Vanishing Silos: Modernizing Data and Cash Management

The Payments Podcast by Bottomline

Episode Transcript

Owen McDonald (host): Welcome to The Payments Podcast. I'm your host, Bottomline Managing Editor, Owen McDonald. 

Cash management exemplifies the once dull back-office functions now undergoing seismic strategic change. Updating us on new trends in cash management for 2025, we're very happy to welcome Leo Gil, Vice President of Product Management at Bottomline, and Naresh Aggarwal, Associate Policy and Technical Director at the Association of Corporate Treasurers or ACT.

Naresh Aggarwal, Leo Gil, welcome to The Payments Podcast.

Naresh Aggarwal: Thank you.

Leo Gil: Thanks for having us.

Owen McDonald (host): Thanks for joining us. Kicking it right off with you, Naresh, how important is it for cash management professionals to understand and communicate with their board about new cash management strategies and tools. Why is communication extra important on this topic?

Naresh Aggarwal: Well, I think that's a great question. I think part of the challenge is boards may not fully understand what does cash management mean and what is a cash management strategy. They all may come to the table with very different views of what the organization is doing, what are the current challenges and stresses the organization faces, and the tools that treasuries are using or not being able to use, in order to manage cash. Now cash may seem quite a boring topic and often is. But when stresses occur, like we found during COVID in the UK, when the Brexit referendum occurred, having enough cash in the bank is critical.

And so, for organizations and the boards, understanding what that actually means can be quite different. So, I think it's really important that treasurers have the skills to, first of all, understand for themselves how they're managing cash effectively across the organization, but are also able to communicate that effectively to the board as well, to make sure the board asks the right questions of them. Very often I hear board members saying, do we have enough cash? We have plenty of cash. But actually, I'm not convinced those are the right questions because we know that having plenty of cash today doesn't always necessarily mean having access to plenty of cash tomorrow.

Owen McDonald: Right.

Naresh Aggarwal: So, understanding what the demands are in the organization and how an organization and a treasurer is planning and making sure there's enough liquidity is critical for the board to make sure they discharge their fiduciary duties. And therefore, it's really important that the treasurer helps educate the board to make sure they challenge the treasurer in the right way.

Owen McDonald: Leo, similarly, accounting teams want to be able to quantify what's happening with things like liquidity, but there are often conflicting KPIs between departments like treasury, AP, and AR around cash management. How are companies overcoming issues like conflicting KPIs as they look to adopt these new systems?

Leo Gil: Yeah. That's a really good question. So, we've seen in the recent years this elevation of the office of the CFO to a more strategic role in their organization, especially when it comes to the treasury function. Now, of course, some companies are still operating in silos, where you have treasury, AP, and AR, and their, like you said they have separate KPIs and separate processes, and those are typically the most challenged to answer to this challenge that is being put upon them to become more strategic.

Now the first step is really to break the data barrier, where companies can centralize all of the data in a unified cash management platform. So now, each department will be able to have a clear view cash positions across the company. Now, ideally, the data should be updated in as much real time as possible. But of course, knowing that some systems or banks may not be able to support real-time updates. It's not a hard requirement, but it's nice to have depending on the business.

And then, once all of the data is centralized, having a collaborative approach to cash forecasting, that's where the conflicts are going to start to become pretty clear between KPIs. Right? So, imagine you have a single view of all cash, cash forecast, AP and AR, everything in one place. Now you'll be able to see that accounts payable might be trying to make a large payment, later than what the treasurer was expecting because the accounts payable team is trying to increase their DPO while the treasurer was hedging a currency expecting that large payment was going to be paid in a due date. Right? Pretty clear visibility into how the conflicts happen and how they can be addressed.

On the flip side, you can have an accounts receivable team who's trying to push for an aggressive reduction in DSO to a segment of the customers. Right? So, they could be cutting the payment terms, for example, across certain clients. Now in turn, some of these customers start ordering less because they start finding other suppliers, which then will bubble up as a liquidity issue in the treasurer's 30-week forecast view. So, when the two teams are working together, you'll be able to see maybe the DSO push, the reduction of DSO push is causing an issue in the business. 

