Cashing in on optimisation

Careful planning significantly boosts the chances of a cash management optimisation project being implemented successfully.

Formulating a comprehensive strategy is the first – and perhaps most important – step a treasury team should take to ensure that a cash management optimisation project delivers the maximum benefit to the organisation.

In this context, there are a number of important considerations that should be part of any project that aims to optimise cash management by using new bank connectivity solutions.

First and foremost, the treasury team need to determine the actual value of the proposed activity to the company. This cash management value statement should be supported by management.

Whether the value lies in reduced capital costs, mitigated risks, more efficient payment processes, a less complicated IT landscape or any other area, companies that are unable to articulate the bottom line value of a project should be very hesitant about embarking on it.

Once the real business value has been identified, the company needs to consider at which managerial or hierarchical level in the overall company structure this value improvement can best be managed. In other words, what is going to be the cash management operating model?

This question can only be answered by identifying

• What needs to be taken care of centrally
• What can be done at operating company level
• What information should be visible what operational activities need to be executed and where

These and other issues require careful consideration and a robust decision-making process.

From there, the ideal banking portfolio can be derived and the company can determine the banking features and functionality it requires, why these features and functions are necessary, and where they are needed.

This assessment should lead to a minimally required collection of banks and accounts.

Only after this stage has been completed should the company start thinking about actual connectivity solutions and consider questions such as:

• In which system are we going to manage our cash and execute payments?
• Do we also need more treasury oriented functions like liquidity forecasting or managing our currency risks?
• If no system is in place yet for the management of payments or the treasury functions should we consider sourcing one service that provides these together with the bank connectivity?
• Which dashboards and user interfaces do we need?
• Which APIs and/or other interfaces do we need to install?

The next question is whether the company should undertake the project internally.

This is feasible in scenarios where a corporate possesses the required internal skillsets and competencies and has a simple overall banking and company structure. However, if the business has a more complex banking landscape and/or company structure, it is advisable to work with a specialised partner.

Finally, the company should ask how it will be able to optimise the benefits of Open Banking in the future. Corporate treasurers need to recognise that they may only execute such a project once or twice in a lifetime, whereas external partners for whom this is a core business will have extensive experience and insights. In that case it is essential to chose a partner you are confident will be able to service your future Open banking needs without requiring a difficult migration for you.

In the final blog in this series we will offer guidance on how to identify the right bank connectivity partner for your company.

A reality check on Open Banking

To know more about the benefits of new developments in bank connectivity for treasury and cashmanagement you can download our white paper. It offers insights on how corporate treasurers and cash managers can avoid pitfalls.