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Post Covid-19 priorities for treasurers and CFOs

Deutsche Bank has launched series 2 of its Future of Payments series by releasing a report that includes the results of a proprietary survey of more than two hundred executives (CFOs and treasurers) across Europe, as well as the bank's forecast of trends in cash management, digitalisation, mobile payments, cryptocurrencies, and blockchain. 

Identifying post-pandemic treasury trends

Covid-19's disruption to business has reshuffled priorities for CFOs and treasurers. The DB report says they must address how to maintain access to liquidity and credit; implement back-up procedures; create visibility to total cash in global locations; determine cash requirements in the short and medium term; and assess current exposures. 

Transforming business models are a key theme emerging from the survey, with four discernible trends identified by report authors Marion Laboure and Jim Reid: 

  1. Traditional B2B businesses entering B2C and a growing interest in e-commerce. E-commerce has risen by 50% in Europe since March and report expects sustained online volume growth of more than 50% globally in 2021 and 2022. This will trigger the need for innovative collections solutions. 
  2. A move toward real-time treasuries. CFOs are willing to monitor and be notified about real-time account balances. They believe that instant payments, application programming interfaces (APIs), and open banking will be the technologies/services with the biggest impact on B2B payments over the next two or three years. 
  3. Usage of cash applications. Automated accounting and reconciliations systems, and e-invoicing technologies are expected to increase. 
  4. Centralisation of cash management. Treasurers are willing to rationalise bank accounts; between 20% and 50% of treasurers intend to implement virtual accounts this year.

Tackling challenges with technology

Technologies are available to help overcome the top challenges and inefficient processes faced by treasury departments regarding B2B payments. In the Deutsche Bank survey, CFOs and treasurers reported the following top challenges: 

Protecting against fraud/security exposure related to payment activity (59%). Globally, business email scams have resulted in losses of over US$12.5bn since 2013.1 Global losses from all kinds of payment frauds have tripled to US$32.39bn in 2020 from US$9.84bn in 2011. 

Manual payment generation workflows are error-prone and time consuming (53%). In the UK on average, executives are misdirecting payments worth £3m each year and a staggering £40bn is paid late. Regarding cross-border B2B payments, 60% require some kind of manual intervention, each taking at least fifteen to twenty minutes.3 

Bank KYC/ documentation or other compliance issues (48%). Automation of KYC processes using artificial intelligence reduced over “6000 manual resources” (full-time positions) in a single organisation, according to a report by Authenteq.

Obtaining timely access to all transactions occurring globally (34%). Almost 54% of treasurers believe that one of the pressing issues in cross-border payments is to trace payments in the case of problems.

Keeping up with industry changes to formats or technologies used in the payments process (20%). According to Google, just during this pandemic, the number of phishing sites registered was 2.02 million (20% more than in full-year 2019).

Legacy payment formats and channels create inefficiencies as payments are processed (18%). Of the treasurers surveyed, 51% encountered cheque forgery, with an actual loss rate of about 18%.

Sources of efficiency gains

The Deutsche Bank report also highlighted the parts of financial management that the CFOs and treasurers surveyed reported as ripe for efficiency gains. The main areas that are currently inefficient, according to the survey, are: 

Cash flow forecasting. Nearly half of all executives surveyed (46%) identified cash flow forecasting as an inefficient component of their financial operations. While doing manual cash flow forecasting, firms generally make mistakes on small expenses, which ultimately adds up to large amounts, thereby rendering forecasts inaccurate.

Bank account management. One-third (33%) of CFOs and treasurers said their bank account management processes were inefficient. Decentralised bank account management typically leads to uncontrolled inflation in the number of bank accounts, and powers that harm the overall control of treasury operations. Further, poor bank account management can open the door for fraudsters to open unofficial bank accounts. Meanwhile, bank guarantees also pose substantial financial risks as at times local management of big firms can request for local bank guarantees without proper central authorisation.

Invoice processing. One-quarter (25%) of respondents said that their invoice processing is inefficient. Approving invoices and preparing payments manually can cost between US$12 and US$17 each, according to the report. Businesses spend on average thirty-nine hours per week chasing invoice exceptions, discrepancies, and errors. Traditionally invoice processing has been an internal function but now organisations are moving it to a managed service by outsourcing or are automating it in house to reduce human error.

Payment receipts/reconciliation. This process was considered to be inefficient by 22% of executives. Sometimes, manual processing of transactions may trigger errors (e.g. are forgotten). Consequently, it will never be added to the ledger. Such omissions can be difficult to detect. Also, manual reconciliation is prone to accidental errors, such as a debit being charged as a credit.

Purchase order processing. Some 14% of CFOs and treasurers identified PO processing as inefficient. Treasurers waste 6,500 hours per year, on average, on inefficient payment practices (e.g. chasing purchase order numbers, processing paper invoices, and responding to supplier inquiries). These inefficiencies cause friction in treasury/payment processes and supply chains.

Spend management analysis. Over one in 10 respondents (12%) identified inefficiencies in their spend management analysis. Manual processing of expenses and/or vendor invoices is especially prone to human error. Paper receipts can easily get lost, and there could be a data entry error due to manual intervention. Among treasurers surveyed, 81% admit to blindspots when it comes to tracking company travel, expenses, and invoices. Many businesses use vendors or fintech software but implementation can be costly for SMEs, ranging from US$10,000 to US$500,000.

Payment initiation. This was considered to be inefficient by 11% of executives. Processing payments is time consuming and labour intensive. Invoices need to be received and entered into the system, then coded appropriately, then submitted for budget-holder approval, and finally entered into the ERP system for approval. Credit card details are a frequent focus of data breaches and a key risk for companies. Last year, for example, British Airways was fined £183m under the General Data Protection Regulation (GDPR) for a security incident exposing card numbers, expiry dates and Card Verification Value (CVV) codes.

Fraud/security management. While only seen as an inefficient component by 8% of finance executives, improper attention to fraud and security needs can lead to reputational and solvency issues. 

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