The following article is an excerpt from the AFP Treasury in Practice Guide on connectivity, underwritten by Kyriba.
Automation is incredibly important when it comes to achieving optimal treasury connectivity. It cuts down on manual processes greatly, freeing up treasury to add more strategic value to the organization.
STREAMLINING DATA GATHERING
Mack Makode, vice president and treasurer for sports apparel and footwear manufacturer Under Armour, noted that treasury processes could be placed into “four big buckets”—collecting data, consolidating data, analyzing data and creating business intelligence. “Most people start with a spreadsheet, and 80 percent of their time usually goes into collecting and consolidating,” he said. “My goal has always been to reverse that, and target only 20 percent of the time for collecting and consolidating and 80 percent for analysis and creating business intelligence. To achieve this reversal, you have to create connectivity to the ERP system or where the information is coming from and automate the entire data gathering process.”
For example, when it comes to cash management and cash flow forecasting, the basic goal of the treasury department should be to eliminate spreadsheets and build an automated stream of information, Makode explained. “You need to connect to your ERP system and pull in all your expected receivables and payments and then consolidate that information to create your short-term forecast,” he said. “People will do that on a spreadsheet, but there is room for automation. There are a lot of pockets within treasury where this type of connectivity could bring operational efficiencies.”
Jennifer Earyes, CTP, director of treasury risk for student loan company Navient, noted that her treasury management system (TMS) receives multiple BAI files each day per bank to do its cash forecasting and cash position. It’s all automated through run cycles, which are critical because Navient receives hundreds of ACH payments and wires per month.
Of course, no system is infallible, and if a technical issue causes a file to fail to be loaded in time, Navient’s treasury team has to handle things manually. “Of course, we have a buffer between the time we’re expecting the bank to load the file versus the time that the system will go to retrieve it,” Earyes said. “But there are times when the file isn’t there and we have to retrieve it.”
Earyes added that in the past five years, file errors per bank have decreased, even as the number of Navient’s banking relationships have increased. “This has come as a result of Navient’s growth through acquisitions—stabilizing the occurrence of manual intervention as we onboard those new bank relationships,” Earyes said.
Multinational courier FedEx is in the process of moving to a SWIFT connection for all of its payment files. Once it does, its treasury department expects to shift away from many of its current manual processes to more automation. Kyle Kremser, CTP, treasury systems and controls principal for FedEx, expects this to not only make the process easier but also much more efficient. “We’ll get a lot more standardized data coming through,” he said. “This will also help us to be more bank agnostic.”
For example, one of FedEx’s treasury divisions has a TMS that runs on a server that has not been updated. So the division has to manually download CSV files for bank balances and upload payment files to the bank. “That’s how they communicate with the bank,” Kremser said. “So efficiencies will be driven based on the communications network that we’ll establish. And it will also add security because there won’t be anyone who touches those data files.”
Download Best Practices in Treasury Connectivity here.