Marching to Your Own Beat

The Power of On-Time Treasury

Real-time treasury holds significant potential benefits – but are 24/7/365 operations suited to the needs of every treasury function? Here, three experts from Bank of America consider an intriguing alternative – the notion of ‘on-time’ treasury. This leverages critical elements of a real-time approach but can offer a lighter touch solution, which can also empower a treasury-as- a-business model.

In business, timing is everything. Of course, the ability to get it right requires the appropriate information to be available to those who need it, when it is needed. This is the mark of ‘on-time’ delivery, rather than the constant 24/7 flow of data in a real-time environment.

Both approaches have their merits, of course. But with the ‘on time’ approach enabling treasury to adjust the level and speed of data collection to suit its individual needs (i.e. not ‘always on’) treasury is then able to collate, analyse, and clearly present accurate and timely intelligence to colleagues in different functions – delivering real business value. This is the basis of the treasury-as-a-business (TaaB) model, taking the treasury function beyond traditional transactional and operating functionality, into the domain of the strategic and value-driven.

Realistic solution

The reason why real-time treasury may not be the right option for all businesses is that not every company would require real time transactions and many corporates simply do not have the scope or resources to run 24/7 operations, explains Serina Hourican, Head of Commercial Sales, Asia Pacific, Bank of America.

It’s about having everything available to you at the point you need to make decisions and act upon them, without the
requirement for a constant flow of data.

While Hourican sees some clients quite advanced in their pursuit of real-time, notably in the B2C stream where consumer demand for instant responses is strong, she sees many cases – in heavy industry in particular – where clients are impeded by the effort and cost required to implement and run a real-time treasury project. “Often, the business case is not strong enough given the particular needs of that organisation, and the ultimate value that a real-time set up could bring. But that does not mean that the corporate has to forego all the potential benefits of instant data,” she explains.

This is where the notion of on-time brings realism to the fore; it serves the business as and when it is needed. Moreover, where a real-time treasury project is often approached in a big bang manner, on-time treasury is easily deliverable in a phased approach – with the corporate picking the elements and timeline that suit their requirements and capacity.

Office hours

The shift from real-time to on-time first calls for an honest appraisal of the most important drivers for business information, says Hourican. If leveraging 24/7 real-time data is not desirable for that company or simply not attainable, then the question of its adoption can be diverted to one where the essential data and information is available immediately and actionable while the office is open. “That’s why we refer to it as on-time,” says Sunil Bhatia, Head for Payments & Bank Transformation, Asia Pacific, Global Transaction Services, Bank of America. “It’s about having everything available to you at the point you need to make decisions and act upon them, without the requirement for a constant flow of data.”

Access to on-time information about bank balances, for example, can help operational teams manage cash flows, and it also means security and fraud management is enhanced. The more treasury has on-time access to that information, the better it is able to control these processes. And this is often the most common use case and departure point for an on-time treasury project.

For Hourican, live information from an on-time structure can also, greatly assist treasury from a risk perspective in managing policy which may, for example, prohibit the use of overdrafts. This notion places treasury more in control on a day-to-day-basis by reducing the element of surprise among receivables.

Holistic benefits

In short, what on-time treasury can offer is the latest available information across all accounts, which leads to accurate and timely data as a source of enhanced control over liquidity decisions, enabling improved management of risk and policy compliance. This has “holistic” benefits for the organisation, suggests Babu Vaidyanathan, Head of Receivables & Commercial Cards, Asia Pacific and South East Asia Treasury Products, Bank of America.

Clients leveraging real-time systems typically do so when accepting incoming payments, but with their own payments often use more traditional rails. However, he notes, “we are beginning to see real-time payments used as a supply chain management tool”. These payments, which can be integrated as part of an on-time model, support supplier working capital strength, but can also “enable the release of the next consignment of goods or credit line” to aid production teams.

Furthermore, where on-time accessibility of receivables data is enabled, it not only supports the flexibility to process collections according to the company’s own schedule but when allied with treasury dashboard technology, also offers live insights into AR/AP data and outstanding positions. This helps other functions, such as sales, to operate more fluidly.

Key to unlocking these benefits is the readiness of the company to roll out an on-time structure. There is a technology and process element to which a business must attend but it also has a strategic component. Thinking holistically means disparate functions such as sales, procurement, production, product development, business development, legal, accounting, and taxation can all potentially make better informed on-time decisions. But it goes higher still.

“When running a business, one of the drivers is maximising shareholder value,” notes Hourican “Whether reducing cost of capital and costs in general, or increasing process efficiency, these all play to the strength of on-time treasury and the availability and accessibility of the most up-to-date data. This amply demonstrates treasury’s capacity to hold its own as a trusted adviser to the organisation’s stakeholders, elevating its own status within that business.”

API ready?

One of the key technologies underpinning on-time treasury is the API. This is a well-established mechanism but if all it does is replace another form of connectivity then it may not be adding value. Corporates need to be in a position to integrate these with their own core systems and their workflows to see the most benefit.

