We’ve come a long way. Back in the 1980s a treasury team would typically have one or two members, focused on cash, FX, deposits and loans. Since then, its role has expanded substantially with the addition of sophisticated features such as derivatives and risk management, as well as new functional responsibilities (for instance, working capital).
At the same time, treasury management systems (TMSs) had to evolve significantly, playing catch-up to meet treasurers’ requirements. Windows and the internet enabled more sophisticated functionality – now global users could log into one TMS, for instance.
In the 2000s cloud-based TMSs enabled transfer of maintenance and regular upgrades to the vendor, allowing clients to minimise upgrade testing, while more frequent scheduled upgrades accelerated the rollout of new and enhanced features.
Currently, third-party apps offer more functionality (for example, supply chain finance) and interface with TMS and enterprise resource planning systems, while application programming interfaces are being integrated within a TMS-facilitating data transfer.
If the treasury team has limited experience with investing in and deploying technology, then projects are likely to be detrimentally affected. In my career I’ve seen many mistakes made – and these can apply equally from a technology perspective as well as non-technical situations:
Historically, group treasurers have been risk-averse, primarily because they did not understand the opportunities available. Technology has provided new and improved software and hardware, enabling computers to take on more complex processes, at increased speeds. Artificial intelligence has, at last, given treasurers significantly enhanced quality of cash forecasting.
Going forward, the pace of change is likely to accelerate alongside technical advances. Fortunately, millennials are much more confident with technology than previous generations and consequently, new technology is likely to be embraced rather than feared and, as a result, adopted faster. The next generation of treasurers needs to ensure that teams include individuals who understand treasury and technology in order to keep up.
Successful selection and implementation of a TMS can be challenging for even the most experienced treasury teams. They must invest enough time to prepare and complete the selection process, as this creates the bedrock for implementation.
Here are some important tips to remember:
SWIFT’s migration to XML ISO20022 in the interbank space was presented at the ACT Cash Management Conference in March, where delegates heard about the conversion from SWIFT MT to MX (ie XML), which is to be implemented globally over the next three years. CHAPs and Faster Payments will be early birds.
Why is this exciting? For more than 20 years there has been demand for more data to be contained in payment instructions.
Why XML? The format is used by corporates. SWIFT MX can include significantly more information in payment instructions, for example, all invoice numbers relate to one vendor payment. This offers more automated reconciliations. XML will enable the use of data analytics, modelling and improved cash forecasting. Future developments might include fraud monitoring and sanction screening.
Diane Barker is a treasury consultant with years of experience working in large corporates and in advisory roles