And lastly, really closing the loop with automated reconciliation processes, right? So, when you have all of the departments working together, treasury, AP, and AR, now would be able to implement an automated reconciliation process where everybody can become more efficient. Right? You don't have that mad rush at the end of the month or at the end of the quarter to close your books. Ultimately, you get all of the silos going to the same direction.

Owen McDonald: Right.

Naresh Aggarwal: And, Owen, just to add to that, I think one of the things that I think is a real challenge for organizations around these conflicting KPIs is who actually owns the working capital. So, one of the things that I'm a big fan of is encouraging organizations to think of an owner of working capital. Because as Leo has said, it's not just sometimes you have different KPIs, but sometimes they're conflicting KPIs. And, I don't know, is that the role for the CFO to intervene? Is it the role for the treasurer?

It really needs somebody who's got overall accountability and responsibility in my mind, to manage to manage some of these sometimes, offsetting and divergent points of view.

Owen McDonald: Well, and part of what we're talking about here is just convincing the C-suite of the value here. And there are varying cash management needs across different industries. I'm hearing that in-between the lines here. Naresh, what are a few things that are true about cash management across all verticals, in your view, that help advance the concept with the C-suite?

Naresh Aggarwal: Well, I think the first thing I'd say, and although it's not very politically correct, I think ultimately cash is king. And in the end, we know that organizations can often fail not because of lack of profitability, but lack of cash in the right place at the right time. And sometimes it's confidence with suppliers and buyers and lenders and credit rating agencies that there is enough liquidity. So, I think the first thing that organizations need to understand, and treasurers need to make sure the C-suite follow and understand fully, is that the importance of cash in most businesses. Now there may be a few where it's great to be highly leveraged.

But even in those, having enough cash to get through the next few months is, and one of the things that I find really helpful for non-financial, non-regulated businesses is this concept of liquidity risk appetite that's really borrowed from the financial services sector that says, how long could you last if your deposit is all fled tomorrow? Now, we applied it during COVID because we said, as happened for many organizations, if your customers suddenly tomorrow stop paying you, how long could you remain in business making sure payrolls met, the lights kept on, the buildings remained secure? And so, building this idea of a liquidity risk appetite, how much do I need in the worst-case scenario to fund the business, I think is critical for most organizations. And it's a reminder of how critical cash is at the end of the day. Having a great brand, having large building, is of no value if you can't pay your staff in cash.

And it's very easy to get caught up in the latest cash management fads to talk about things like virtual bank accounts, to talk about the latest technology, whether it's stablecoins or the role of AI. But at the end of the day, whatever vertical you're in, whatever activity you have, the board needs to understand what is cash, why it's fundamental to the security of the business. And whilst I can say why they shouldn't care, but also why they should care. By asking the right questions, they should be comfortable that it's not an area they need to care about because they've got a well-qualified, experienced treasury team that's using the right providers to make sure that cash is being squeezed from around the business. They're using the right banks and institutions and cash management processes and techniques.

So, the board should be confident that we're doing the right thing, but also worried, but not too much, that we are making control and taking control over the cash position for the organization.

Owen McDonald: That's a very thorough answer. Thank you. Back to you, Leo. We recently spoke, and you emphasized the need for customized cash management strategies. That's not easy for everyone.

How can businesses achieve a tailored approach to cash management? Is it through partnerships with PSPs? Is it through their commercial bank? Both? How can they do this?

Leo Gil: Yeah. Good question. So, the keyword here is objectives. Right?

So, all the points that Naresh raised and part of your questions around cash visibility and KPIs, TPO, DSO, they're all means to an end, right? Every business has their own objectives based on their industry, the stage of their growth, their geographic location, customer distribution, and so on. But unfortunately, a lot of those businesses, they don't have a good base to begin with, right? There's a lot of still manual processes that are being implemented or being used across these businesses. There are too many disparate systems where information is spread out across the organizations, like spreadsheets everywhere, so it becomes really challenging if their base is not well-architected or well-structured.

