A Fitter Treasury Starts with a Strong Digital Backbone

Digital transformation is one of the hottest topics in treasury right now. Although there are many ways that treasury departments can approach digital transformation, whichever path they choose, an important first step is establishing a strong and stable core in the form of a digital backbone.

Anyone who has ever embarked upon a personal fitness regime will understand what it means to have a strong core. It stabilises the body and reduces the likelihood of injury. The same goes in the world of business, and treasury, where the support of a strong ‘digital backbone’ – a cornerstone of a successful digital transformation – can lead to a fitter and, ultimately, more resilient organisation.

There are a number of reasons why a company might pursue digital transformation. But whether it is about improving customer experience, growing revenue, workforce optimisation, risk management or operational efficiency, the development of a digital backbone can be the uniting factor. In fact, without a digital backbone, any transformation risks becoming merely a loose aggregation of technologies. It is a missed opportunity – especially for treasury. Only when a digital backbone is in place to support the entire digital structure can true transformation take place. 

Meeting all needs 

There are two key aspects of technology that form the digital backbone. The first is access to data that is both fit for purpose and able to flow freely back and forth. This facilitates real-time intelligence, which is critical for correct and timely decision-making. The second aspect is open application programming interfaces (APIs). These are steering the development of modern software towards the formation of scalable and open treasury infrastructures, where core treasury systems can connect to a multitude of internal and external systems. 

The twin notions of strong data and connectedness speak perfectly to the needs of the modern treasury. There are multiple roles within every treasury department that have their own day-to-day information requirements – such as treasury operations managers, cash managers, FX traders, analysts, and back- and middle-office managers. Increasingly, the people in these roles must interact with, and meet the wider-ranging needs of, other decision-makers throughout the organisation and beyond, from purchasing and sales through to the CFO, board, banks and investors.

By removing the distinctions – and thus the barriers – between treasury’s front, back and middle offices, through a digital backbone, a unified treasury can serve the entire organisation more effectively. What’s more, bringing real-time financial decision-making to the table through the backbone enables treasury to optimise cash flow forecasting, deliver working capital improvements, implement payments processing efficiencies, and undertake effective fraud management. 

But what does a digital backbone look like? And how can treasury implement one?

Not just any TMS 

A digital backbone may form around a treasury management system (TMS), however, the traditional on-premises system tends to be monolithic and unyielding and is far from an ideal base for a digital backbone. One of the major challenges is that systems requiring a deep level of customisation, as TMSs often do, make it difficult for treasuries to consider any new technologies, preventing engagement with innovation and the benefits it may bring. 

The opposite of the monolith is the truly digital and open TMS, which offers a modular, reusable architecture, built around cloud technology, APIs, and the notion of a highly flexible data model. We take this approach at GTreasury because we recognise that clients’ needs are constantly changing. This allows for continuous innovation because we have small teams working collaboratively towards rapid releases, which are rolled out as soon as they are ready – via the cloud.

The implementation approach for the GTreasury backbone is also markedly different. It can start with one module and grow. The cloud-based architecture and APIs ensure the solution can evolve in line with treasury’s needs – there is no requirement for a ‘big bang’ implementation. And yet the backbone still provides connectivity for all of treasury’s systems, far more seamlessly than could ever be achieved through the monolith.

Fig 1 - Digital backbone

Data drivers

Of course, success of the digital backbone is dependent on certain conditions, such as the right data being in the right place. Where data is siloed, and systems fragmented, it is so much harder for treasury to close the books or report on time, let alone become a valued business partner. 

GTreasury’s approach to data and connectivity, in terms of system openness and architecture, ensures the free flow of data from common data tables. This effectively draws from a single source of truth, from cash to risk, avoiding overlapping data and thus removing the difficulties of reconciling that data. Manual re-keying work becomes unnecessary, since the system itself takes care of aggregating the data, meaning that the legwork for treasury is minimal. 

As industry specialists, we also recognise that there are a variety of user types and needs within treasury; that is why GTreasury is a comprehensive digital system in its own right. But with the openness of APIs, this resource will always fit within treasury’s expanding ecosystem, whether it is working with banks, trading partners, fund managers, ERP providers or even the yet-to-be created innovations from the fintech community.

This open architecture also enables smarter treasuries to leverage the innovation that is happening around data and data analytics. The intensity of conversation around artificial intelligence and machine learning, for example, is rising rapidly. Far more accuracy in forecasting is becoming possible as a result. Fraud detection and management is also improving using these technologies. Indeed, where individual corporates are making millions of electronic payments, certain fraud scenarios would become impossible to detect or prevent without their intervention, the cost of which can be both financial and reputational.

Robotic Process Automation (RPA), too, is having an enormous impact, especially in shared services where invoice processing and payments are manually intensive. There are many other routine tasks that can be automated, freeing people up to deliver higher value, more insightful work. These technologies can easily be incorporated into treasury workflows, if the digital backbone is firmly in place.

A change of pace

No matter how clear the benefits of a digital backbone may be, however, it is understandable that not all treasury functions are yet onboard with digital transformation projects. Treasuries are often under-resourced and overwhelmed by the growing volume of day-to-day work. But the automation and efficiency aspect of such transformation projects will help free-up personnel from routine tasks, enabling treasury professionals to focus on the value-added tasks that perhaps they cannot currently find the time to undertake. 

Furthermore, hiring more people is rarely an option for treasury, given today’s ‘do more with less’ mantra. So, by turning the conversation to automation and accessing real-time information, the stock-in-trade of the digital backbone, better ways of managing risk and compliance, optimising cash positions and liquidity, and much more, will soon become apparent.

In addition, as more millennials enter senior roles in the workplace, they are bringing their own tech-driven expectations with them. Treasury has to be able to respond to these internal customers in the way that they demand – which is increasingly digital and instantaneous. Treasuries who choose to ignore this, risk losing their seat at the decision-making table.

In summary, every treasury function has the opportunity to transform because of the digital initiatives that are happening today. But it is essential to deploy the right technology from the get-go to enjoy continued success. A lack of core strength will soon see the aches and pains of modern treasury starting to show; whereas treasurers who create a strong digital backbone from the outset will be able to comfortably accommodate – and benefit from – change.