Working Capital Management: Where is my Cash and Why?
By Jan Dirk van Beusekom, Head of Strategic Marketing, Cash Management and Trade Solutions, BNP Paribas
Jan Dirk van Beusekom
Technologies such as artificial intelligence have the potential to make it easier for treasurers to gain visibility and control over their cash. But simply investing in these technologies is not enough to achieve working capital efficiencies – treasurers must deploy them in combination with human skills, while reviewing and upgrading existing processes.
In many ways, the core responsibilities of the treasurer have not changed over the past decade: the main objectives of visibility and control over cash flows to ensure the optimisation of working capital and corporate finance for the company remain the same.
Nevertheless, the operating environment is shifting – bringing with it new opportunities for treasurers to meet these objectives with less manual effort. One of the major factors shaping this new era for working capital management is the Fourth Industrial Revolution, also known as Industry 4.0.
The First Industrial Revolution was driven by mechanisation, and the Second by mass production. The Third leveraged digital tools to automate production. Now, Industry 4.0 is utilising technology to bring digital and physical worlds together, essentially combining the skills of humans and machines to create better ways of working.
Examples of these technologies include the Internet of Things (IoT), application programming interfaces (APIs), distributed ledger technology (DLT), also known as blockchain, artificial intelligence (AI), machine learning (ML), big data and advanced data analytics, as well as cloud computing.
For treasury, these technologies – deployed in the right way and in combination with the right human skills – hold the potential to aid working capital management and to help treasurers answer the question: “Where is my cash and why?” Industry 4.0 technologies could also assist in speeding up the cash conversion cycle (CCC) by increasing visibility and control.
Concrete technology applications
Visibility could be improved in a number of ways, including leveraging APIs to bring information together from multiple bank accounts, enabling a comprehensive view of notional and physical cash pool balances and their details. Consolidated reporting of cash and liquidity positions across cash pools should also be possible from an API-driven dashboard, with the potential to generate a number of different reports, drawing on new data analytics capabilities.
New technologies essentially enable treasury to run a single dashboard for central and local operations, a good example being BNP Paribas’ CashBoard. Having all the relevant information in one place also means that an audit trail of liquidity management activities across the group can easily be produced.
In addition, AI and ML could be applied to help provide more accurate daily and intraday cash forecasts. This could be achieved by drawing on the increased visibility over cash flows via the single dashboard, and greater analysis of projected cash flows thanks to the computation of past data in combination with variables inputted into the AI model by the treasury team.
On top of this Industry 4.0-powered infrastructure, treasurers can add functionalities such as SWIFT gpi, virtual accounts, and mobile banking solutions, to create even further process efficiencies and achieve visibility across all flows – incoming and outgoing – regardless of geography.
Taking back control
From a control perspective, new technologies will enable treasurers to manage and settle their lending and borrowing interest postings online. In addition, global cash mobilisation across geographies and currencies will minimise idle cash. Via the single treasury dashboard, it will also be possible to monitor and manage intercompany term loans, as well as fully automating intercompany interest posting.
In addition, these emerging technology solutions are creating a more self-service banking environment for corporate treasurers, putting them firmly in control. With SWIFT gpi, the Tracker functionality that some banks are making directly available to their clients enables them to see precisely where their payments are, and whether there are any bottlenecks. Similarly, BNP Paribas’ INQUIRO web-based enquiry app reduces the number of payment enquiries and the time taken to resolve any payment delays resulting from compliance issues.
Treasurers will also be in the driving seat when it comes to the choice of payments and collections solutions – from virtual cards and Apple Pay to blockchain-powered routes such as BNP Paribas’ Cash Without Borders project for intragroup payments. As such, in an Industry 4.0 world, treasurers no longer have to play by the traditional rules and constraints of transaction banking.