CFOs ‘slow to automate despite pandemic’

Nearly three out of four (74%) financial executives report that pandemic disruptions underscored the imperative to achieve real-time tracking of cash inflow and outflow, yet only 12% of them currently are automating their accounts receivable and accounts payable, according to a survey by market researcher Forrester.

“The majority of AR and AP departments tend to operate separately within finance organisations, citing a lack of resources and expertise for automating those processes,” according to Matt Clark, chief operating officer at Corcentric, which commissioned the Forrester survey.. Companies that want to reduce costs, increase profits and improve the customer experience must make optimising AR and AP systems a priority, he said.

Survey respondents said “holistic” cash forecasting would prompt smarter decision-making (97%), streamline payments for all users (88%) and increase business agility (83%), Forrester said. At the same time, respondents believe that without a complete, real-time view of their cash position they face greater risk of fraud (52%) and are less able to adapt to disruption (45%) and identify funding to support stakeholders’ top priorities (48%). 

The global onset of Covid-19 in 2020 plunged many economies into sharp recession and compelled companies to hoard and more closely track cash. In major economies such as the US the authorities reversed the cash crunch and averted a prolonged downtown by swiftly enacting record monetary and fiscal stimulus which has only begun to fade in recent months.

Despite lessons from the collapse in liquidity, nine out of 10 survey respondents are not automating their AP and AR processes, Forrester said, noting that the two functions remain siloed.

“Most companies are interested in enabling a real-time, complete view of their cash position, but few can actually do so today,” Forrester said. “Holistic cash forecasting can not only help with cash management but also contribute to better risk management, improved fraud management and more effective financial planning.”

Although 82% of financial executives want to achieve holistic cash forecasting, only 5% have the partners and/or systems in place to do so, Forrester found in its July 2021 survey of 663 CFOs and other C-level executives, as well as directors and vice presidents, at companies in France, the UK and US. The companies’ annual revenue ranges from US$750 million to more than US$5 billion.

More than half of companies (57%) struggle to upgrade payment processes to meet users’ needs, Forrester said. Seven out of 10 financial executives say their cash flow systems provide only partial insight into their companies’ financial position.

“To gain the benefits of holistic cash forecasting, CFOs need to be the leaders in driving the process automation and the data integration across and between” AP and AR, Forrester said.

“The key to holistic cash forecasting is to capture data on outgoing cash payment obligations in approved AP invoices and on incoming cash receipts based on customer approval of submitted AR invoices,” Forrester added. “AP and AR invoice automation systems are the best sources of this advanced data.”
 

Indian corporate bond issuers ‘must compete harder’

India’s corporate bond issuers will have to offer higher returns on their papers to compete more keenly with state-issued government bonds, according to the website Mint. At the same time, the increasing yields on such bonds have led to a decrease in the volume of bond issuance, experts told the service.

“Corporate bond issuances have seen a drop amid rising government security (G-sec) rates,” Ajay Manglunia, Managing Director and Head, Institutional Fixed Income, JM Financial, commented to Mint. “Investors are looking for higher yields, and they feel yields will go up further from here. There is also a larger quantum of state development loans (SDLs) available at higher yields. Investors, therefore, prefer a higher-yield instrument”.

Indian three-year AAA-rated corporate bonds have increased their yields to 5.74%, a rise of 43 basis points (bps), while the five-year AAA-rated corporate bonds have also seen an increase in their yield by 36 bps to 6.35%. Both have been accompanied by a decrease in the volume of issuance of corporate bonds, which dropped to rupees (INR) 5.93 trillion in 2021, from INR 7.87 trillion in 2020.

However, an expected hike in Indian interest rates during 2022 could reanimate the bond market. A rise in interest rates leads to increased yields, although coupon prices of the bonds would fall consequently.

A recent note to clients issued by Nomura advises: “Our rates team expects the 10-year government bond yield to rise to 6.75% by end-2022 and further to 7% by 2023, up from 6.5% currently. The yields are likely to move higher on the back of global liquidity tightening, higher rates and higher government deficits. There can be some support from the potential inclusion of India in the global bond index."
 

Oman’s OIFC to use Bank Muscat’s transaction banking platform

Oman’s Bank Muscat and Oman Investment & Finance Co Khedmah (OIFC), which provides billing and collection services for the Sultanate’s utilities, have tied up to enable OIFC to use the bank’s recently launched transaction banking platform, especially to manage its liquidity needs. Bank Muscat has the largest network in Oman, with more than 150 branches.

The agreement was signed by Ilham Murtadha Al Hamaid, General Manager - Corporate Banking, Bank Muscat, and Saud Ahmed Al Siyabi, Chief Operating Officer, OIFC Khedmah. OIFC already uses online banking and remote deposit capture (RDC) and will now add the bank’s liquidity management solution of automated ‘sweeps’ for managing its liquidity needs. The solution involves the rule-based physical movement of funds between different bank accounts for efficient utilisation of funds, enabling corporate customers to optimise liquidity available across multiple bank accounts and currencies.

Benefits of the liquidity management solution include: better visibility of funds position, increased control over the use and allocation of internal resources, increase in operational efficiency by automating cash concentration and improved insights through various information reports.

Liquidity management is one of a range of features offered under Bank Muscat’s transaction banking platform of end-to-end digital solutions for the transactional and operational needs of corporate and government clients. It offers a suite of products for payments, liquidity management, collections and receivables, and reconciliation needs of the institution, with the possibility of full integration of the bank’s transaction banking platform with the corporate’s ERP system. Through the platform, the customer has a proper reconciliation mechanism in place and the ability to send different MIS reports.

