With interest rates bottoming and the market jittery, treasurers are seeking more unconventional and versatile means for managing stockpiled war chests of liquidity.

Author: Karen Kroll


Ruiz, Treasury Strategies: Treasurers want to understand where their positions are each day.

Technology and automation are playing a key role in helping treasurers better manage their liquidity. Though efficiency remains a priority of treasurers’ efforts to automate accounts payable and receivable and other financial operations, the focus has expanded to include control and visibility, Ruiz says. “Treasurers want to understand where their positions are each day.” Automated systems can provide this to a greater degree than manual processes.

Even better, says Martin, is the rise of Cloud-based systems that have put many of these tools within the reach of smaller companies for the first time. “These solutions,” he adds, “have become more robust.”

One example is a technology that allows companies to offer or use dynamic discounting—a sliding scale of discounts that suppliers can offer buyers for accounts receivable. Ad van der Poel, senior vice president of financing services with Basware, says dynamic discounting isn’t new, but the execution is new, based on new technology. According to the company’s research, between 60% and 80% of suppliers are willing to offer discounts if they can receive payment early. The return to customers is significantly higher than what most can get through bank deposits, van der Poel notes. For companies that are cash-rich, “this helps them get value from their liquidity.” At the same time, suppliers can accelerate their cash flows.

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Although many organizations try to work with a small group of banking partners, regulation can make that difficult. For instance, regulations in place in Europe make it hard to find continentwide solutions from one bank, so many companies work with multiple banks, Lind says. However, that creates challenges when it comes to managing cash payments and receipts. “The more systems, the more banks, the more people and the more cash management centers, the bigger the risk. You can automate, but it’s a hassle to do that. It becomes more complicated.”

On a global basis, the impact of Basel III remains to be seen, as each country’s regulator will need to interpret the liquidity-coverage-ratio regulation within the context of the country’s regulatory scheme, says Martin of the AFP. The general consensus seems to be that cross-border pooling of excess cash balances will continue to be permitted, albeit at a higher cost.

Basel III also is expected to boost the cost of borrowing, says Tom Hunt, AFP’s director of treasury services. Treasurers are being encouraged to extend credit facilities now, even if they don’t mature for several more years.

Treasurers are taking several steps to better understand and forecast cash inflow and outflows, which has become both more important and more challenging, given many organizations’ increasingly global footprint. A growing number of treasurers are also working more closely with their colleagues in other business units. “The smart ones are doing this,” says Joseph Bizzarro, CEO of Vizant, a treasury advisory firm. “You can’t understand the flow of funds when you don’t understand the business.”

Indeed, treasury needs to take a lead role as many organizations venture further from their home base, Martin says. “We’re financial market analysts and risk managers. So it falls to treasury to understand the global risks.”


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