So, while they're setting up their base, as you mentioned, working potentially with partners can help with that, especially partners who have already solved problems like this with other companies. For example, one of our clients, they restarted with their objectives in mind. They are in the hospitality industry. The treasurer has a strategic seat at the table in your organization, and part of the treasurer's role is to help decide which properties they need to invest based on where people are going vacation, based on potential natural disasters.

And the treasurer has to ultimately decide how to invest, right? Are we going to borrow money? Are we going to move money between accounts and so on? But knowing that objective, then it becomes easier to go into the next step, right? Which is one of the requirements in order for the treasurer to deliver on the mandate that they received from their CFO, which ultimately is I need real-time view of my cash positions.

I have to rethink somewhere in my banking relationships because some cannot accommodate my needs. I have to automate and centralize my data, bring data from my backend systems like my ERP. Then, I have to tailor my cash positions based on separate hotels, right? Each hotel can hold its own cash position, or I can split that or group it based on my geographic region of the hotels are based or based on divisions within the organization, right? So, all of that can also give me a single view of my boring short-term and long-term investments, which makes the treasurer's life much easier to deliver on the mandates that they have.

So, to summarize, to just have a clear view of what your objectives are upfront, piggyback a lot of what Naresh had said before. And then, that's really the key step while they're setting up their base for their financial operations.

Owen McDonald: Let's talk about Generative AI, the hot topic du jour. Naresh, you've mentioned the importance of standardizing data before implementing AI in areas like cash management. Elaborate on why that is an important step.

Naresh Aggarwal: Well, I definitely agree with a couple of things you've said. One is, it's a very topical area, Generative AI, and data quality is really critical. But I think more fundamentally, this is not a story about Generative AI. It's a story about the use of technology generally. And if I look back over the last thirty-five years I've been in treasury, what's been very clear to me is getting good quality data in, is always the key to being able to use and provide trust and transparency to the users of the data.

And part of the challenge we have now is we have more complex bits of data, more nuances, more customized bits of data. And trying to make sure they're standardized has generally been quite a real issue for most organizations. But it's also very clear to me, in order to harness the true benefits of Generative AI and, in fact, any type of AI tool, it's critical to have data that is good quality. So, I'm not sure I would agree that it has to be standardized, but it's definitely got to be good quality. And maybe one of the things we can use, things like Generative AI, is to improve the quality of the data we're getting.

If what it's doing is identifying anomalous data points and data sets and data sources, that's a tremendous improvement on where we are today. So, I don't think organizations should wait until they have standardized and clean data because I don't know how long that's going to take. But there are tools available to keep cleansing the data and make sure it's as good a quality as it can be. But it's definitely true, the dirtier your data, the poorer the results you can trust that come out of any tool, whether it's a Generative AI tool or just a piece of RPA.

Owen McDonald: So, it's the old garbage in, garbage out, sort of maxim. Leo, dovetailing off what Naresh just said, in your experience, what are the most common pitfalls companies face when bringing in new technology like Gen AI, into cash management processes, and how can those pitfalls be avoided?

Leo Gil: Yeah. I think one of the biggest pitfalls is trying a big bang approach. Right? Some of what Naresh said about looking at technologies and seeing how they can be used in the business. It's almost like you're trying to find a use for a tool versus the other way around.

So, what we see a lot of companies do sometimes is they'll make large investments in lots of systems with like AI, RPA, large treasury management systems, that they'll take too long to implement. They never fully leverage all of the bells and whistles that they thought they needed when they were going out for purchase. And it takes them long just to take value from leveraging the investments they've made. Right? And I think that the last pitfall or second pitfall I see a lot is looking at technology sometimes as replacements for their functions.

Of course, automation of manual processes, it's a replacement of a function of an individual or a person in the organization which has positive outcomes for it. But, what we also see, what I also believe can be a negative is when you're looking at certain technologies like AI, for example, as a replacement for the function of what the treasurer does when it comes to forecasting. 

