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The 5 problems of treasury management


Before delving into the main problems that financial directors, treasury managers, and accounting personnel encounter in current treasury management, it is important to explain a little to contextualize what treasury management is, and what phase it is in. currently.

In our view, treasury management has never been in style. This is perhaps possible since it was associated with manual and tedious processes that nobody wanted to do; precisely derived from the scarcity of technological innovation in this space. Banks and ERP accounting systems left treasury management aside, focusing on other types of functionalities and needs of financial teams.

However, today this is changing. The pandemic forced us all to stay at home and work remotely. This created an immediate need for innovation in the payment and treasury arena. In the United States, where more than 50% of payments between companies originated through paper bank checks, they had to adapt to the new reality from one day to the next. In Europe, where the use of checks is less frequent, the digitization of payments between companies was also inefficient, but somewhat more advanced than in the United States. However, the new forms and methods of payment that have emerged in the United States make the perception of the methods used in Europe even more obsolete. Today in the US, it is already possible to make one-click bill payments through external non-bank platforms while in Europe it is not yet possible. The evolution of Open Banking is forcing Europe to open up, however, there is still a long way to go.

What is clear is that treasury management, payment and collection management, need a clear innovation revolution, which will take the sector to where it belongs, and take it out of the middle ages, which is where it is still in the year 2022.

What is treasury management?

Treasury refers to the daily management of money. This concept is more commonly used in the business field and in the field of state finances. Thus, the money management department of the United States is called “US Department of Treasury”.

In the business field, the concept of treasury management corresponds mainly to the finance teams that are in charge of managing the existing cash inflows, outflows and balances. That is, the collections, payments and the existing bank balance. In addition, these tasks, which could be defined as basic, can be extended to more complex and sophisticated concepts such as debt management, obtaining new sources of financing, credit risk management, interest rates or exchange rates. This set of functions will depend on the type and size of the company, since the treasury management of a bank is not the same as the treasury management of a store. Both the size and the complexity of this vary greatly from one business to another.

The 5 problems of treasury management

As we said, the treasury and finance department of small and medium-sized companies, even of large companies, encounters great digitalization problems. These departments are currently stuck in the past, and that is why their financial teams allocate many resources to manual, tedious and inefficient tasks, which ultimately do a lot of damage to the morale of the companies’ finance staff. If all these processes are improved, financial teams could spend much more time analyzing and better understanding the company’s trends than closing the accounts for the month and carrying out tasks with little added value.

It is true that the problems of small and medium-sized companies are different from the problems of large companies. Large listed companies generally have treasury platforms, a niche where these types of platforms do exist. However, its implementation in this type of company costs millions of euros, and its subscription, too. It is true that, despite the fact that they exist, their technology is still old and we would even say that it is also obsolete. Partially fixes treasury issues, but with old-fashioned connections and integrations. In the field of small and medium-sized companies, the situation is quite different. Today there are not even treasury platforms yet.

Beyond these structural problems that we mentioned above, we will now proceed to discuss some of the problems that treasurers and finance personnel encounter in their day-to-day activities when managing their companies’ treasury on a daily basis.

(1) Access to multiple banks and decentralized bank accounts

Most companies today, especially as they grow, have more than one bank account at different financial institutions. This is a big operational problem for companies for several reasons. First, they have to access multiple banking interfaces every week, which means having multiple accounts and user credentials, and not having a consolidated view of their finances. On the other hand, one of the typical tasks of those in charge of accounting is to reconcile the movements and extract the bank movements of each month. This implies entering each of the bank accounts and downloading the corresponding files one after the other. In addition, since each bank is different from the others, this means that each one has to learn how each bank works, and it must be said here that, in addition, they are not the most intuitive.

(2) Decentralized and manual receipt of invoices

One of the big problems of the cash out process, that is, of the invoice payment process, is that there is a document involved, which is the invoice. Unlike Peer to Peer (P2P) payments or between individuals, where you simply have to connect two parties for the payment. On the business side, there is the invoice involved, which slows down the payment process, since it must be reviewed, registered in the accounting systems, approved, etc.