 “Over the past few years, Bank Muscat has been spearheading the digitalisation trend in the Sultanate, which is helping our corporate customers transact quickly and efficiently while minimising the data-entry related risks in the payment process and improving overall security,” said Ilham Murtadha Al Hamaid, General Manager - Corporate Banking.

Launching the transaction banking platform last month, Bank Muscat commented that its “digitally-enabled services ecosystem will play a major role in accelerating corporate B2B and B2C transactions, unfolding a digital economy and promoting a customer-centric business model, which is vital to Oman Vision 2040”.
 

NetSuite expands cash management suite

Oracle’s NetSuite division says that it has added two dashboards to its ERP suite for project and cash management for small and medium businesses (SMBs). The dashboards provide real-time forecasting, without the need for third-party integration, as well as an added layer of analytics.

The NetSuite 360 dashboards are designed to proactively inform users of what they should be looking at, said Paul Farrell, Oracle NetSuite’s VP of product management.

NetSuite Cash 360 was designed to help businesses make strategic cash decisions and improve forecasting of their finances. The automated software uses data such as current cash balance, accounts payable, and accounts receivables balances to provide cash management as a service. It also uses data modelling for forecasts “to allow enterprises to quickly adjust the cash flow forecasts based on things that might happen,” Farrell said.

The forecasting tool in NetSuite Cash 360 uses multiple data points such as funding sources, planned expenditures, sales forecasts, and billing schedules and can apply historical averages to the models.

Companies may often have trouble seeing cash beyond 60 to 90 days, so many are working to fund projects and business operations without a high degree of cash visibility, said IDC financial applications research director Kevin M. Permenter. The challenge can increase if the enterprise has operations across many geographies.

NetSuite Project 360 offers an additional layer of visibility and reporting enhancements for projects. The dashboard is part of NetSuite’s SuiteProjects, a professional services automation (PSA) product that can combine with NetSuite’s CRM, HR, and ERP suites.

The NetSuite Project 360 dashboard brings data from across SuiteProjects and offers enterprises a centralized view into vital project information to help them monitor KPIs, project budget analysis, plan and rectify project billing, and help check project resourcing, Oracle NetSuite’s Farrell said. “The system is going to very quickly allow me to diagnose the health of all those projects.”
 

Rapyd adds cross border trade platform Neat

Fintech-as-a-service (FaaS) company Rapyd, which in early December announced an agreement to acquire Hong Kong-based Neat – a cross-border trade enabling platform for small- to medium business (SMBs) and start-ups – said that the deal has now been completed.

Rapyd added that the integration of Neat into the Rapyd Global Payments Network means that users  will be able to:
- Incorporate new companies in minutes, streamline receivables and payables in a single venue, starting with Hong Kong and soon in other trade-friendly markets around the world
- Offer real-time high-value payments in Hong Kong via FPS, CHATS, and SWIFT
- Accelerate payments to suppliers across Greater China 
- Empower smart business and employee spending via virtual and physical Visa cards
- Provide eligible businesses with fast working capital through an in-wallet credit line

“Completing the acquisition of NEAT represents a significant step forward in expanding our platform's global capabilities for small and medium businesses,” said Arik Shtilman, CEO and co-founder of Rapyd.

“As SMBs have evolved into increasingly complex and ambitious enterprises, the tools they require must advance as well in order to keep pace with the demands of this new wave of ‘micro-multinationals’. We will continue to add more tools to our network in order to continue to support these growing businesses.”

The Rapyd platform supports more than 900 payment methods in over 100 countries and its investor base includes Stripe, Fidelity Management and Research, Altimeter Capital, BlackRock Funds and Tal Capital.

WEF encourages more SME listings

The World Federation of Exchanges (WFE), the global industry group for exchanges and central counterparties (CCPs), has published a report on how the flexibilities for listed issuers, introduced as a result of the pandemic, could be used to stimulate SME listing in the future. 

Drawing upon the initial findings of a WFE member survey on covid-related issuer flexibilities, the paper studies how exchanges worked closely with wider stakeholders – including regulators, governmental departments, and institutional investors – to help companies deal with the challenges of the pandemic. The paper acts as a stock take of the measures that were introduced but also considers whether some of these relaxations are fit for purpose as we ‘build back better’ following the pandemic. In particular, the paper notes: 

• Capital raising measures, including relaxed pre-emption rights for shareholders, enabled companies to raise emergency funding and remain fully solvent. 
• Authorities granted temporary extensions for filing of annual disclosures; 
• Virtual and hybrid Annual General Meetings enabled shareholders to effectively engage with company management, without having to be present in person; 
• Online investor roadshows enabled savings in terms of management time and costs, compared with traditional roadshows;
• Alternative audit procedures were employed by the international audit community, to provide a ‘reasonable level of assurance’ over corporate reporting; 
• A number of WFE members produced guidance for issuers and investors to promote awareness of ways to deal with the novel challenges of the pandemic; and
• Effectively implementing these relaxations required close working with key stakeholders. 

Nandini Sukumar, Chief Executive Officer, the WFE said: “As we continue to recover from the pandemic, it is critical that we understand and learn from the role that the exchange community has played in guiding issuers through the challenges they experienced. While markets varied in their individual responses, this paper is a welcome contribution in highlighting measures that were successfully implemented and more importantly, those that can be used to encourage SME listing.”

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