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Tips & Tricks for optimizing Forecasting & Working capital
| 30-06-2021 | Cashforce |
The economy is poised for a rebound due to pent-up household demand coupled with historically low inventories. Businesses need to start preparing for the surge in orders and ensure they can sufficiently manage working capital and continue to finance their operations in the most efficient way.
Automating key elements of the Order-to-Cash process will allow businesses to absorb this revenue growth with their existing resources, while generating greater sums of liquidity — ensuring they can stay on top of their cash conversion cycles without the need for expensive and risky borrowing.
Watch Rob Harvey from Sidetrade alongside Nicolas Christiaen, CEO & Co-founder of Cashforce.
A few key points discussed in this session:
Are you ready for the economy to bounce back?
Watch this session on-demand Here
What is Market Data and Why should your Company take it Seriously?
29-06-2021 | treasuryXL | Arjen van der Sluis |
Working in the market data space for many years now, one of the most challenging aspects has always been to explain: What is Market data? In the early days such a question was much easier to answer as the size of the market data landscape was far less complex and much smaller. To keep it simple: market data was price and trade-related information and there were only a few data providers out there: Reuters, Telerate and exchanges. Since then, a lot has changed. Bloomberg shook up the market by offering a one-stop-shop terminal solution including trading capabilities and a Bloomberg-wide messaging system. Much data has been added since, like broker estimates, ownership data, index data and OTC instruments, to mention only a few.
More recently, everyone is talking about Alternative data or Environmental, Social and Governance (ESG) data. These developments, along with increased market demand, have broadened the scope of market data. Nowadays a good description of market data is “all data related to the investment cycle”.
What does Market Data mean for You?
International corporations may, for example, need foreign currency, seek protection of currency swings, need short-term cash or make daily valuations of their outstanding positions. Your investment cycle will be risk adverse and your market data requirements will include Foreign Exchange and Rates information, perhaps also some counterparty company accounts or macro-economic indicators and news.
To meet these needs and to make sure you are operating under the right market conditions, corporations may have a professional setup of market data terminals from Bloomberg or Refinitiv, FX data feeds and Treasury Management Systems (TMS). All based on different commercial models and usage rights as contractually agreed with the supplier (vendor compliance).
As a market data consultant, it is in our nature to review market data costs and -usage among financial institutions. Corporate treasurers might not be looking at market data with the same perspective as we do. Nevertheless, a regular Market data health check is advisable. Questions to be asked include: “Will market data help to perform a better job, in other words, gain a competitive advantage?” or “Why pay for a full market data terminal while there are cost-effective alternatives out there?”
Among financial institutions we see a trend to apply user profiling. Your role and workflow processes should determine the type of services used and should also justify the more expensive high-tier terminal if and when opted for. More importantly, favorably priced alternative terminals are available with excellent data sets and functionality. As an alternative to Bloomberg messaging, financial institutions have started adopting Symphony as collaboration tool and to manage workflows including proprietary data sets.
In-House Systems
Regulatory pressure has led to more emphasis on risk management and the valuation process, resulting in an ever-growing number of data feed offerings. Depending on in-house requirements there may be a need for plain vanilla instruments or the more complex instruments that push the need for evaluated prices like Bloomberg BVAL. Not only pricing data, but information like entity reference data is becoming critical as well to manage your counterparty risk. In response vendors offer tailormade solutions, but it comes at a cost.
For data to feed in-house systems or databases, we see a trend among financial institutions who are moving to the cloud to lower their Total Cost of Ownership (TCO) or to avoid restrictive usage rights when consuming the data via a 3rd party market data vendor. It will also help them in being more flexible in response to new data requirements.
Concluding, market data is a dynamic business. Looking at market data costs and usage, by definition, you cannot compare a corporation with a financial institution. Having said that, this does not mean market data can be neglected. With market data costs rising by more than 5-10% annually and new solutions and vendors entering the market, it is worth reviewing your market data requirements regularly.
