The Role of IT in Cash and Treasury Management

Some of the key priorities of the treasury department are managing financial risk, liquidity, and ensuring strategic growth (e.g., acquiring new companies or building new manufacturing plants), and development of the company. Today, these goals are difficult to achieve without state-of-the-art cash and treasury management solutions and IT must support the financial group with the implementation and maintenance of the solutions. As the treasury department has the overall responsibility for the company’s cash flow and financial stability, and they need to ensure that there’s working capital available so the business can run without interruptions, having the right processes in place supported by the right tools is imperative. 

To ensure financial stability, long-term cash forecasting and predictive analytics are indispensable for treasury teams. To be able to maintain an accurate rolling forecast, the reliance on IT is once again acute. All the data from the different data sources must be consolidated in a single source, preferably in a cash forecasting solution. The more data sources a company has the more difficult it becomes to handle large data sets from a variety of sources via Excel only. 

Cash & treasury management efficiency for meeting strategic goals 

The efficiency of treasury and cash management processes must be the primary focus of finance teams today. While there are many excellent cash and treasury management solutions on the market, treasurers still face many roadblocks. One of the major obstacles is the lack of alignment between the treasury, finance, and IT departments. While during the last decade improvements have happened in terms of cross-department collaboration there’s still a long way to go before there will be a seamless alignment between the three departments. Nevertheless, to best support the company’s strategic objectives, more focus on cash flow and cash visibility is a must and it is difficult to achieve without integrating all the necessary tools in a way that is compliant with the company’s financial processes. 

Liaising with the IT department  

Buying and implementing a new treasury and cash management solution requires a lot more effort than shopping around for the best solutions on the internet or at treasury and finance fairs. To be able to choose a new solution and carry out the implementation, creating a roadmap together with IT is an excellent starting point. In the end, the IT team will need to work tightly with the solution provider as well as all the internal stakeholders to ensure that the solution fits into the current setup, especially when corporates still tend to use do-it-all monolithic solutions instead of the best-of-breed approach. When it’s time to get a new solution, it's a good idea to already include IT early in the process of choosing a solution provider. There should be a compromise between the departments: you need to make sure that the solution has all the features you need to improve the financial processes, but also that the third-party vendor meets all the requirements of IT, especially when it comes to system and data integrations, data transformation, bank connections, as well as security and compliance. 

Going from do-it-all to best-of-breed solutions cannot happen without IT 

Naturally, all treasurers want the best solutions that will help with challenges like payment centralization and automation, payment security and compliance, or achieving better cash visibility and cash flow optimization. 

The treasury function has also been impacted by digitalization during the last decade. Corporates have started to move away from monolithic do-it-all on-premise solutions and looking for SaaS solutions that can be integrated end-to-end and have the scalability and flexibility to work well with all the different technologies. The best-of-breed approach means that companies are no longer reliant on a single solution provider, but instead, they choose solutions from a variety of vendors making sure that the software meets all the requirements. 

When working with the IT department, IT needs to understand the role of the financial functions, the treasury processes, and the data in-depth and how it will be utilized. Besides these factors, it’s imperative to understand how the different financial functions work together, what systems (e.g., enterprise resource planning systems) they are using and how these systems need to work together to help create the best possible solution setup. This will help your colleagues in IT to best identify what integrations, data transformations, or bank connections will be necessary and create a project plan. 

The four main focus areas of IT when working with treasury and finance 

The cooperation with IT should start with creating the initial roadmap so all parties align on the priorities and timelines. Only after that it’s time to move forward to select solution providers. IT plays a major role in delivering integrations, establishing bank connections and maintaining them, they ensure the data availability and security and compliance of all the solutions in place. 

1. Integrations 

Integrations are perhaps the most important part of getting the best-of-breed approach work for you. Whenever you choose a new solution, integrations need to be set up between the new solution and other systems to enable the data-sharing between them. While APIs have been simplifying the way how systems communicate with each other, when there are still legacy systems and data formats in place, your IT personnel will definitely need to support the solution provider to be able to connect to the endpoint and map the data accurately for data transformation. 

2. Bank connectivity & maintenance 

The treasury department typically works with multiple banks, often across the globe. Maintaining the relationships with the banks is essential, not only to be able to tell the available cash balance on each account, but to be able to easily transfer funds from one account to another for short-term liquidity. 

With existing bank connections, not only liquidity management gets easier, but it also supports payment automation and reconciliation to understand historic, current, and future cash positions to maximize liquidity yield. 

The biggest challenge of working with banks is often the many different data formats they are using as every different format will require a separate data mapping project. Varying data standards used by banks are still very common despite all the data standardization efforts during the past two decades. Working with bank connections requires maintenance because if the banks make changes at their ends, it means that the IT team will need to implement changes too. This maintenance work can be avoided when you outsource your bank connection setups to a vendor that will also maintain them in the future.  

3. Data availability 

Real-time data is a great promise that businesses want to exploit as much as it’s possible. The integration with all financial and enterprise resource systems as well as banks is the first step to make sure that all data is available where it’s needed, preferably in real-time.  

Nevertheless, in an environment of multi-banking and multi-country, real-time data may be a stretch, as different banks and countries have different rules and regulations. The work that IT does for interconnecting all the different solutions is the prerequisite for having the correct data available in the systems where it’s needed to utilize them for cash flow forecasting and gaining more visibility of cash inflows and outflows. 

4. Managing security risk & compliance 

Cybersecurity and compliance are constantly gaining more attention from IT teams and it’s no different either when they need to find and implement treasury and finance solutions. One of the main concerns when it comes to financial departments is the possibility of payment fraud – both from external and internal parties. A strong alignment with your IT team is essential to ensure you have the tools and processes for stopping fraud from happening. 

Treasury, Finance, and IT: How to move forward?  

It is unrealistic to think that everything can be modernized and implemented in one go. Companies that understand that they need to have a good plan prepared in collaboration with IT will see the most success in the future.  

The departments need to plan together for both the short term and long term and identify what solutions they need and why, what are the strategic priorities of the company, what solutions would make the daily work of the treasury department easier, what technology is already available and what should be added. The solutions that a company needs largely vary based on the industry or the strategic objectives. 

Working with a cash & treasury management solution provider 

Besides your own IT team, there is one more important stakeholder you need to consider when you are planning your cash and treasury management roadmap. When you choose a cash and treasury management solution provider to work with, you will also get an extension to your internal IT team. Many vendors provide support with integrating the new solution into your existing financial and enterprise resource planning systems set up and they have an excellent understanding of treasury and finance processes. Some vendors also provide bank connectivity as a service via host-to-host connections, local connections, or the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network, so that you can rapidly connect with all the banks you are working with, and your IT team does not need to worry about the maintenance of the connections.