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Cash forecasting and real-time capabilities crucial for European treasurers

Every year, the European Association of Corporate Treasurers (EACT) runs a treasury survey to identify the top priorities for corporates. It also aims at identifying challenges corporate treasurers of multinationals are facing and technological innovations they intend to implement. This year's survey polled 316 treasurers from across Europe, and is the first EACT survey since COVID-19 hit.

Top treasury priorities

This year, perhaps unsurprisingly, cash-flow forecasting is seen as the highest priority for treasurers in the coming 12-24 months, followed by the digitalisation of the treasury function, and risk management. Cash flow forecasting is away on its own at the top of the priority list, identified by close to two-thirds of respondents (63%), leaving digitisation (43%) and risk management (33%) as distant fellow podium places. 

Some 17 months since COVID-19 was declared a global pandemic, it is no surprise to see the continued focus on cash flow forecasting. While some might declare that we are now living and working in a 'post-pandemic' world, while the virus is still with us in so many countries, the volatility we have seen from lockdowns and the shuttering of businesses around the world is still not over. Having a robust cash forecast that can piece together what is happening in terms of cash coming into a business is almost literally worth its weight in gold. Combined with the pandemic impact on corporates, the low or sometimes even negative interest rates around the world has put increasing pressure on how treasurers are managing their cash and short-term investments. A solid, reliable cash flow forecast can afford some treasurers the possibility of earmarking some level of cash for a longer term investment in an attempt to find some elusive yield by incrementally increasing the duration and credit risk of the investment instruments they use.

The digitisation of treasury is another ongoing trend that was supercharged by the pandemic, as businesses were faced rapidly adapting to their entire staff working from home, and treasurers scrambled to understand how they could move from paper-based to digital approvals on everything from payments, to bank account management, and more.

Treasury technology innovations

In terms of the tools that support the further digitisation of the function, data analytics tools (54%) top the list for innovations that are currently being used by treasurers or that they intend to use in the next 12 months. Treasury collects so much data in the various systems and programmes that are common in the day-to-day role of the function, actually being able to have a tool that can analyse and dissect the data into meaningful insights that support strategic decision-making is essential to today's treasurer. The capabilities of data analytics tools today mean that insights which could take a whole treasury team weeks to put together manually can now be presented with a few clicks of a button.

The second most popular technology innovation also replaces manual work with automation - namely robotic process automation (RPA) which is being or will be used by 40% of treasurers over the next 12 months. RPAs are particularly useful in automating repetitive manual processes, freeing up considerable time that can then be applied to more strategic work.

Application programming interfaces, or APIs as they are more commonly known, round out the top three innovations that treasurers plan to use in the next 12 months. Over one-third (37%) of respondents identified the API as an innovation they will be using. While not as new or technically as flashy as some of the other emerging technologies that have received hype in the treasury space, APIs found a new lease of life thanks to open banking initiatives. Essentially, an API lets one electronic system communicate with another, and with banks being forced to open up their systems through a variety of open banking regulations, many have developed use cases for APIs to connect with their corporate clients, letting treasurers access real-time banking data across cash positions, FX trades, daily operations and more. 

Data analytics, RPAs and APIs are top of the treasurer's innovation focus for now, with artificial intelligence (19%) and blockchain (8%) not gaining as much traction. Only 2% of respondents indicated they had any interest in crypto currencies, which is quite understandable given how volatile the Bitcoin currency has been this year. A little over three months ago, CTMfile published an article exploring the Tesla treasury's approach to Bitcoin, which at the time seemed quite groundbreaking. Since then however, the firm changed its approach and no longer accepts Bitcoin for car payments, despite CEO Elon Musk saying a couple of weeks ago that this might happen again in the future. With the price of Bitcoin soaring or cratering depending upon utterances and tweets from Musk, treasurers have shown that - in the short-term at least - they have little interest in the volatility associated with crypto.

Real-time treasury gathers momentum

The EACT survey also demonstrated the burgeoning interest that treasurers have in real-time treasury activities, which are enabled by a combination of technology and smarter processes. When asked what the greatest interests for their treasury in the next 12-24 months are, real-time related answers dominated the top three responses.

Of most interest is real-time information, which was identified as an interest by almost half of the treasurers polled (49%). As treasury is increasingly driven by the data it can access from across the business and from its own bank connections, it makes sense that being able to access and analyse data in real-time is a major priority for the contemporary treasurer.

The second and third most identified interests for treasurers in the next couple of years are real-time liquidity (39%) and real-time payments and collections (39%). This reflects the growth of real-time payments systems around the world - the 2020 'Flavors of Fast' report from FIS found that 56 countries around the world were live with real-time payments. As consumers, we are used to transactions being instant, and that demand is increasingly moving into the business-to-business space. With real-time payments comes the need for real-time liquidity - if payments are leaving corporate bank accounts instantly, treasurers need to know that they have access to the funds at the same time in order to settle all outgoings.

FX management (38%) and APIs (28%) round out the top five treasury interests for the 12-24 months ahead.

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