Connect with us

Finance

OPENING UP THE CASH MANAGEMENT OPPORTUNITY

CASH MANAGEMENT

James Buckley, Head of Finacle Europe

 

In recent years, payments and cash management have seen hectic action, thanks mainly to the advances in the treasury management capabilities of the corporate world and the move towards real-time supply chain operations in several economies.

This is progressing more so, due to an era of proprietary apps, private APIs and close networks, banking which is becoming increasingly open with developments like open API, Fintech collaborations, cross-industry partnerships, regulatory changes like PSD2 etc. These developments impact all areas of banking, and corporate banking too needs to be digitally-enabled and API ready. Multi-bank cash management, which today takes hours or sometimes days to process, is set for a massive transformation with APIs and will transform the way cash management works today.

There is also a regulatory impetus in the form of Open Banking, which is transforming the way companies, large and small, run their business operations. This is an opportunity for banks to earn a profitable fee income on their cash and liquidity management services, provided they make the right investments on time.

 

What are these investments?

Unlike its retail counterpart, corporate banking has been slow to adopt digital technology across its operations. Corporate banking users are exposed to convenient banking on mobile and other channels as retail banking customers in their personal life, and expect similar experiences from their corporate banks. This is creating a gap between corporate banks and their clients, who expect a digital, self-service “retail banking-like” experience that allows them to control not only banking transactions but also the privileges and limits of different treasury roles.

In addition to investing in digital technologies that can produce such an experience, in an Open Banking world corporate banks would need the capability to aggregate clients’ financial positions across all their banking relationships in different banks. This capability is (by and large) missing at present.

Most businesses juggle multiple banking relationships and source their cash requirements from more than one bank. Treasury managers lack a consolidated view of their organisations’ cash and liquidity positions across bank accounts, which prevents them from managing their resources efficiently. But now that Open Banking has enabled corporate banks to easily access each other’s data, it is time to invest in the latest cash management solutions to offer clients a consolidated view of liquidity, in real-time.

In contrast to SWIFT MT messaging which imposes significant costs and interbank agreements for data sharing, the Open Banking proposition allows – subject to conditions – even small banks and FinTech firms to access a universe of customer and transaction data. New players, such as FinTechs and challenger banks, have been quick to capitalise on the opportunity, leveraging their formidable technological prowess to provide value added services, such as cash flow forecasting. Incumbent banks must get in the game right away if they want to retain their market position.

Early movers can seize the advantage by providing services that go beyond simple cash management and forecasting, such as analyses and recommendations on next best actions.  For example, they could build out a model comparing the best approaches to sweeping, netting and covering cash positions with traditional methods of covering shortfalls (company loan, overdraft) to enable treasurers to make better informed decisions.  By providing this kind of advanced functionality, a bank could attract a larger share of its clients’ cash and liquidity management business, hollowing out the share of the other banking relationships.

Corporates also want retail-like real-time payments and faster payment systems. Another area where corporates have invested heavily is reconciliation. Adoption of solutions like virtual accounts can help corporates digitize and manage cash management more efficiently. Now driven by the challenges and opportunities in modern corporate banking combined with regulatory changes, “Virtual Ledgers” are making their way into the corporate banking space. Corporate treasures focus on factors like efficiency, fund optimization, cost reduction, and STP operations. Rationalization of banking relationships is a key area of focus for businesses and virtual account management solutions allow corporates to do this effectively. With virtual accounts and on-behalf-of operations, the benefits are manifold – reduction in cost, risk and administration, easier liquidity management etc. Moreover, onboarding/opening of virtual accounts is much simpler compared to opening new accounts which comes with its set of KYC processes et. al.

Although plurality of corporate banking accounts will remain, the bank that offers services that add the most value will garner the largest fee income from the customer. In an Open Banking, real-time environment abounding with digital technologies, the possibility to innovate such services is virtually endless.

