Cash & Liquidity Management
Published  11 MIN READ
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What Matters Today #2: Efficiency

#2: Efficiency

by Linda McLaughlin-Moore, Regional Head of Product Management and Delivery – Asia Pacific, and Chris Winter, Region Product Executive, EMEA, J.P. Morgan Treasury Services

In last month’s edition of TMI, J.P. Morgan introduced its new series addressing the topics that matter most to treasurers today by focusing first on risk management. In this second article, we look at the opportunities and barriers to transactional and process efficiency, both amongst banks and corporate treasuries, and how confronting the impediments to efficiency can contribute to an effective treasury strategy. Optimising operational and financial efficiency are among the primary objectives for corporate treasurers, so efforts that can be made to enhance these areas are likely to result in financial advantage and process efficiency.

Visibility for efficiency

Increasing operational efficiency in treasury is closely connected to our previous topic, risk management. There are a wide variety of ways in which treasurers can increase their operational efficiency, which in turn mitigates the risk of error and fraud. Furthermore, efficient business processes reduce costs, which reduce pressure on margins, and facilitate better decision-making based on greater visibility over information and transactions. Efficiency improvements could include:

  • Improving straight-through processing (STP) i.e., the automated processing of transactions without the need for manual intervention. STP extends across both internal and external systems.
  • Switching from paper to electronic methods

–  electronic banking removes manual processing and payment statement storage;
–  e-invoicing removes postage cost and time in transit;
–  ACH payments offer improved account credit time scale compared to cheques.

  • Taking advantage of market initiatives like the new SEPA Direct Debit (SDD) to improve collections efficiency and to increase the certainty of account credits, assisting with both reconciliation and forecasting.
  • Leveraging new electronic data feeds to enhance cash flow forecasting to improve the decision making process around liquidity and investment management.
  • Optimising the management of data from multiple bank sources through proprietary multi-bank portals or SWIFT’s corporate access solutions (SCORE).  

Financial efficiency also involves optimising the liquidity structures that support the needs of the business. This includes rationalising account structures, particularly in Europe where the 32-country reach of SEPA has prompted treasurers to question the efficiency of maintaining multiple in-region accounts. Companies are also increasingly seeking to reduce the number of bank relationships to reduce fragmentation, build deeper relationships and achieve greater liquidity concentration.