Our approach has been to leverage insights and AI as another member of the treasury team, not necessarily a replacement where we can help the treasurer drive new insights, different insights that maybe they weren't looking at, and make the ultimate decision into how to optimize working capital. So, I think that's the more pragmatic approach that helps companies advance technologies with the organization. But ultimately, all of these technologies have to respond to what the needs are of the business, what the board requirements are, what direction they have from their CFOs. Otherwise, we're just implementing technology for the sake of technology.

Owen McDonald: Last question, and I'd like you both to have a go at it. How can companies ensure their cash management strategies remain flexible and adaptable to changing market conditions? Naresh, why don't you take it first?

Naresh Aggarwal: I think it's going to come down to three things, the classic people, processes, and systems. For people, I think it's important to make sure you have good, capable people. That may mean doing qualifications like the ones provided by the ACT or by other organizations. But it's important to go back to fundamentals and understand why we do cash management. What are the key tools available?

It's very easy to think about what you see in front of you and that's the only way of doing things. But trust me, having seen over many, many decades, there are so many different ways in which you can manage and optimize cash in an organization. So, making sure you've got a team that's skilled and have got a very flexible mindset because the business will continue to change and adapt. I've read of many organizations, for example, entering into B2C relationships post-COVID. If your business is focused on B2B, you're not going to be able to deliver a cash management solution that is now right for the business as it is today. So, making sure you've got people, the right tools, and the right mindset is critical. 

Making sure you have systems as well that are capable of supporting how the organization is changing and what the needs of the organization may be. Because it's not just how the organization is changing, it's how buyers, sellers, and consumers are also changing their preferences. So, ten years ago, you may not have been engaging with Apple Pay or faster payments. Today, your business may be receiving or using these tools in much greater numbers. So, as a treasury function, you need to be alert to these and have systems capable of adjusting and adapting where appropriate to these new changes of ways of working and behaviors we see across all of society and across all of these different countries. 

And we need processes that are flexible enough as well. So, that means making sure that we don't just do things the way we've always done things because they're hard coded. We need to make sure we're constantly revisiting how and why we do things the way we've been doing it. We don't just make in the UK CHAPS payments because that's the only way of making large value payments. We explore other ways of making payments, including faster payments. 

So, it's really important that we have people, process and systems that are capable of being flexible and adaptable because, believe it or not, the world continues to change.

Owen McDonald: True enough. Leo, same question. How can companies ensure their cash management strategies remain resilient in the face of uncertain market conditions?

Leo Gil: Yeah. No. That's a great question. Ultimately, the way to become most flexible is to have a strong foundation. Right?

A strong foundation of having centralized view of the data, your cash positions in one place, being able to work with collaboration and break into silos within the organization. Those are timeless. Right? Doesn't matter which market conditions could happen with a strong base. You can navigate any challenging waters, right?

Also, I'll say looking at usability, right? Can I get all of these functions and features implemented across my organization where we're leveraging them quickly versus looking at, again, big bang approaches for first things? I'll give you an example. If you were pragmatic, and you have a strong foundation, one of our clients, they have a strong, heavy reliance on trade finance instruments, right? Export letters of credit.

As you all know, market conditions are changing when it comes to trade. And because of their heavy reliance on letters of credit, they're starting to rethink what their approaches are. But, from a strong base, it's easy to pivot the business into moving to different ways to borrow and move funds that would be less costly to them. Because, again, their foundation is strong.

Owen McDonald: Okay. Well, there it is, folks. Formatting data to improve AI performance, custom cash management strategies. These changes are opening a new world of possibilities in B2B payment processing. Our thanks to Naresh Aggarwal, Associate Policy and Technical Director at the Association of Corporate Treasurers, and to Leo Gil, Vice President of Product Management at Bottomline.

To our fantastic audience, thanks for listening. Hit subscribe. Catch us again on your favorite podcast platforms, including Apple and Spotify. Bye for now.

Owen McDonald: The Payments Podcast from Bottomline.