 

Finance

HOW TO MANAGE YOUR CASH FLOW IN UNCERTAIN TIMES

While the world is constantly changing, probably at a faster pace now than ever before, businesses need to manage cash flow and costs to drive success in uncertain times, says Matthew Thorpe, partner at Haines Watts Essex.

 

Managing people and expenses

There are certain costs that you just can’t avoid as a business – to keep your operation running seamlessly, but scrutinise the detail and cut down on any non-essential expenses. Check things like your SaaS subscriptions and look out for costs that auto-renew and if you do cancel, remember to also cancel your direct debits too.

You might want to put a freeze on hiring new people, but ensure that other roles and responsibilities are clearly and efficiently assigned across your team. The Coronavirus Job Retention Scheme (CJRS) has been introduced by the Government to help UK employers access support to continue paying part of their employees’ salary to avoid redundancies. Affected employees are classed as “furloughed workers”.

Once furloughed, the employee cannot work or they will not qualify for the scheme. For businesses that perhaps need to go further, there may be some roles they don’t need any more, but businesses should work sensitively with people to manage this.

 

Cash is king

In uncertain times, owner managers will need to keep operations going to ensure financial stability. You should look to manage debt more efficiently by negotiating extended payment terms with creditors. You could also renegotiate loans for longer repayment terms to give yourself a lower monthly payment, helping the business to set some cash aside each month.

 

Daily forecasting

As a business owner, you need to create a cash flow projection and update this regularly if you are to improve things. You can do this using financial information to create a picture of how the business will look in the next 12 months. The forecast needs to show revenue sources and expenses, which will show the ups and downs of business income and can be used to make sure that enough finance is in place.

 

Good house-keeping

While banks and other finance providers recognise that the cashflow of a business may be disrupted by the impact of Covid-19, they are still going to want to see that you are viable and continue to trade in these uncertain times. Make sure your business is organised and don’t let disorganisation cause unnecessary issues. You can evidence this by having detailed forecasts; current order books and projections (as best as possible).

Having instantly accessible, accurate financial information allows you to plan effectively, spot issues before they become problems and manage your money in the most efficient and rewarding way.

 

Embrace technology

Software is now incredibly user-friendly and accessible from anywhere. For a business owner embracing the technology, this means:

  • Invoicing can be done instantly when a job is complete, emailed to the customer with an easy to use link to a payment platform.
  • Comparison websites can automatically monitor and help maintain lowest cost for things such as light & heat, insurance etc.
  • Technology can be used in place of face-to-face meetings. It can also enable them to adapt production lines to different demands.

All of these things and more, used properly, can make managing your business finances quicker, easier and often cheaper.  You will also be able to bring clarity to where your business stands and prepare for the next steps.

 

Continue Reading

Finance

HOW FINANCIAL SERVICES CAN GET TO GRIPS WITH RISING SUPPLY CHAIN RISK

FINANCIAL SERVICES

By Alex Saric, smart procurement expert, Ivalua

 

UK businesses have never been more dependent on their suppliers to help them deliver goods and services to their customers. Be it retail, manufacturing or financial services, suppliers have a vital role to play when it comes to innovation and meeting customer expectations. However, as supply chains become increasingly global, businesses are potentially exposing themselves to more risk than ever before.

This is especially true in financial services. Whether it’s the impact of geopolitical events like Brexit or global tariff wars, supply shortages, security or the businesses impact on the environment, an organisation’s failure to identify and mitigate risk could see millions wiped off its share price, and its corporate reputation left in tatters. Risk can present itself anywhere and at any time, so financial services firms must be ready to address it. However, many simply don’t have the ability to evaluate suppliers for risk factors, leaving them wide open to business operations being hindered, or being slapped with financial penalties.

 

More suppliers, increasing risk

One reason why financial services firms aren’t able to evaluate suppliers is the breadth and scale of today’s supply chains. For example, French oil company Total said in in a recent human rights briefing paper that they work with over 150,000 direct suppliers worldwide. This is just one example of how large and varied the roster of partners has become. Research from Ivalua has found that financial services businesses on average are working with around 3,600 suppliers annually, which is evenly split between UK-based and international partners. That number is expected to rise, with 60% expecting the number of suppliers they work with to rise.

