Resource guide: Keeping liquidity and cash management top of mind during economic stress

Treasury And Cash Management

Jun 1, 2023

Liquidity is in the news. Cash positioning and management is in the news. That means CFOs, treasurers and other finance leaders are in the spotlight, as they should be. Effective cash and liquidity management is crucial for the financial health and viability of any company, especially in a turbulent global economic sea. We’ve assembled a resource guide for business payments cash lifecycle management that spans current concerns about economic instability as well as the burgeoning area of AI in this category. 

Cash Management Practices to Weather a Downturn

There’s no shortage of fearmongering and handwringing when the topic is cash management during a recession. But the smart approach will be rational, data-driven and focused on liquidity management. This microsite from Bain is laser-focused on the latter approach with steps treasurers and other finance leaders can take as they forge ahead during this uncertain macro-economic environment. Key quote: “Maintaining an unflinching eye on cash is critical. That task may feel difficult amid all the unknowns, especially if the downturn is at an early stage and recovery seems more than a year away. Yet, sustained cash management practices will lay the groundwork for a company to emerge from a period of extended turmoil in a position to grow.”

Optimizing Liquidity During Times of Stress 

Continuing with the rational vs. emotional approach, this report from JP Morgan gives treasurers and other finance leaders economic, operational and financial advice about using the approach of analyzing short-term, medium and long-term factors when determining cash positioning and forecasting. Key quote: With all the existing variables and the new unknowns, you may want to revisit your assumptions and calculations. Connect with your local and regional teams across the business to try and improve frequency, data collection, analysis and forecast accuracy. You may also want to review reporting platforms and technology infrastructure to ensure the finance organization can respond quickly to changes in business conditions.

Digital Banking Maturity Report

The intersection between digital banking and cash management arguably doesn’t get enough attention. But it should. The features built into a state-of-the-art digital banking platform will be agile enough to show you how to integrate customer data into a cash management solution, and that’s what this report from Deloitte provides. Key quote: “Taking the role of a trusted advisor, banks support clients’ everyday finance management with a wide array of digital solutions, such as PFM tools, multiple investment options, risk profiles, automated investment advisory, and portfolio management.” 

4 Realms for Digital Acceleration reporter Adam Zaki’s take from earlier this year on digital acceleration is worth a look. One of the surprising things you will find here is his focus on data as an essential part of any digital transformation initiative. Key quote: “As work environments fluctuate, the processing and utilization of data need to be paramount… CFOs, regardless of industry, appear to be forecasting frequently as their data reliability knowingly varies. If frequent forecasting is being done with poor data, not only is CFO productivity taking a major hit, but business decisions and capital allocations are being determined with bad information.” 

The Payments Podcast: Payment dynamics turn to use cases for high-speed rails

Payments and cash management again finds its intersection in this podcast where Bottomline subject matter experts Brian Hall and Michelle Pasquerillo discuss the potential for high-speed rails to affect liquidity and the underrated ability for AP automation to help with cash flow management. Key quote: “AP automation can significantly reduce the time it takes to process invoices, which ultimately means faster payments. It can improve accuracy so it can help reduce errors and discrepancies in the payment process, which again helps remove the need for any manual intervention. It also allows better visibility into payment data, allowing companies to track payment status, identify payment trends and monitor payment history. All that will allow companies to make more informed decisions on cash management and forecasting.” 

What banks can do to grow their treasury business

A cautious approach and thorough data analytics are at the top of the table in this Accenture report, which transcends the mindset of simple management and details ways that the cash management function of a company can pivot toward growth. Key quote: "The arrival of API-enabled solutions and fit-for-purpose fintech capabilities is likely to alter the composition of treasury management products and services revenue pools. This will influence bank strategies for years to come."

Making Bank Software Development Choices in the Digital Age

Payments and cash management is a cloud-based software solution, as is digital banking infrastructure. Some banks have either upgraded to meet those digital requirements or partnered to integrate them into legacy systems. For the finance leader looking to make informed decisions some basic software evaluation is necessary and that’s what this report from Aite-Novarica provides. Key quote: “Almost all banks use the cloud today, and many use multiple types of clouds. Public clouds are open to all companies that pay for access; infrastructures are shared among consumers. Private clouds are restricted to a specific company and exist behind a firewall, so third parties must be permitted to access them. Because so many solutions on the market today are cloud-hosted, IT executives should take the cloud type into account during the software selection process. While private clouds can be expensive to build, the limitations of public clouds can result in cost implications down the line. On the other hand, hybrid clouds built using containers serve to safeguard longer-term flexibility.”

Association of Corporate Treasurers: 2023 Cash Management Event

UK-based but decidedly global in scope the ACT wrapped its annual event in late March with participation from finance leaders and treasurers from the likes of Lloyds and Barclays. The site is full of video interviews and blog posts where the liquidity theme once again takes precedence. Key quote from one of the blog posts: “In the context of the recent banking turmoil in the US and Europe, risk management – particularly counterparty risk in the current environment – is vitally important in establishing the security of investments. Developing a multiple-period investment strategy that can adapt to potential changes in monetary policy, while maintaining liquidity and, crucially, protecting cash assets is vital. Such a strategy includes mitigating counterparty risk by diversifying deposits in multiple banks, rather than consolidating them with single-relationship banks. While bringing together the themes of technology and the latest developments affecting the work of treasury, the event underlined how the profile of treasury has been raised with the unanticipated turmoil of the banking sector. It highlighted again the vital role of treasury to carry out its basic functions well and have robust policies and good risk management plans in place to reduce exposure to third parties.” 

How AI in treasury management is transforming finance

Artificial intelligence is more than Chat GPT and has been used for payments and cash management by many banks and corporates for some time. But it is certainly the hot topic of the day. This post from US Bank details the role AI could and should play within the treasury function. Key quote: Before seeking technology solutions, treasury management departments need to clearly understand and systematically improve how their teams work. Most companies won’t know how AI can improve business unless they’ve critically examined existing processes first. Flaws in processes develop over time because of workarounds to accommodate exceptions, or from underinvestment in technology. Regardless of their origins, flawed processes incur hidden costs, often in the form of wasted employee time or project delays. While these costs may initially appear incremental, they can quickly amount to millions.

When to Have Treasury Management AI Tools

Fifth Third Bank has also been on the case when it comes to AI and treasury functions. This post details the urgency of integrating its practical functions into payments and cash management. Key quote: “Automated treasury services using AI can get a real-time consolidated view of cash positions across stores and subsidiaries, making cash flow forecasting easier and more accurate. Once treasurers can see where the cash is, in real time, they can run various models and apply formulas to see sunny-day and rainy-day forecasts based on business expansion plans. It provides greater insight for their leaders considering expansion into new markets or mergers and acquisitions."

The Bottomline: Payments and cash management is no longer the exclusive concern of the treasury function. Everyone from the accounting department right up to the CFO and other C-level executives share responsibility for paying bills on time and planning for the future. With AI coming into practical use, it's important that shared responsibility stay away from hype and stay focused on the present and future of business payments. 







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Cash Management Treasury
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