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The changing face of treasury technology: technology has given the treasury function the ability to pinpoint global positions and enable better decision-making and fund-centralization activities.

Just 10 years ago, the operation of a global treasury within an organization was run largely as a silo of functionality associated with cash management, investment, debt and foreign exchange through a decentralized approach. Each geographical region was responsible for its own operations. Now, treasury is charged with a lot more than managing its daily position. The scope and responsibilities associated within treasury have extended dramatically and are now expected to fulfill a larger, more strategic role within the organization.

In order to meet these expectations, the treasury department is evolving to fulfill the need for a more centralized operation, allowing for access to information in real time. As treasury centralizes, there are efficiencies gained by concentrating the investment and borrowing decisions. A systematic, inter-company sweeping of account balance funds between central treasury and each internal division can now manage dealing operations that were once performed through individual regional treasuries. To optimize this approach, an in-house bank is created.

Today's companies want a clear view of the cash flowing through their organizations so they can optimize how it is used and invested. Obviously, the further out a company can accurately forecast cash, the more efficiently it can invest and borrow.

By meeting this need, treasury is evolving into a department capable of making a major impact on the organization's bottom line. Clearly, the catalyst of this change is technological advances that are helping corporate treasuries fulfill their expanded role.

Treasury Technology's Evolution

Historically, a global treasury organization operated in a decentralized fashion. Positions were managed locally, and investing and borrowing was done in the same manner. Periodic updates, with respect to balances and investments, were provided through spreadsheets and electronic documents--a rather antiquated method.

During the late 1980s and early '90s, treasury benefited from the advent of new technology. The systems that entered the scene at that time focused on eliminating manual tasks and redundant entry of information into multiple systems. Internal straight-through processing (STP) was considered a breakthrough development, allowing for the increased automation of data flow. While it offered enhanced functionality, early treasury technology was often only able to integrate and automate with a limited number of target solutions, and the exchange of information in and out of early applications was just beginning to gain momentum.

Additionally, while earlier technology enabled solutions to match invoices with purchase orders and shipping receipts, get approvals to authorize payments within accounts payable (A/P) systems and create the A/P file, nothing was bank-ready. Treasury would receive requests by phone, fax or email to make electronic payments, be forced to sift through each one and finally re-enter the information into the electronic payment solution for approval. This often resulted in significant audit and workflow breakdowns.

While fax in the 1980s and email in the '90s were considered technological breakthroughs for their time, they aren't secure enough in the new environment of Sarbanes-Oxley.

Finally, came the advent of the Internet, which has been a mixed blessing for treasury. As banks have moved to the Internet, disaster recovery and contingency planning has benefited. During the transition, the legacy automation routines into which treasuries had established needed to be replaced. The new options for the exchange and securing of data have improved dramatically. Exchange of information went from minutes to seconds. In addition to the increase in speed of data exchange, the confidence, with respect to the security and integrity of the data, has also been satisfied.

Today's Treasury Technology

Changes in technology--including the movement from independent local area networks (LANs) to corporate wide area networks (WANs)--have provided the infrastructure that allows the same organization to centralize its operations. The birth of corporate intranets, divisional portals and corporate-wide systems have become commonplace.

Now, not only have the user's desktop and the underlying operating systems changed, but so, also, have the communication channels that allow the exchange of information to internal and external partners. Thanks, too, to the advent of Web-enabled treasury applications, enhanced STP, the emergence of shared service centers and more, corporate treasury is expected to have better control over the entire financial value chain than ever before.

As new technology has become available to corporate treasurers, they've embraced the opportunity to exert greater control. Corporate intranets make it possible for internal treasury clients to access the information they need 24/7. As a result, treasury is quickly moving from manual operations to a broader strategic center of the organization.

Common Challenges

With increased regulation like Sarbanes-Oxley and international financial reporting standards (FAS 133 and IAS 39), not to mention recent high-profile cases of corporate financial mismanagement, shareholders are growing more concerned with effective treasury risk management and cash management. All of this requires improved internal efficiencies, streamlined processes and treasury automation that support compliance policies.

At the same time, there is an increased demand for predictable cash generation. Worldwide, treasury departments are being asked to assume responsibility for enterprise working capital management--a far cry from the traditional cash-only mindset. In fulfilling the role of cash management center, corporate treasuries are fraught with daily complexity.

