Making the right connections

18-08-2022 | Cobase | treasuryXL | LinkedIn |

Since the outbreak of the coronavirus pandemic, and more recently the geopolitical disruptions,  treasury teams have been operating in a uniquely demanding environment that has stretched resources and ingenuity to the limit. Never have treasurers had to cope with so many different factors at the same time.

The challenge is exacerbated by the fact that corporates are often composed of multiple subsidiaries working in a number of different currencies with a variety of banks with which they will typically hold numerous accounts.

Multiple cash management banking relationships make managing payments and cash visibility a cumbersome process that involves logging in and out of different bank portals and managing disparate authorisation schemes while trying to ensure that bank data and data in ERP or accounting systems is synchronised.

In some organisations, managing cash positions over multiple banks and accounts remains a manual process, increasing the possibility of human error. When looking to execute sophisticated liquidity forecasting and/or manage foreign currency exposure, this process may become significantly more difficult and risky.

At the heart of these challenges lies the current state of connectivity between banks and ERP/accounting systems. The available integrations can be cumbersome, resulting in ongoing IT projects.

As a result there is scope for significant improvement in this area, which can be achieved through use of specific solutions centred on connectivity.

Optimally managing payments and cash requires seamless, robust and near real-time connectivity between banks and financial systems and the execution of all payment and cash management tasks in the company’s administrative environment or another single user interface dedicated to this task.

Companies who do all their business with a single bank should be able to access an efficient interface and connectivity to their back office functions via a single bank wholesale solution (whether e.g. host-to-host, API or SWIFT).

However, for corporates that have significant business with multiple banks a single bank will not be able to provide a robust solution. In this scenario, corporates are faced with negotiating a vast amount of workarounds, dedicated applications, and interfaces to perform cash management.

It is not hard to envisage the high degree of inefficiency and risk introduced to the process by this way of working. These drawbacks have been highlighted in various research reports where corporate clients are asked about the biggest challenges they faced when integrating with a bank.

Challenges around bank connectivity demonstrate that this is an issue to be taken seriously. This is another area where automation, or working with a dedicated specialised partner, frees up time for the treasurer to focus on the other many strategic challenges at hand.

In the next blog in this series we will look at how harmonised practices increase transparency and visibility, why automating manual processes in invoice handling and payment processing adds to the transparency, quality and speed of payments, and offer guidance to corporates looking to improve sanctions checking without negatively impacting the user experience.

The 7 habits of highly effective treasurers

Why are some treasury teams more adept at managing the financial challenges faced by their enterprises than others? We decided to identify some of the factors that contribute to intelligent treasury management and operational excellence and created an e-book which we would like to share with you. If you follow the habits outlined in this e-book, you will be well on the way to better cash flow and working capital management.


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