During the pandemic, and at the drop of a hat, treasurers worldwide had to offer insight into their company’s liquidity in real-time. Not easy when you’re pulling data from several sources, and often manually. Given new industry initiatives and technology advancements, treasurers can now access truly connected, real-time financial management.

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Podcast Transcript

Voiceover: The Payments Podcast, from Bottomline Technologies

Process Transformation to Enable Real-time Treasury

Jacqueline Powell: As we emerge from the financial impact of the pandemic, and many businesses make their way towards financial recovery and growth, we see that the need for speed in financial management has never been greater. Much of the corporate world has turned their attention to real-time payments, but what about the other parts of treasury? What is the larger impact of this movement that is real-time visibility and liquidity?

Hello. I'm Jacqueline Powell, host of today's Payments Podcast. Today, I'm joined by Kevin Grant, Managing Director of Treasury at Bottomline, to discuss how corporate treasuries can take full advantage of what real time is, and learn what it can truly do, from optimising cash and accessing liquidity, to delivering greater and more comprehensive intelligence to the business. Hello, Kevin, and welcome.

Kevin Grant: Hello, Jacqueline, and thank you for inviting me along.

Jacqueline Powell: It's great to have you here, Kevin. Firstly, in the introduction, I mentioned briefly that, globally, corporates have picked up the pace towards overall real-time treasury and financial management. Why do you feel there has been an increased, or even new, focus on real-time liquidity, and subsequently visibility?

Kevin Grant: Yes, lots of interest around this topic we're seeing in our activities with our existing customer base and new customer base. Overall, the interest is being accelerated because of three key factors. Regulation is being brought in to prompt and facilitate the acceleration of real-time payments; liquidity risks, highlighted by the COVID-driven financial crisis. Clearly, we are now in an era where cash is even more king than it has been historically; access to data and automation experiences through new innovations that were previously unavailable.

Corporates know have the infrastructure that can allow them to operate in real time. So, retail payments have accelerated and have influenced the movement towards faster treasury overall, from visibility to liquidity; technology advancements that were previously unavailable three, five, ten years ago, such as APIs, open technology infrastructures, providing unprecedented access to data from a speed and consumption perspective. Open banking, like tech advancements, offers access to financial data and eliminates the traditional barriers.

Jacqueline Powell: Kevin, thank you. It's interesting you mention treasuries now being able to operate in real time. From your perspective, what does ‘real time’ really mean to corporates? Or is it just a buzzword that banks are promoting?

Kevin Grant: It’s a valid point. I think the banks need to become better equipped in the narrative that they're using around faster payments, and really to talk about the use cases of how this would benefit the corporate.

My perspective over the years has been very much treasury, but in the last five years or so it has really been more of a focus on unified financial management across the organisation. What I mean by that, is that is treasurers have been asked, in my experience, to become more involved in tracking corporate KPIs, like DSO and DPO. They have been asked by international accounting agencies to also have some transparency around our use of derivatives to hedge financial risk for the organisation globally.

In 2021, the concept of real time for liquidity and visibility has never been more real. The need is more real and urgent than ever before. Insights of financial health can be drawn from the access to data of high quality with, and quickly, collaboration across all financial functions and stakeholders across the organisation.

Corporates need to pay more attention to what is going on across all finance and the entire organisation, including the core commercial teams. Instantaneous decision-making on liquidity, funding, and supply chain, etc., can be facilitated; increase in financial data generation and complexity. Need for access, and aggregation and analysis is what we're finding.

Secondly – or lastly, sorry – reputational risk can be removed. Now, the possibilities here are actually very real. There has been a big drive around DPO to, perhaps, lengthen your payment cycle for your invoice obligations.

Or if you have a key supplier in your production process that you want to ensure is financially viable and successful, because without them you would struggle to get the raw materials in the timeframe that you require to get them so that you can meet your obligations to your commercial customers. Technology drivers, availability, innovation, these are the key things that I would highlight.

Jacqueline Powell: I agree wholeheartedly that the concept of real time has never been more real. Thank you, Kevin. I must ask, though, with the condition so ripe for real-time payments, liquidity, and visibility, do you feel that corporates are truly ready for it?

Consider for a moment those that are holding back or are not as far along in their journey towards real time. How can this be transformative for those corporates, particularly when it comes to real-time liquidity?