Today it is very typical for companies to have an email address called where they receive invoices from suppliers. However, the process does not end here, but this is step number 1. Then you have to download the email invoice, save it, open it and extract the information either to Excel or to the accounting system. Everything manually. A long, tedious and inefficient process that makes financiers waste a lot of time in this process, which also adds value. In addition, it should be noted that since the process is completely manual, there is a great risk that the information is extracted with errors. This can lead to making incorrect payments to suppliers that did not correspond, or amounts in error, or even making duplicate payments to a supplier, since there are no verification systems either.

(3) Execution of Payment by outdated methods

Hoy en día, sorprende cómo hacer un pago en las interfaces bancarias es un proceso tan anticuado. De hecho, no existe el concepto de pagos de facturas o de pagos de nóminas. Las interfaces bancarias simplemente emiten transferencias, sin importar quién es ni el emisor ni el receptor. Lo único que los une es un código arcaico. Además, a la hora de hacer transferencias desde los bancos, existen dos formas principales. En primer lugar, y la más ineficiente, es la vía más común. Muchas empresas van a su sección de transferencias anteriores, y abren una transferencia emitida, y proceden a actualizar la fecha del pago, la cantidad, la referencia, el concepto, etc. Obviamente, este proceso es totalmente manual y tiene un gran riesgo, y si además te toca hacer 100 pagos de facturas, este proceso puede ser totalmente ineficiente y tedioso.

The other common way is by importing an XML file to the bank. It is very typical, especially for companies that are larger and have an accounting or ERP system, to export a payment file that they upload to their bank, or to the multiple banks from which they want to make the payment, and once uploaded , a day or two is executed. In the case of small companies, this type of file is also quite common, but instead of being exported from the ERP, it is usually sent by the agency or accounting advisor. It should be noted that this is usually the case with payroll, since, normally, the manager does not decide on the company’s payments.

(4) Disconnection between banks and the rest of the systems

One of the main problems with banks today is that they are totally disconnected. By this we mean that they are totally isolated systems, and that they do not communicate with or with another system, such as accounting systems or human resources software. The easiest way to see this disconnect is simply to analyze how these systems manage to connect today; through XML or Excel files. That is, a transfer payment remittance file or a payroll payment remittance file. That’s the way those systems are “wired” today. For us that is not connecting. The consequences of all this is that a transfer that you make in the bank, then you have to go to the accounting system and mark it as paid or leave it registered again. The same goes for any type of transaction that occurs at the bank. Then you must go to the corresponding system and reflect it again. That is why, as we said, for us the disconnection between banks and systems is one of the biggest problems we find in today’s financial world, and it seriously affects companies having to duplicate tasks.

(5) Null visibility and forecast of treasury

Finally, another of the recurring problems of treasury management is the lack of foresight. In this sense, banks generally provide little future visibility of cash inflows and outflows because they do not have such information within the system. Here, therefore, we find a couple of cases. In the first place, that of those small companies that delegate accounting to an agency or external advisor. Therefore, since they do not even manage the accounting software, they do not have any information for forecasting. Therefore, they are currently neglected. On the other hand, medium and large companies that have accounting or ERP systems do not have that degree of visibility either, because normally these tools have focused more on the accounting function, and not so much on the financial reporting function. That is why all financial departments are neglected in this area. In addition, accounting systems are used to provide static and past reports, and do not have the ability to provide future reports, such as the cash forecast.

To counteract this, what typically happens is that someone in the finance team keeps an Excel file on the side with all future payments listed, thus monitoring pending future payments. Some of them produce treasury forecasts in the form of a graph or cash flow, but as we can imagine, this is very tedious and for the result to be good it is necessary that, in the team, someone is very good and detailed operating in Microsoft Excel. .

Snab as a Treasury Tool

Snab is a pioneer treasury cloud platform in Europe, which helps precisely in each and every one of the functions and tasks related to cash management and treasury management and which precisely solves all the 5 problems that they face. today’s financial teams. Snab acts primarily as a bank aggregator, allowing companies to access all their bank accounts at different banks and in different countries with absolute independence. Secondly, Snab serves as a tool for receipt of invoices, scanning, and automatic registration of the same. In addition, Snab serves as a payment and collection management tool, giving full control and visibility to the accounts payable and receivable functions, since the tool allows you to pay and collect in one click. Snab not only shows you alerts and helps you monitor the status of payments and collections, but also generates treasury forecasts in real time, based on both historical and future information. Lastly, Snab is synchronized with the main ERPs in the market, which eliminates the disconnection between systems that we mentioned earlier.