Driving down operational costs across treasury

March 15, 2023

Economic uncertainty is driving many organizations to unlock opportunities for efficiency gains and savings. As a result, treasurers are having to drive cost efficiencies across their operations.

Modernizing can help

What may be often overlooked is the savings opportunities available through the deployment of more modern technology, which very often helps reduce costs across the IT infrastructure giving treasurers the ability to:

  • Replace not just one but multiple legacy applications (e.g., separate applications for cash management and hedging)
  • Implement new capabilities such as hedging or an in-house-banking, which helps reduce the overall number of bank relationships

Choosing the right partner and solution

We are seeing a trend for organizations to work with vendors who are value-added partners. They are moving away from legacy or niche solutions that only address a relatively small business area to solutions and vendors who can add value on a larger scale.

Organizations are recognizing they can get more value out of strategic treasury management solutions that are better interconnected to corporate systems such as ERPs compared to smaller, niche solutions that often lack integration capabilities, leading to manual data entry. Areas such as real-time cash management and reliable and precise cash forecasting are more important than ever and can help drive tangible returns by allowing organizations to expand their working capital. To deliver best-in-class cash forecasting, a digital treasury management solution needs to be able to seamlessly integrate with the ERP, ideally through API-based, real-time connectivity.

However, many treasury departments need to make compromises as their niche solutions may not provide the technology needed to automate integration.

Liquidity and risk visibility is key

According to the November 2022 Deloitte Global Treasury Survey, 64% of respondents state visibility into global operations, cash and financial risk exposures as a key challenge. Lack of liquidity visibility is also more than a hindrance – it’s a liability. You need a comprehensive view of your operations to consolidate global risk positions and optimize your hedging strategies.

Creating an efficient hedging strategy commonly relies heavily on corporate data, whether these are balance sheet positions or expected future cash flows that ultimately constitute exposures to be hedged.

Manual processes or manual data entry are not adequate operational tools to manage the necessary data volume. The more data you have, the more analysis you can provide in areas such as cash forecasting or exposure management. Better analysis translates to better accuracy and better accuracy to lower operational cost (e.g., cost of hedging) or returns (e.g., working capital).

In-house banking is also critical for large companies, especially those who need to reduce costs. A modern solution can help companies set up or automate existing in-house banking programs including the facilitation of cash pooling (physical and notional) as well as payments on behalf of (POBO) and collections on behalf of (COBO), thus helping reduce banking relationships and costs.

A cloud above

A sophisticated cloud-based treasury management solution can offer a significantly lower total cost of ownership (TCO) compared to an on-premise solution or even a sub-optimal cloud system.

Treasurers who adopted a cloud-based treasury management solution five or 10 years ago should ask whether that system still provides value for money – particularly when it comes to preparing for future economic uncertainty and market uncertainty.

While it’s true that cloud-based solutions and managed service offerings can speed up deployment times, the cloud is a facilitator for much more. It gives companies the opportunity to improve the efficiency of their treasury operations by outsourcing system administration and the management of data. Cloud deployment means you can meet your needs without having to invest in costly IT and capital-intensive resources.

Summary

Implementing modern treasury management and payments technology can lead to cost savings. In this evolving marketplace, FIS has much to offer. Our treasury offerings can help your organization get up and running quickly without needing to spend valuable time engaging with multiple vendors and with an easy digital architecture integration. We can help implement the state-of-the-art treasury infrastructure you need to adapt and grow.

About the Author
Thomas Jerolitsch, Business Line Executive, Enterprise Treasury, FIS
Thomas JerolitschBusiness Line Executive, Enterprise Treasury, FIS

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