Instant Treasury Use Cases: Cash Management at Midnight?
How companies benefit from real-time payments and balance reporting
Real-time technology is on the up and making its way into corporate finance departments. But what would “instant treasury” really look like? And how are companies already benefiting from real-time technologies? In this blog post, we take a look at some use cases.
Daily treasury operations now
The everyday business of finance departments today looks comparatively peaceful despite strict regulatory requirements and global political uncertainties. In the morning, the smaller activities driven by cash management and payments are carried out, such as collecting group-wide account statements for the global financial status, short-term planning and cash positioning. The afternoon is built around work on long-term and strategic planning, and activities relating to recurring tasks such as netting or reporting. A treasurer’s life is characterized by relatively uniform waves of activity which depend on the data processing rhythms of the banks.
Daily treasury operations in the future
By contrast, the daily life of a treasurer in the near future will not follow a neat, regular curve. Real-time technologies – especially in the area of payments – are accelerating data processing and enabling information relating to any status changes to be available more quickly. So, will treasurers soon find themselves in their bedrooms at midnight checking their balances and initiating cash positioning transfers? Will people have to be available and active 24/7/365, a slave to technology?
Instant treasury raises questions
Although this vision of the instant treasurer may seem exaggerated, real-time payment systems and end-to-end notifications throw up a wide range of very real and engaging treasury questions. For example, on which day will an instant payment be booked if it crosses time zones? Or at what time of day around the world are sweeps carried out for cash pooling arrangements? And then there is the issue of what impact different national holidays will have on a global “instant treasury.”
Real-time technologies available and their application in corporate treasury: instant treasury use cases
Back to the present. The infrastructure for instant treasury is gradually taking root. Real-time payments are already possible, at least in BELLIN’s system, with the integration of SEPA Instant Credit Transfer and SWIFT g4C. So, let’s look at some instant treasury use cases that demonstrate how companies can already benefit from real-time payment systems and end-to-end notifications.
Efficient use of working capital by making real-time HR and supplier payments
Treasurers’ core daily or monthly business is to instruct bulk payments from the HR, ERP or treasury management systems. Without real-time payment systems, treasurers are required to issue payment orders with one to two days’ leeway to ensure that the credit is actually made to the recipient by the due date. Things are different with real-time payment orders. In this case, treasurers can schedule payments to coincide precisely with the due date as sums are credited on the same day. Payment can be extremely quick: within 15 seconds with the SEPA Instant Credit Transfer scheme, or within minutes with the global cross-border SWIFT g4C technology. Treasurers with instant treasury technologies no longer need to factor in transit time and can make optimum use of their working capital.
Avoidance of fees and interest by using real-time account balance reporting
Companies with significant intraday cash inflows and outflows benefit greatly from a treasury management system which receives reliable, real-time information. Without real-time technology, companies can automatically retrieve account balances via the TMS on a regular basis but, depending on how often these figures are requested, this can incur considerable costs, puts unnecessary strain on the payment infrastructure and provides the account balance only at those points in time.
Instant treasury real-time payment systems use APIs to provide information on the status of payments and thus update users immediately on changes to account balances. Treasury decides when and how often the information on each individual account balance is refreshed. An instant treasury finance department can view account balances in each currency directly in the system, eliminating unnecessary conversions and interest and enabling it to make transaction decisions based on sound, up-to-date information across the group.
More accurate reporting by eliminating cash in transit and using end-to-end status information
Real-time payments which facilitate the lightning-quick transfer of cash to the beneficiary make cash in transit a thing of the past. Instant treasury technologies enable balances to be determined at key dates accurately down to the last cent; outstanding transactions do not have to be taken into account.
The available real-time payment systems – SEPA Instant Credit Transfer and SWIFT g4C – offer not only fast processing but also end-to-end status information. If this information is integrated into the TMS, as is the case with BELLIN’s solution, it is fed through seamlessly to the treasury management system. For cross-border payments using SWIFT in particular, FX rates and fees calculated by the banks involved can be identified and evaluated at the click of a button. For the first time, it is possible to have a truly precise evaluation, not to mention an enormously simplified process for determining the values involved.
The outlook for instant treasury
If you want to leverage the potential of instant treasury, analyze the payment and messaging processes at your company now. You can use real-time payments in integrated systems across the company to optimize working capital, improve the efficiency and cost-effectiveness of cash management, and achieve more accurate and most importantly significantly simplified reporting. You can also consider, for example, how you can use real-time payments to enhance customer, supplier or employee satisfaction and differentiate yourself from your competitors. What are you waiting for? The future is now!