Automating further Treasury processes, good idea… but which ones, that’s the question

The Nirvana of treasury (but this also applies to other functions) is(or should be) to HYPER-AUTOMATE every process in order to strengthen internal controls, reduce operational risks, increase productivity and free up limited time for more analytical, and sometimes even strategic, tasks. The future of treasury cannot be conceived without innovation and new technologies, and not with a single Treasury Management System (TMS). To achieve this, you need to find your way through the jungle of solutions. To do this, the Treasury Tech Map is your best tool. What's more, you need to define a roadmap, because unfortunately, Treasury Rome was not built in a day, and never will be. The question we intend to answer is simple: automate, yes; but what?

Hyper-automation instead of robotization

As the old saying goes, don't put the cart before the horse. Before we think about robotizing (we're not talking about RPA) or injecting AI, let's first think about standardising, rationalising and standardising lakes of data. I don't think we should jump in headlong, but rather that we need to have a vision of what we want to achieve. A good itinerary is the beginning of a successful journey. It seems that hyper-automation is primarily intended to complement processes that are still too manual, to aim for the perfect STP and to minimise the need for import/export, manual data transfer, spreadsheets and copy/paste. The idea is to change tools and add the missing layer to automate what is not automated. Admittedly, the idea is laudable, but automating what? That's the question that needs to be addressed.

There is always room for automation in treasury management

Some people think that they are sufficiently automated and so used (or their teams) to repeating mastered tasks that they convince themselves that they are "hyper-automated". The truth is that they blind themselves and refuse to change what's going on because they don't like change, prefer complaints or solutions and accept things fatalistically, without challenging or questioning them. Isn't the treasurer a great conservative? So, the question to be addressed is which processes can be "improved". In my humble opinion, we could mention the following processes.

- FX / Currency Management Automation (CMA): this is undoubtedly one of the weak points, as it overlooks the pre-trade phase, which is essential for efficiency. What's more, executing OTC derivative deals on a platform remains a 'manual' operation. The same goes for monitoring open positions to avoid the impact of swap points. Adopting a solution such as KANTOX by BNPP is the solution to add to any TMS.

- Decision-making: here again, when you think about it, traditional TMSs are weak when it comes to decision-making tools. They provide reports that are sometimes automated but need to be analyzed before a decision can be taken manually. The treasurer has a minimalist notion of automation... TMSs are therefore not these decision-support tools, and they don't prepare the work for you and do it for you 24/7.

- Execution of transfer to sweep accounts (multi-banks): another example of a missing function. Ideally, the tool itself should calculate and prepare the levelling operations and propose them for approval, or even carry them out automatically on an account-by-account basis. It would then calculate the impact on current accounts, and transfer prices and interest calculations would also be adjusted. Finally, all accounting postings would be automated based on predefined accounting schemes. Few tools can claim to have reached this point. It is a question of levelling the master accounts, the holding company accounts and initiating the movements to or from the accounts of subsidiaries.

- Automatic generation of some reporting (e.g. TP, Hedge Accounting / IFRS9, sensitivity analysis, impact of 100 bps of fluctuation, etc.). I'm always amazed at how few reports come out of TMS tools automatically. The standard offered is often poor, the reports to be 'customized' basic and not always automatically generated. I dream of the treasurer arriving in the morning and checking what the tool would have done, over a good cup of coffee. Weaknesses in the generation of semi-automated reports mean that third-party tools such as ETL or, for example, FENNECH F³ must be used. Appropriate reports tailored to their beneficiaries/recipients should be automatic to allow permanent (albeit unpleasant) control.

- Accounting and treasury reconciliations: accounting and treasury reconciliations should be 100% (or almost 100%) automatic. SWIFT Camt and XT messages provide enriched information that is ideal for optimizing reconciliations.

- Proposals for investments according to policies, amounts, existing portfolios and maturity (possible): here again, it would be great to have a tool that, when you arrive in the morning, proposes the investments to be made, the breakdown to comply with the internal rules and policies, and recommends transactions that simply need to be validated, with all the accounting, treasury and payment processes involved in the investment decisions. Wishful thinking? Not at all.

- BAM or Bank Account Management: even without mentioning the 'e' for 'electronic' (via swift messages), BAM solutions make it possible to automate the process of upgrading and maintaining accounts and other KYCs. Who has never been afraid of forgetting to request a bank balance confirmation at the end of the accounting year?