The expanding nature of suppliers is only going to expose financial services firms to more potential risk than ever before, yet 78% say they face challenges gaining complete visibility into suppliers and their activities.

A lack of supplier visibility leaves businesses unable to identify and mitigate against supply chain risk. In fact, almost three-quarters (73%) of financial services firms have experienced some type of risk during the last 12 months. These include; supplier failure (43%), environmental impact, such as pollution or waste (35%) and supply shortages (45%). Supply shortages can be among the most damaging to a business, as seen by both the KFC chicken shortage which closed stores, and the summer 2018 CO2 shortage which caused companies such as Heineken and Coca-Cola to pause production, impacting supply across Europe during the World Cup.

 

Businesses unprepared for the worst

One way financial services firms can better prepare for risk is to ensure they know what to plan for to reduce the impact. However, whilst some say they have a contingency plan in place to deal with risk, many of them are unprepared. Financial services firms admitted to not having comprehensive and deployed contingency plans in place to prepare the supply chain for risk such as; natural disasters (68%), supply shortages (67%), geopolitical changes (65%), environmental impact (63%), supplier failure (62%) and modern slavery (50%).

In order to effectively prepare for these types of risks, it’s vital that financial services businesses fully understand their suppliers, their business environment, global variations in regulations, geopolitics, and a host of other factors. But for many, there are multiple challenges when it comes to gaining this understanding. A prevailing factor is an inability to gain visibility into all suppliers and activity because supplier management data is stored in multiple locations and formats, making insights difficult to access. This leaves teams unable to review supplier activity and assess compliance.

 

Making supplier management smarter

It’s imperative that financial services businesses are able to respond or prepare for supply chain risk. Clearly, much more needs to be done to ensure they have complete visibility of suppliers, especially in an era where regulators can levy heavy fines for GDPR breaches and scandals spread in minutes over social media. These types of risks can be reduced in the future if procurement teams have a 360-degree view of suppliers which will help with contingency planning and risk management.

For example, in the instance of supply shortages, plans could be put in place that identify alternative suppliers to ensure any shortages do not impact end users. This type of supplier collaboration is paramount when it comes to managing and mitigating against supplier shortages. When it comes to regulations, financial services firms can’t allow a lack of visibility to limit their ability to ensure all suppliers are compliant.

To do this, teams must take a smarter approach to procurement that gives complete visibility into suppliers throughout the supply chain. This will allow financial services firms to identify and plan for risk, reducing the potential damage, and ensuring they are working with and awarding business to low-risk suppliers. Supply chain risk is rapidly becoming an overarching concern for financial services firms, but by providing the ability to assess suppliers, they will have all the insights they need to mitigate the impact on business operations.

 

Continue Reading

Magazine

Partner Events

Trending

News2 hours ago

CUSTOMER CARE TODAY WILL BUILD RESILIENCE FOR FUTURE CRISES

Cathal McGloin, CEO of ServisBOT writes, “The COVID-19 pandemic has created major spikes in calls to financial sector helplines dealing with customers...

Banking1 day ago

THE CO-BRAND CREDIT CARD MARKET – SINK OR SWIM

By Chris Vinnicombe, VP Financial Services at Acxiom The co-brand credit card market is the result of the partnerships between...

Finance1 day ago

HOW TO MANAGE YOUR CASH FLOW IN UNCERTAIN TIMES

While the world is constantly changing, probably at a faster pace now than ever before, businesses need to manage cash...

News1 day ago

NEW IVALUA STUDY SHOWS TECHNOLOGY CHALLENGES ARE HINDERING PROCUREMENT TEAMS FROM ACHIEVING BUSINESS OBJECTIVES

Lack of system integrations and actionable insights are stopping organisations from accurately measuring performance   Ivalua, a leading provider of global...

