD rate at 65c instead of 75c is a major positive. This isn’t what importers want to hear, but it’s the reality of the foreign exchange markets.

Interest rates dictate currency movements. The RBNZ pays particular attention to inflation, wages, GDP and employment data to make their decisions. But, the NZD is at the mercy of international reserve banks, including the US Federal Reserve and the ECB (European Central Bank).

Conclusion

Volatility is here to stay. Big swings in the market will persist. It’s almost impossible to predict where the markets will move. Yet XE has the people, processes and technology to give your business the best odds of success.

It’s unfair to judge yourself on attaining the very best rate when hedging foreign exchange. Our mantra is to empower businesses to compete to their full potential in international markets.

XE works with over 6,000 clients throughout New Zealand, and several thousand more around the world to help manage foreign exchange requirements to minimise fluctuations on margins. It would be our pleasure to advise you on how to mitigate the impact of currency on your business’ cash flow.

Survey | Anomalous Payments Detection

15-12-2021 | treasuryXL | Nomentia | LinkedIn |

Our partner Nomentia and Netguardians, are conducting a survey for treasury and finance professionals to get a better understanding of the current challenges companies are facing in identifying and preventing anomalous payments. This way, we can provide more relevant solutions and share industry knowledge with the treasury and finance community.

Payments are growing in volume and gaining speed, with “instant payment” gradually becoming the norm. With increasing speed and volume, the risk of processing anomalous or fraudulent payments increases simultaneously. These anomalous payments may be caused by human errors or by fraudulent activities such as fraudsters impersonating CEOs, sending fake invoices, and other scams. This results in both operational and financial losses for the company.

By filling out this survey you will help advance the solutions that are needed to fight anomalous payments. You can fill out the survey completely anonymously. It takes around 5 to 10 minutes to complete the survey depending on the answers you provide throughout the survey.

We thank you for your kind participation!

Currency Volatility Is A Catalyst for Response by Treasury

15-12-2021 | treasuryXL | Kyriba | LinkedIn |

The Q2 2021 Kyriba Currency Impact Report showed a strong tailwind for many US corporates driven in large part by the strengthening of two main trading currencies for many US corporates, EUR and GBP.

Both currencies strengthened steadily through Q2 2021, but currencies have since retreated through Q3 2021, setting up a return of relatively strong headwinds for the Q3 earnings season.

As we look forward to Q3 and Q4 currency impacts, it is very likely we will see increased levels of negative currency impacts for North American and European corporates as a result of continued business activity expansion combined with the return of a stronger USD and general market uncertainty. The recent impact of the newest COVID variant, Omicron, has also added a new level of uncertainty-driven volatility and questions about how businesses and central banks will respond.

Beyond the general level of market uncertainty there are a few other economic and operational challenges that are adding to the complexity of managing currency risk and liquidity. With inflationary conditions starting to take hold in the US and other parts of the world, Treasurers and CFOs are having to contend with increasing supply chain costs. In addition, the supply chain disruptions are increasing the uncertainty of business operations. Many treasury teams are far less confident in their long-term cash flow forecasts which has many reconsidering their hedging and liquidity needs.

How are Corporate Risk Managers responding to the currency markets and supply chain disruptions?

Treasury teams are faced with a complex set of variables in the current market environment. Their long-term cash flow forecasts are less and less reliable due to uncertainty related to supply chain disruptions. The disruptions are impacting both the supply side and the revenue side of the forecasts. There is increased uncertainty around both the value and timing of supply chain cash out flows. On the revenue side, there is also uncertainty around the value and timing of future inflows as manufacturers are having a hard time getting products on the shelves. In addition, the currency markets are adding to the complexity as the USD is strengthening or at least holding strong against a broad basket of currencies.

As a result, many treasury teams are re-focusing on the things they can control. Daily and even intra-day cash position monitoring is the norm now and combining that with an increased focus on FX hedging for working capital positions on the balance sheet are critical best practices to ensure treasury teams have the right amount of cash in the proper currency at the right time to cover vendor and supplier payments and ensure they maintain a strong liquidity position as they ride out the supply chain storm.

Another challenge FX risk managers are having to contend with is the by-product of improper posting of multi-currency transactions within their ERP system(s). When volatile currency markets are creating significant directional moves in various currency pairs, it often uncovers multi-currency accounting posting mistakes as well as missed exposures. This missed exposures and improper accounting postings can results in very surprising results that often create significant FX losses. The most frustrating aspect of these types of FX impacts is that they are entirely self-inflicted. With proper Exposure Data Integrity Analytics and robust and dynamic exposure capture processes, these self-inflicted currency impacts can be anticipated and avoided.

Ultimately, Treasury teams that can monitor and manage their liquidity and working capital FX exposure in a single integrated platform have a distinct advantage in the current market.

Question treasuryXL Panel #4 | When do I pay an FX surcharge to my payment service provider?

14-12-2021 | treasuryXL | EcomStream | LinkedIn |

treasuryXL is the community platform for all your relevant treasury questions.

We received the following question from one of our followers… Read more

2021 Treasury Technology Analyst Report

13-12-2021 | treasuryXL | Gtreasury | LinkedIn |

The 2021 Treasury Technology Analyst Report is the definitive guide to today’s technology for Treasury & Risk Management, Treasury Aggregation, and Supply Chain Finance and Cash Conversion. Request your copy to learn more about these technologies and evaluate how GTreasury stacks up for treasury and risk management.

2021 Treasury Technology Analyst Report

A digital treasury technology evolution is a big undertaking. With so many types of solutions to choose from, it’s hard to know where to start. We recommend you start with this report – The 2021 Treasury Technology Analyst report. It will help you understand the benefits and selection criteria to consider for three types of valuable treasury technology solutions: Treasury and Risk Management Systems (TRMS); Treasury Aggregation Solutions; and Supply Chain Finance and Cash Conversion.

Topics covered in this 64-page report include:

The shift to emerging technologies
The value of API connectivity
The power and value of a networked technology ecosystem
Principles of treasury technology selection and implementation
Definitions, Challenges/Solutions, Selection Criteria, and the Future of each of the three types of technology.

Request your copy to learn more about these technologies and evaluate how GTreasury stacks up among treasury and risk management platforms.

Complete the Form to Get Your Complimentary Copy Now!

A CFO’s Summary of the Treasury Function

Four Things Every CFO Should Know About Treasury

About TIS

Top 5 treasuryXL website articles of 2021

Top 5 treasuryXL LinkedIn posts of 2021

The Right Payee, in the Right Currency, at the Right Time

XE Mass Payments: A Proven Platform from the World’s Trusted Currency Authority

How to automate the FX treatment of cancellations

Cancellations and FX exposure

Taming the ghost in FX-related cancellations

Conclusion: speed is the name of the game

How to hedge

What stops hedging?

The importance of interest rates

Conclusion

How are Corporate Risk Managers responding to the currency markets and supply chain disruptions?

2021 Treasury Technology Analyst Report

Topics covered in this 64-page report include:

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