Arjen van der Sluis
The author, Arjen van der Sluis, is Senior Consultant and Partner at MDS at Work, a Dutch based Market Data Consultancy firm with specialists conducting market data projects globally for 20+ years now.
Contact us: [email protected]
How a Treasurer can really add Value
28-06-2021 | treasuryXL | Kyriba |
”The pandemic has boosted automation in treasury departments and led to big increases in productivity. But that is only the start. The big prize is the value that treasury teams can generate with the man-hours that automation frees up”, says Bob Stark, Head of Marketing Strategy at Kyriba.
The Post-Pandemic Treasurer
The post-pandemic world will not be a return to the previous status quo. In treasury we can look at this in three ways – people, process and technology.
In terms of people, a recent survey showed that 61% of CFOs expect their teams to be working out of the office at least a day a week in future (source: fortune.com 2020). In some ways the combination of working from home and in the office will pose its own problems, with different opportunities for fraud and mistakes. At least working from home all the time provided some consistency! Furthermore, many of the changes that treasury teams had to make suddenly last year will now become permanent.
Now let’s look at processes. Fully 78% of CFOs have changed inefficient workflows during the pandemic, and 82% intend to keep the changes that they have made in terms of automation and digitisation (source: MasterCard 2020). These changes involve the standardisation, automation and streamlining of multiple processes.
Thirdly, treasurers need to digitise and have an enterprise-wide cloud platform; to leverage analytics to assess and improve decision-making; and then to innovate through Artificial Intelligence and Machine Learning to make treasury a better business partner.
There has also been a change in the role of treasury within companies over the past 15 months. During the pandemic, treasury’s involvement in other areas of the business has increased. A treasurer’s objectives often now include more strategic aims, and the remit is likely to expand still further. In many cases this will involve increased shared responsibilities, for example reverse factoring.
Treasurers are progressing from a simple focus on productivity to making liquidity visible and then participating in strategic decisions that really add value. All of which in turn elevates the value of treasurers within their organisations.
How Treasury can add Value
We can all agree that treasurers have the ability to add value. We regularly see our clients make significant productivity gains in terms of man-hours as they automate residual manual functions. In many cases, automating processes can save over 80% of the man-hours involved (source: Hackett Group).
But that is only part of the story. The real value comes from what the treasury team can do with all those freed-up hours. The extra time gained through improvements in productivity allows them to analyse risks (such as counterparty, liquidity and FX risk) and make better, informed decisions, based on real insight and business intelligence. Or perhaps the extra time that automation has made available can reduce the opportunity for fraud. The common aim is to leverage liquidity to drive business growth and turn treasury into a strategic business partner.
Digitisation plays a big role here, especially in areas like payments, which have remained partially manual, for example in sanctions screening. Smart contracts are also increasing, which makes for other savings.
Measuring the impact
In any such analysis it is essential to be able to measure what you are achieving. That starts with liquidity itself: how much do we have? How far forward can I forecast liquidity? How confident can I be in the accuracy of those forecasts? After all, you can only use the “excess” liquidity within your company when you are confident that you aren’t going to need it!
Digitisation is the way to improve the visibility of your liquidity. You can then test the accuracy of your information and decide how to use that asset. You can do this with a scorecard to measure your company against industry peers and assess your level of maturity, from Ad hoc, through Emerging and Standardising to Strategic. You can then highlight the opportunities for improvement
Many of our clients have done just that. For one client, an 88% improvement in cash management and forecasting – thanks to automation – saved over £1m in net interest by unlocking cash that had been lying idle. It also helped the same client to save over £100K in bank fees.
Another client reduced costs by 85% and used the newly spare man-hours to avoid £1.2m in fraud-related costs. They also accelerated ERP migration by 80%. Other savings might include generating free cashflow or protecting the business against financial loss. But all these achievements start with productivity gains that free up treasury staff to do something more valuable within their organisations.
I will leave you with three thoughts: automation and digitisation are here to stay; productivity is an opportunity, not just a saving; and if you are going to add value as a treasurer, you need to be able to measure that saving.