Technology1 day ago

WHY DIGITAL TRANSFORMATION IN FINANCIAL SERVICES IS ABOUT CULTURE FIRST, TECH SECOND

Stuart Templeton, Head of UK at Slack    In today’s world, there’s no such thing as a ‘non-tech fin’. Every...

Business2 days ago

STOP THE CONFUSION: HOW TO KNOW IF YOUR BUSINESS MAY BE INSURED AGAINST COVID-19

By Alex Balcombe, Partner at Harris Balcombe   The last few weeks has seen businesses in hospitality, tourism, retail, leisure...

Top Stories2 days ago

BRAVE NEW WORLD: A FUTURISTIC VISION OF PAYMENTS

James Booth, VP, Head of Partnerships in EMEA for PPRO   Over the last ten years, the retail e-commerce ecosystem...

Interviews2 days ago

A PROPTECH FOUNDER’S BEGINNING, THE START OF KLEVIO AND HOW ACCESS-TECH IMPROVES FACILITIES MANAGEMENT

An interview with Klevio’s CEO and Co-Founder, Aleš Špetič    What is Klevio?  Klevio is a smart intercom that allows...

COVID-19 COVID-19
Wealth Management2 days ago

HERE’S HOW YOU CAN LEARN TO TRADE RISK-FREE DURING THE COVID-19 MARKET CRASH

Trading app BullBear has launched new features to support budding investors looking to hone their skills against the backdrop of...

INSURANCE INSURANCE
Top Stories3 days ago

ENTERPRISE BLOCKCHAIN: DRAGGING INSURANCE OUT OF THE DARK AGES

Ryan Rugg, Global Head of The Industry Business Unit at R3   The history of insurance traces back to the development...

BIOMETRIC BIOMETRIC
Technology3 days ago

DISPELLING BIOMETRIC MYTHS AND MISCONCEPTIONS

By Lina Andolf-Orup, Head of Marketing at Fingerprints Gangsters cutting off enemies’ fingers to access secret locations and spies lifting...

Videos3 days ago

FUTURE FX PROMO

Videos3 days ago

FutureFX Profile

BANKING BANKING
Banking6 days ago

FOUR WAYS OPEN BANKING AND AI WILL REVOLUTIONISE ACCOUNTANCY

Ed Molyneux, CEO and co-founder of cloud accounting software company, FreeAgent   It’s been just over two years since the...

FINANCIAL SERVICES FINANCIAL SERVICES
Finance6 days ago

HOW FINANCIAL SERVICES CAN GET TO GRIPS WITH RISING SUPPLY CHAIN RISK

By Alex Saric, smart procurement expert, Ivalua   UK businesses have never been more dependent on their suppliers to help...

MARKET DATA MARKET DATA
Wealth Management1 week ago

TWO TO TANGO? MARKET DATA AND OPINIONS IN INVESTMENT MANAGEMENT

Sebastien Lleo is Associate Professor of Finance at NEOMA Business School (France)   Analyst views and expert opinions matter. They...

EARLY RETIREMENT EARLY RETIREMENT
Wealth Management1 week ago

AN ULTIMATE GUIDE TO TURNING YOUR EARLY RETIREMENT DREAM INTO A REALITY

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ.  ...

FINANCIAL SERVICES FINANCIAL SERVICES
Technology1 week ago

WHAT EVOLUTIONARY AI MEANS FOR FINANCIAL SERVICES

by Babak Hodjat, VP of Evolutionary AI at Cognizant   Many banks and other financial services institutions (FIs) are beginning...

ANALYTICS ANALYTICS
Business1 week ago

HARNESSING ANALYTICS IN THE FIGHT AGAINST FRAUD

By Anna Lykourina, EMEA Fraud Analytics Expert at SAS   In the past, the fight against fraud has been a...

ONESPAN ONESPAN
News1 week ago

ERSTE BANK HUNGARY IMPROVES AND SECURES THE REMOTE BANKING EXPERIENCE WITH ONESPAN MOBILE SECURITY

Leading Hungarian bank deploys OneSpan’s Mobile Security Suite to one million customers to make mobile banking convenient while fighting fraud...

Trending