One of the treasurer’s primary responsibilities is cash management - ensuring that liquidity is sufficient to pay their organization’s expenses, bills, and vendors. However, the pace of growth and regulation over the past decade has left financial leaders struggling to keep up, in an area that is now more fundamental than ever for even just the company’s survival.
Improvements in cash management are being aided greatly by technology, specifically automation, which is enabling a more cost-effective and and less labor intensive treasury.
There is now a vast array of sophisticated tools that better facilitate the treasury function. The basic spreadsheets that were traditionally the staple of treasury departments may have dramatically improved, but integrated treasury-management systems and enterprise-resource-planning (ERP) modules are now widely available that provide far more advantages. However, almost half of companies with less than $10bn in revenue still use spreadsheets as their primary treasury system, and they are losing competitive edge as a consequence.
The reliance on spreadsheets is easily explained. The costs can be prohibitive, with advanced systems sometimes costing in excess of $1m. Many treasurers have management systems that include 100s of different spreadsheets, each representing a different system in a different geography. Such complexity leads to errors, even the most minor of which can end up costing a company many times the expense of a sophisticated treasury-management system. Automated systems too eliminate human error. Just one single error in a single cell has a ripple effect throughout the entire financial model. For example, at one North American utility company a simple spreadsheet error for energy auction bids caused managers to enter into unnecessary nonreversible contracts. These ended up costing the firm half of its operating earnings for the quarter, an expense that would have been avoided had they had the right tools in place.
Automation and integrating systems also aids greatly with compliance, providing an audit trail automatically. Spreadsheet programs, although much improved in recent years, do not easily account for the multitude of regulations that differ from region to region, and they do not suit a centralized global treasury. The complexity means that governance is difficult, and companies do not audit spreadsheet programs stringently enough to validate the logic of interconnecting calculations or even the formulas in individual cells.
The difficulty in convincing decision leaders to invest in treasury-management systems is that the value of things like stronger governance, risk avoidance, and better internal controls are difficult to quantify. Ultimately though, companies that lack a unified database and automated systems will suffer.