Resources | Treasury Management | December 14, 2023

5 Trends Driving the Future of Treasury Management

Which technologies and approaches will help your treasury team effectively manage cash and avoid risk amid economic uncertainty?

future of treasury management -- five trends you should prepare for

Which technologies and approaches will help your treasury team effectively manage cash and avoid risk amid economic uncertainty?

If you’re a chief financial officer (CFO), treasury leader or other enterprise financial professional, recent global disruptions probably haven’t changed your core mission: ensuring that your business has enough cash to fund operations and grow.

However, the way you approach this goal most likely has changed. Challenges related to the pandemic, geopolitics and the economy have prompted many organizations to expedite digital transformation. For treasury teams, this means investing in new technologies and skills to manage financial strategies and risks.

Rethinking cash flow management is especially important considering the rising cost of capital and economic predictions. According to the International Monetary Fund, global economic growth is anticipated to slow further in 2024, and inflation levels aren’t expected to normalize again until 2025. Some experts believe that a recession is still possible, especially for non-US markets, and that potential political and environmental risks could seriously alter the current course.

To ensure that your team is prepared for the future of treasury management, here are five trends to consider.

5 trends transforming the future of treasury management

The evolution of treasury centers around digital transformation. Forward-thinking treasury teams must engage more with technologies such as artificial intelligence (AI), analytics and fintech to manage risk, inform stakeholders and optimize cash management as borrowing costs rise.

1. Digital transformation and tech upskilling enable a more accurate, efficient treasury department

If your business invests in digital transformation, your treasury team will most likely require tool and skill upgrades. Globally, 66% of treasurers say the pandemic significantly scaled technology adoption. What do these innovations look like for treasury departments? According to the European Association of Corporate Treasurers (EACT), technologies that allow for centralization and standardization, and real-time insights for reporting, liquidity, payments and collections are top treasury priorities.

For example, robotic process automation can automate financial reporting and provide real-time insights into liquidity, receivables and other factors. Application programming interfaces (APIs) link data between applications, supporting more efficient payment processes. This can free up treasury teams, which face significant talent shortages, to focus on more complex tasks. AI can also reduce errors in treasury functions such as financial reporting and forecasting.

As a treasury professional, it’s important to ensure that your team has the skills required to use these solutions effectively. This may require additional investments in treasury upskilling, as well as low-code and no-code software that can help you customize applications without development expertise.

2. Advanced cybersecurity and IT collaboration are must-haves

Treasurers are responsible for a business’s most sensitive financial information, making them prime targets for cybercrime and fraud. A 2023 survey by the Association for Finance Professionals (AFP) found that 65% of organizations were targeted in payment fraud attacks, with nearly 3 out of 4 falling victim to business email compromise (BEC) scams.

With BEC, fraudsters pose as trusted individuals, emailing treasury personnel to extract money or sensitive financial data. Wire transfers were the most common payment method targeted with BEC. According to the FBI, BEC scams aimed at treasury teams have cost organizations over $2.3 billion in the last three years.

This points to a necessary evolution in the future of treasury management: joining forces with your cybersecurity and IT personnel. It’s also important to ensure that your treasury processes are protected by sophisticated security solutions. For example, blockchain can establish more secure transactions. AI can automatically scan payment and other financial data for anomalies that indicate suspicious activity. Some treasury management solutions are also embedded with security controls, such as permissions for allowable transaction parties, limits and dates.

3. Forecasting and risk management are key to resilience

Cash flow forecasting and risk management have always been central to treasury, but economic risks mean that this function is now a major focus. EACT’s 2023 survey found that cash flow forecasting is by far the top treasury priority into 2025. Perhaps more than ever, treasurers need easy access to cash flow and external market insights. Real-time information is especially crucial because rapidly fluctuating markets can quickly make forecasts outdated.

In this climate, treasury teams must replace manual processes with automated, AI-powered solutions that improve forecasting accuracy and timeliness. This empowers treasurers to make more informed decisions when optimizing working capital and planning for risks, such as foreign exchange and inflation volatility.

4. Treasurers are now strategic players

Traditionally, treasury was viewed as a support role responsible for managing costs and risks. But increasingly, organizations are realizing the importance of integrating treasury across different business functions, including leadership. This isn’t just because treasury must engage more with other departments — such as IT — to do its job effectively. It’s also because treasury is uniquely positioned with the finance knowledge required to develop long-term strategies.

According to an HSBC survey, 64% of CFOs at large organizations now consider treasurers as part of the C-suite, and just over half say that treasury is central to strategic decisions. Emerging technologies, such as advanced data analytics and AI, are facilitating this transition. Equipped with key insights, treasurers now bear a responsibility to help the organization navigate turbulent economic times and other growth challenges.

5. Innovative fintech solutions help treasurers generate value

Higher borrowing costs mean that treasury teams are looking for alternatives to traditional funding sources and opportunities to optimize working capital. For many businesses, significant value lies dormant within accounts receivable as buyers extend payment terms to address their own cash management needs.

To this end, supply chain finance (SCF) has gained popularity as a way for buyers to finance early supplier payments. Dynamic discounting and early payment programs are also emerging as more flexible options for suppliers. These buyer-implemented programs allow suppliers to request early invoice payments in exchange for a discount of their choosing.

For many suppliers, discount rates are competitive with the cost of traditional borrowing, and early payment programs are much easier to access, too. They have the added benefit of increasing your cash flow without creating additional liabilities on your balance sheet. Through programs such as C2FO’s Early Pay solution, this approach has helped many businesses improve their cash management strategy even during challenging economic conditions.

“As part of the program, we’re able to get our money, we’re able to forecast better, we’re able to not throw down our credit line at a higher interest rate. We’re willing to give up a little to get those receivables in a more timely fashion.”
Kelly McClelland
Offshore Inspection Group

The bottom line for the future of treasury management

In the coming years, successful enterprises will rely heavily on treasury teams — especially those that understand how to effectively use technology — to address risk and make strategic business decisions. Innovative treasury teams now offer significant opportunities for cash value generation, particularly through early payment programs and other fintech solutions.

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