The most common API use case today for treasury is the call for account balances across multiple banks and entities. Delivered in a matter of seconds, this information has value in itself. But when embedded into workflows, API calls can be triggered automatically to seamlessly empower a variety of scenarios. The technology is available, the banks can support it, but companies and their treasury departments need to gear their internal systems and processes towards leveraging these tools.

The desire and capacity to set up an on-time model across an organisation will depend on the individual company’s roadmap for growth and development, the industry and sector in which it operates, and the geographies in which it operates from a sales and procurement perspective. Based on its unique set of circumstances, a position can be taken by the company as to how on-time can be leveraged. This might range from aggregating multiple bank account data flows using APIs, to full workflow integration of data across multiple functions and entities to optimise the management of cash flow and liquidity.

If a full strategic change is sought – as opposed to just improving selected existing processes – then an early conversation between functions is imperative. Bhatia adds: “In the longer-term, all companies will use on-time. But for now, they should be discovering where and how it adds value, and focusing on their immediate priorities, because although on- time can be rolled out in phases, there is still a cost to change internal systems, so careful assessments are required.”

Whether reducing cost of capital and costs in general, or increasing process efficiency, these all play to the strength of on-time treasury.

Changing up

For those companies that see on-time as a goal but feel they are not yet in a position to embark on conversion, Bhatia offers the encouragement that the technologies are already available, and that the next step is to explore how it fits into their processes. It may be that the best starting point is receivables matching, just checking bank balances, or as a means of initiating payments in a more timely manner.

Banks and fintechs are now offering tools that can be integrated seamlessly into workflows, once the business knows what it is trying to achieve. With the tools and infrastructure in place, the key to successful on-time operations is being able to use the information as needed. For Hourican, the right dashboard presentation is essential. She advises thinking about what’s on the dashboard and whether or not what is being tracked is needed in real-time – there is no advantage if it cannot be used to support the rest of the business when it needs it. Balances, for example will be constantly changing, so it is important to think clearly about what treasury wants to know, and how that data will be used in the most effective way.

“It’s not a case of finding a tool and believing it could be useful, but rather about thinking in terms of its application within your entire ecosystem. This approach is important because you may need to carry this ecosystem along with you,” adds Vaidyanathan.

On that note, what treasury wants in terms of technology may not be what other functions want, and with a limited budget, creating a fully scoped business case and cost-benefit analysis and taking it to the CFO will be an important consideration to gain top-level support.

Of course, major process changes also impact people. “We’ve seen AP and AR teams that have been successfully following certain processes for many years,” comments Bhatia. “Automation of these tasks to fit an on-time structure requires strong change management planning to secure buy- in. Facilitating a discussion on how the jobs of 12 people will now be done by two will be a challenge.”

Thought may also need to be given to how to approach standardisation of operating procedures on a global level. While real-time payments systems are now available in many countries, they are not universal. This may require bespoke processes to be implemented or the current operating or procedural model to be revised. It may mean real-time payments are adopted in some or all of those countries where it is offered, with batch processing continuing everywhere else, or alternatively moving some or even all payments onto APIs to build a 24/7 approach.

A business with global operating procedures should therefore begin by querying whether certain proposed on-time activities are truly global or if there needs to be differentiation at a country or market level.

Ready to move

With many questions to ask, and answers to find, the immediate quest for treasurers considering on-time is to find the most appropriate resources, to build the knowledge and understanding that will help them steer their organisations in the right direction.

TMS and ERP vendors, banks and fintechs should all be able to explain how their platforms fit the longer-term plan for on-time. Securing stakeholder buy-in is essential and IT in particular is likely to be in strong demand, so demonstrating knowledge and understanding from the outset will be vital in getting them onside.

Beyond the technical implementation, planning the phases of an on-time project should make strong reference to, and be prioritised by, company strategy and objectives. While treasurers may feel now is not the time to complicate matters with real-time or on-time processes, like it or not, it is going to happen at some stage, says Bhatia. “Doing nothing is not an option,” he cautions. This puts pressure on effective use-case evaluation, certainly in terms of understanding how on-time can help the company meet its goals. But it also involves an evolution of technology, operations, policy, and people. “Considering all of these together, but taking small steps in the most beneficial direction now, is important.”

As part of this evaluation, treasury talent will require its own strategic approach. While on-time is a technology play first and foremost, a company taking this path will need to plan and build its personnel strategy in alignment with the roll-out of the new structure, to ensure it maximises its adoption and use, and can maintain the advantage.

It will be apparent to many tech-minded treasurers that companies not planning their progress towards on-time are, for various reasons, going to lag behind those already moving up the curve. In essence, on-time companies will be more efficient in their use of data – and data is knowledge, and knowledge is power. So, when power is on tap as and when it is needed – when it is on-time – the whole organisation and its stakeholders benefit.

It’s not a case of finding a tool and believing it could be useful, but rather about thinking in terms of its application within your entire ecosystem.