A Fitter Treasury Starts with a Strong Digital Backbone
By Alok Tyagi, Chief Product & Technology Officer, GTreasury
Digital transformation is one of the hottest topics in treasury right now. Although there are many ways that treasury departments can approach digital transformation, whichever path they choose, an important first step is establishing a strong and stable core in the form of a digital backbone.
Anyone who has ever embarked upon a personal fitness regime will understand what it means to have a strong core. It stabilises the body and reduces the likelihood of injury. The same goes in the world of business, and treasury, where the support of a strong ‘digital backbone’ – a cornerstone of a successful digital transformation – can lead to a fitter and, ultimately, more resilient organisation.
There are a number of reasons why a company might pursue digital transformation. But whether it is about improving customer experience, growing revenue, workforce optimisation, risk management or operational efficiency, the development of a digital backbone can be the uniting factor. In fact, without a digital backbone, any transformation risks becoming merely a loose aggregation of technologies. It is a missed opportunity – especially for treasury. Only when a digital backbone is in place to support the entire digital structure can true transformation take place.
Meeting all needs
There are two key aspects of technology that form the digital backbone. The first is access to data that is both fit for purpose and able to flow freely back and forth. This facilitates real-time intelligence, which is critical for correct and timely decision-making. The second aspect is open application programming interfaces (APIs). These are steering the development of modern software towards the formation of scalable and open treasury infrastructures, where core treasury systems can connect to a multitude of internal and external systems.
The twin notions of strong data and connectedness speak perfectly to the needs of the modern treasury. There are multiple roles within every treasury department that have their own day-to-day information requirements – such as treasury operations managers, cash managers, FX traders, analysts, and back- and middle-office managers. Increasingly, the people in these roles must interact with, and meet the wider-ranging needs of, other decision-makers throughout the organisation and beyond, from purchasing and sales through to the CFO, board, banks and investors.
By removing the distinctions – and thus the barriers – between treasury’s front, back and middle offices, through a digital backbone, a unified treasury can serve the entire organisation more effectively. What’s more, bringing real-time financial decision-making to the table through the backbone enables treasury to optimise cash flow forecasting, deliver working capital improvements, implement payments processing efficiencies, and undertake effective fraud management.
But what does a digital backbone look like? And how can treasury implement one?
Not just any TMS
A digital backbone may form around a treasury management system (TMS), however, the traditional on-premises system tends to be monolithic and unyielding and is far from an ideal base for a digital backbone. One of the major challenges is that systems requiring a deep level of customisation, as TMSs often do, make it difficult for treasuries to consider any new technologies, preventing engagement with innovation and the benefits it may bring.
The opposite of the monolith is the truly digital and open TMS, which offers a modular, reusable architecture, built around cloud technology, APIs, and the notion of a highly flexible data model. We take this approach at GTreasury because we recognise that clients’ needs are constantly changing. This allows for continuous innovation because we have small teams working collaboratively towards rapid releases, which are rolled out as soon as they are ready – via the cloud.
The implementation approach for the GTreasury backbone is also markedly different. It can start with one module and grow. The cloud-based architecture and APIs ensure the solution can evolve in line with treasury’s needs – there is no requirement for a ‘big bang’ implementation. And yet the backbone still provides connectivity for all of treasury’s systems, far more seamlessly than could ever be achieved through the monolith.
Fig 1 - Digital backbone
Of course, success of the digital backbone is dependent on certain conditions, such as the right data being in the right place. Where data is siloed, and systems fragmented, it is so much harder for treasury to close the books or report on time, let alone become a valued business partner.
GTreasury’s approach to data and connectivity, in terms of system openness and architecture, ensures the free flow of data from common data tables. This effectively draws from a single source of truth, from cash to risk, avoiding overlapping data and thus removing the difficulties of reconciling that data. Manual re-keying work becomes unnecessary, since the system itself takes care of aggregating the data, meaning that the legwork for treasury is minimal.