- Bank Fees Management (BSB): here again, systems exist to simplify your life and calculate the fees paid, analyze them in relation to what had been planned and finally claim any overpayments. A lot of people don't bother with this and, out of an excess of confidence, prefer to think that their bank charges are perfectly collected. I'm thinking of a solution like oak-eye, which is tailored to the needs of a treasurer and pays for itself in no time.

- IBAN name check: although we will have to wait for PSD3 to ensure that what applies to instant payment applies to all types of payment. Think of Trustpair or SiS-ID, for example, to help you limit the risk of fraud.

- Cash-Flow Forecasting: Cash-Flow Forecasting adjustments should be done in real-time based on TMS and ERP continuous updates, etc... The cash-flow forecasting enables today to detect changes in behavior of customers and AI to predict the future flows. AI applied at CFF has proved its worth.

- Performance reporting and analysis including comments: another example, if one were needed, of the missing pieces in the treasurer 4.0 toolkit. The machine should provide this information and analyze performance through KPIs.

- Working capital figures crunching and pre-analysis: We can only be surprised at the weakness of the figure’s reports, even complete ones, which still must be analyzed. The tool should automatically analyze the causes of variances (as it does for CFF) and suggest areas for improvement and action. AI is once again the solution to our problems.

- The list could go on: e.g. dashboarding in real-time, sophisticated alert systems, volumetry assessment per counterparty, risk of counterparty, etc... Let's stop here, because it has been demonstrated that we are often far from being as automated as we claim to be or as we would like to be.

Real-time Treasury, the new time scale

Today, we have entered the era of "all-in, all-out". Real-time management is essential in treasury, given the amounts of money involved. Time is money, and you can't afford to waste it. This notion of immediacy is required by every CFO. You must act faster (than your competitors) to outlast and outlast them. A good decision is one taken on time. Delay is dangerous when it comes to cash flow. Time can only be defied through automation. In addition to speed, maximum automation means that internal controls can be strengthened, and fraud combated (almost all the time). "Automation is virtuous, and more than an objective, it is an absolute necessity" (François Masquelier, Chair of EACT).

Innovation, a motivation factor for younger generations

We can expect to help people thrive and really enjoy what they do. Bringing the technology is a way to motivate teams and to help them reducing the manual work and the error-proneness of spreadsheets and copying figures from one system to another (i.e. export/import of files is what I call the “Financial/Treasury Supply Semi-Manual Reporting Chain). Our vision at Simply Treasury is that we should harmonize, automate straight-through processing with modern tools. It is also a great motivation factor for teams. Treasury teams should start working “smarter”, automating what can be further automated and dig into processes to eliminate manual or semi-manual ones freeing time for the development work. We underestimate the impact of projects and a clear strategy on the choice of employer or position. Today's treasurers must convince candidates to join their team, and to do that they have to be persuasive. Indeed, the younger generations of 'Z', 'Y' and millennials are looking for greater comfort in being involved in IT treasury projects. Having a roadmap and knowing that the company wants to invest in technology to become "leading edge" and stand out from its peers is a motivating factor when choosing a job. Candidates are no longer so desperate to take a job because of a salary, a name or a person. They want more, and they want great projects, which is an unsuspected vector of motivation and attractiveness.

And eventually…

At the end of the day, I think treasurers generally overestimate themselves. A treasurer is conservative (in general) but pretends to be innovative when you talk to him about automation. The frog in the fable thinks it's bigger than it is... So, we need to ask ourselves the right questions and question our processes wherever we use spreadsheets, data import/export, manual file transfers, the use of proprietary EBS (electronic bank management) systems to pay, incomplete or under-exploited tools and, finally, the use of paper or e-mail for important processes. Automation is virtuous, we said, hyper-automation is its quintessence and one day AI will be the (universal) panacea for our needs. But on that day, I won't be here to comment on the state of the treasury profession. We'll talk about it again, I guarantee you... And I'll end with two quotes that I really like.  “Automation is driving the decline of banal repetitive tasks”. (Amber Rudd) and finally “The first rule of any technology used in a business is that automation applied to an efficicent operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency”. (Bill Gates).

François Masquelier, CEO of Simply Treasury – June 2024 - Luxembourg

Disclaimer: This article was prepared by François Masquelier in his personal capacity. The opinion expressed in this article are the author’s own and do not necessarily reflect the view of the European Association of Corporate Treasurers (i.e., EACT).