Less than 10% of UK Corporates have Real-Time Visibility of their Cash Flows

• Complex banking relationships and reliance on inadequate multi-bank systems hinder real-time views of operational liquidity

LONDON – Over 90% of corporates in Europe, Middle East and Africa (EMEA) lack a transparent line of sight to their real-time cash positions, according to a report released today by Cashfac Technologies, the market leader in Bank-to-Corporate Cash Management solutions. Complex transactional banking relationships, lacking capabilities of multi-bank solutions and inefficient management of working capital were all seen by corporates as undermining the accuracy and confidence in data and impacting the ability to achieve real-time cash visibility.

For the survey – The Cashfac EMEA Operational Cash Index – research firm East & Partners interviewed 350 chief financial officers and corporate treasurers from the top 1,000 revenue ranked corporates across EMEA to create a unique snapshot on the true state of play for the treasuries of major organisations in Europe, Middle East and Africa. The report highlights issues around clarity on cash positions and the realities of the complexities associated with managing multi-bank systems for large corporate treasuries in the region, and found high levels of frustration with the set-up process, on-boarding and account opening as well as the suitability of solutions to meet the company’s specific industry needs 

Paul Dowling, Principal Analyst, East & Partners, said: “Due to the complexities and shortcomings of managing multiple banking relationships regionally, our research found that many EMEA corporates lack a line of sight to their cash positions. Interestingly, a number of interviewees were hesitant in rating the accuracy of their cash flow; this is doubtless a result of their known inability to have clear line of sight to the organisation’s entire enterprise cash positions and being somewhat wary of confirming this.”

Commenting on the research Alastair McGill, Managing Director, Global Business, Cashfac, said: “The challenges facing the corporate treasurer are significant but accepting the status quo and failing to achieve a clear line of sight into the enterprise’s cash position injects risk and cost that most firms are keen to drive out of their business. There’s a fantastic opportunity for the banks that serve these corporates to add greater value and secure long term sticky relationships in exchange. The satisfaction gap that exists between bank-provided systems and their clients’ expectations can definitely be closed; after a drought of innovation and investment in bank-provided cash management tools we are just starting to see the market leaders establish competitive new offerings.”

Key findings from the report include:

• Only 9.1 percent of UK corporates have a 360-degree, real time view of their cash balances, with only 8.3 percent being able to forecast cash flow in real time.
• EMEA corporates sustain as many as 17 bank relationships; many more than in other regions such as Asia.
• There is a powerful need for treasurers across the EMEA region to lower the contingent risk for their organisations in not having accurate real time cash management in place.
• UK corporates report having greater control over transactions across time zones and multiple banks relative to their EMEA peers.
• Corporates feel that bank understanding of their businesses and the industries they work in needs to be improved.

A Treasurer’s View: The Reality

Achieving a real-time consolidated understanding of transactions and balances was alarmingly low across EMEA. Only 7.7 percent of corporates in Western Europe have a 360-degree, real time view of their cash balances, with only 5.7 percent being able to forecast cash flow in real time. For Africa and the Middle East the figures were 4.0 percent and 2.3 percent respectively.

When asked to reflect upon the risk impact of not having accurate cross border, cross bank, real time cash management in place, CFOs and treasurers in the region clearly recognised that significant risk existed for their organisations and that this risk needed to be lowered.

All three markets confirmed they had a considerably greater degree of control over their transactions where a more real time view of their cash positions was achieved; the better the CFO/treasurer’s view of their cash, the more control they had over the business’ financing, financial management and risk mitigation.

Increasingly Complex Bank-to-Corporate Relationships

The median number of transaction banking relationships held by EMEA corporates is just over 11, within a range from 6.4 and 17.4. This is a large set of relationships to both manage and ensure cross relationship visibility of cash positions and forecasts. This number of transactional services relationships held by corporates represents a complex management challenge for treasury functions, particularly at the account level, with these typically running into hundreds of transaction accounts held globally.

Corporates were in unison in feeling that bank understanding of their businesses and the industries they work in needed to be improved. Using a reversed point scale of 1 (strong understanding) to 5 (weak understanding), UK corporates rate their bank relationships at an average of 2.44, with Western European averaging 2.69, and Africa/Middle East companies rated their banks at 2.86. 

Corporate Satisfaction

Companies across each of the three regions also appear relatively dissatisfied with the functionality of their current bank provided cash management solutions. The set-up process, on-boarding and account opening; ease of scaling-up/upgrading for regional coverage; suitability of solutions to meet the company’s specific industry needs; and the ability to adapt to the company’s workflow and authorisation mandate structure were all highlighted as areas of dissatisfaction. 

When asked to rate the importance of a number of factors influencing effective cash management, receivables were seen as a particular pain point for corporates relative to the payments side of their ledger. Efficient management of working capital was the most important priority for UK companies, but ranks among the lowest for satisfaction levels. For Western European corporates, accuracy of cash flow forecasting ranked as the most important priority, slightly ahead of maximising returns from cash.