Kevin Grant: I think real time, maybe short history lesson, but treasury used to be – used to receive – aggregated information, but that lacked a depth of understanding, and just an understanding around the seasonality of the cash flows within the business, which aren’t uniform across every country that a multinational may be operating within.

There are local nuances that have to be taken into consideration, but the volume of data, quite often, is overwhelming and has to be extracted from a number of different source applications, consolidated into a management dashboard, using Power BI. Or, as we all know, spreadsheets are widely used for this type of data analysis, but, as I am explaining this, I just feel time and latency being built into the process.

Real time helps for better decisions because of the speed of the data delivery, the quality of the data delivery, and the analytics that can be taking place on top of that data. That would help you maximise your cash and help you reduce risks – perhaps risks that you hadn't foreseen.

Foreign exchange, accounts receivable, intercompany borrowing, and funding decisions, can be impacted, reducing leverage on corporate debt, more intelligent debt management, intelligent supply-chain management, looking after the people who are key to your commercial obligations.

It allows businesses to go into new markets more quickly and more intelligently. Risk management, fraud detection and prevention: the faster and more accurately we can reconcile data and have insight, the faster we can detect and avoid misbehaviour.

Jacqueline Powell: Well, the motivation certainly seems apparent. I think the innovation and market conditions are present, but how can it be achieved? What are some of the challenges or barriers that corporates face?

Kevin Grant: Overall, corporates and stakeholders need to fundamentally be prepared for a new way of measuring, monitoring, managing, complying, executing. So, it is imperative that the systems and processes are structured, and capability of being supported.

Things that worked in an intraday world are just not relevant or compatible in a real-time world, so a strong look at policy that governs what you do and why you do it; processes that are consistent with fulfilling the obligations under the policy; people with the skills and knowledge to understand the implementation; and, also, systems to manage the real-time connectivity aspects, the data-analysis aspects.

Really, I would prefer that we have solutions in place that give intuitive dashboards to senior management that really help them have insight and will really help them drive more effective decision-making for their organisation. But there are internal and external factors here. Externally, banking partners give us access to liquidity, access to data, so there has to be a connectivity piece there. How do we achieve that? We need technology partners.

For instance, we talk about open banking and real-time payments, but that's being implemented in slightly different ways in different geographies. If we look at APIs, they are being implemented in the standards unique to the banks themselves. We may have messaging protocols, but what goes into those messages can be selective and can be custom for a particular region, so technology partners can take on the obligation of managing that. Suppliers and vendors, clearly, and customers, are all part of the ecosystem that we need to be observant of.

Internally, as I mentioned, policy and processes, but why processes? Because the processes have to allow for visibility of data, the analysis of that data, decision-making around the data, access, and execution, and performance, and all of this requires technology in today's world because of the volume of data that has to be processed. Overall, processes, technology, and policies, are the solution.

Jacqueline Powell: Thank you. That's useful insight, Kevin. For treasurers, it's rather encouraging that real time truly is real, given the evolution of technology to enable faster payments, visibility, and liquidity. This seems to be a level of empowerment for corporate treasury that couldn't come at a better time, certainly given the global journey we're on towards financial recovery and growth post-COVID. Kevin, before we close off, though, are there any final thoughts that you would like to share with our listeners?

Kevin Grant: Yes. I'm extremely excited for industry right now, for all corporates. The technology partners that are available, the banking open transparency around PSD, bank account information, there are lots of regulatory changes that are driving a momentum here, which provides opportunities, as long as you see them as opportunities. So, the impact real-time liquidity management and overall treasury will have, I think, is a positive impact overall. However, with great possibility comes a good amount of work.

The final advice I would give to a corporate is that banks, globally, are implementing APIs in a way unique to them. Therefore, working with a trusted technology partner to shoulder this burden makes perfect sense. Faster payments, and faster visibility of cash flow, leads to better decision-making on how to utilise this asset for the benefit of the business.

The final point is this linked-up accounts receivable, accounts payable, treasury and bank connectivity are enablers for change in optimising cash and liquidity. Treasurers that really harness the power of a connected treasury can elevate their position, from financial protector to financial value creator.

Jacqueline Powell: Well said, Kevin, and thank you for sharing your thoughts with me and our listeners. Unfortunately, that's all we have time for today, but in the meantime you can listen to more episodes focusing on all things payments related, or pop over to our website at ‘www.bottomline.com’. See you all next time.

END AUDIO

Why it Matters

Real-time financial management in treasury is being accelerated by three key drivers: regulation, heightened liquidity risks, technology innovation and automation.

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