Typically, a corporation needs to establish its cash position. Taking into account activity from systematic and anticipated forecasts (accounts payable and receivable), activity from financial transactions investment, debt, foreign exchange and more must all be factored in. What makes this difficult is the fact that all of this information originates from different sources.

The average corporate treasury center can handle anywhere from a few dozen to hundreds of key transactions a day. Then consider that for most multinational corporations, which have multiple centers across the globe, such activity is multiplied exponentially. The result is a need and expectation to have access to information anywhere, anytime.

The corporate treasury is expected to be able to control a company's cash on a global level. However, many treasury departments are still keeping vital treasury information on spreadsheets, wasting the time of highly skilled employees by requiring them to re-key the same information into multiple spreadsheets or internal systems. Moreover, an over-reliance on spreadsheets puts a company at risk. The goal is to eliminate the requirement of performing separate log-on routines to access various databases and then manually exchange data from one database to another or from a database or a spreadsheet.

Treasury needs to optimize workflow and cost and move from distributed to centralized processes. Centralization is the key.

Creating a Centralized Hub

Treasury's ability to extract real-time critical data from multiple, diverse systems is crucial. It's no longer just the data associated with payables and receivables that must be automated. The processes and management of information must be automated as well. C-level executives want a dashboard that provides an overview of the most important financial data. Thus, a treasury solution needs to have the ability to drill down to the individual transactions to retrieve as much or as little information as needed.

Corporate treasuries gain strategic value by how well the technology can seamlessly exchange information with other systems within fully automated, end-to-end processes. The new emphasis on compliance demands that automation include communication with financial partners and both internal and external STP processing.

There must be communication and workflow within multiple internal departments and between the company and financial third parties such as banks, market data providers, financial portals and investment money market fund providers. Core to the solutions are the traditional tasks, such as balance retrieval and electronic payment transmissions, but those abilities should be an extension of treasury to other departments of the corporation.

Through such external seamless integration, treasury can help companies achieve greater compliance. With Sarbanes-Oxley's emphasis on accountability, automation is key. The ability to optimize STP to automate the import of bank statements, reconciliation of accounts and the definition and automation of workflow is especially important.

It isn't enough to employ satisfactory treasury technology. Instead, treasury must utilize technology to centralize operations and create a consolidated information hub that is a repository of all financial activity and can process all payments, wherever in the world they occur. This results in clear visibility of all global operations through the same solution.

By employing such a centralization strategy, new functions can be implemented that leverage the concentration of information. For example, treasury can create a "payment factory" that can manage the growing number of electronic payment methods and formats for the initiation of credit and debit transactions. In addition to providing a common, defined workflow for the initiation, approval, formatting, security and data exchange, there are also better forecasting benefits. This provides C-level executives with more accurate short-term, intermediate-term and long-term forecasting capabilities to improve working capital management.

Due to advances in treasury technology, companies can now immediately pinpoint a global position, resulting in better decision-making and fund centralization activities. Once the Treasury department and the extended users of treasury information operate within the same system of features and controls, better communication and smoother audits and Sarbanes-Oxley compliance will occur. Such systems also help with FAS 133 and IAS 39 compliance.

As an additional benefit of centralized treasury technology, companies and their operating units have access to information from anywhere, through a "thin client" deployment. They also have the ability to implement treasury functions that were not as viable in a decentralized environment, such as operating an in-house bank (centralizing investment and borrowing options), multi-lateral netting and forming relationships with core global banks, reducing the number of banking relationships required.

Treasury's ability to impact the bottom line is gaining increased recognition at the C-level of leading organizations. This demands agile deployment of more sophisticated and thoroughly integrated, automated solutions. These optimized solutions exist in effective, efficient technologies that help corporations achieve financial transparency, control and centralization.

Rob Hansell is Product Director for XRT, a treasury solutions provider in King of Prussia, Pa. He can be reached at or 610.290.0430.


* The scope and responsibilities associated within treasury have extended dramatically, and it is now expected to fill a strategic role in the organization.

* The Internet has been a mixed blessing for treasury, as the exchange of information has gone from minutes to seconds.

* As new technology has become available to corporate treasurers, they've embraced the opportunity to exert greater control.

* Optimized treasury solutions exist in effective, efficient technologies that help achieve financial transparency, control and centralization.
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Title Annotation:treasury
Author:Hansell, Rob
Publication:Financial Executive
Date:Nov 1, 2006
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