Midsize Companies Embrace Treasury Technology

Despite the continued economic and geopolitical uncertainty that continues to loom over the world, midsize companies have optimistic perspectives on the future. A recent study by Capital One and Morning Consult of over 400 midsize decision-makers indicated that 86% of respondents are plan to grow, while only 2% plan to downsize.¹

Many organizations are looking to technology to help them meet growth objectives while remaining competitive and protecting the organization against future instability. In this blog, we’ll explore the common challenges that midsize companies are facing, and the treasury technology areas they believe can make a difference.

Cash Management

Cash management has always been a top priority for financial decision-makers with one key objective: optimizing working capital, which is often viewed as an organization’s most important asset. The foundation of this practice includes optimizing shareholder returns and ensuring sufficient enterprise liquidity for business operations and unexpected expenses, while keeping minimal idle cash on hand. To successfully achieve this goal requires access to real-time information on the flow of cash and balances. Additionally, teams must possess the ability to present this information in a digestible format to quickly analyze and identify any potential adjustments that that may be required to ensure sufficient liquidity.

In the past, many companies relied on labor intensive, error-ridden Excel spreadsheets to capture the daily cash position of the organization. However, the risk of human and formula errors, time delays, or even file corruption and data loss in a process that provides crucial, decision-making insights is becoming far too great for most organizations. As a result, today’s treasurers in midsize organizations are looking to automate this functionality, leveraging technology to obtain real-time liquidity insights for more accurate and timelier decision-making.

Cash Forecasting

Continued geopolitical and economic uncertainty is also having an impact on cash forecasting processes. As a result, businesses are focusing more on accurately forecasting liquidity, particularly in the short term, to ensure that they have the right amount of cash available at the right time.³

Historically, many organizations relied solely on P&L forecasting to manage business operations. However, this practice relies on budgets and goals established the year before that are rarely updated to adjust for real-time information, insights, and changes. Detailed insights into weekly or even daily fluctuations in cash forecasting and positioning enables organizations to manage business operations and leverage assets more proactively rather than being more reactive to these changes. This valuable information helps leaders support organizations’ growth and protects against potential challenges related to economic conditions and liquidity shortages.

The result is an impact directly to the bottom-line, such as reducing interest expense from avoiding last minute borrowings, enhancing yield on cash, or ensuring more educated decisions on growth initiatives such as mergers and acquisitions. Technology that can leverage artificial intelligence, historical data analytics and regressions, as well as scenario modeling, is essential to more reliably and timely predict liquidity.

Payments

Payments are another critical pillar that midsize organizations are looking to automate. In a recent Citizen’s Bank survey of over 200 middle-market participants, 100% indicated they have made improvements to their payment platforms or already have plans to do so in 2022.⁴ As the economy continues to experience supply chain disruptions and the demand for real-time payments increases, the speed and accuracy in which payments can be processed is becoming a key strategic advantage.

Additionally, security of these payments should also be closely evaluated by treasurers and CFOs. In 2020, losses by midsize businesses related to internet crimes totaled more than $4.2 billion, the majority of which were phishing scams, non-payment/non-delivery scams, and extortion.⁵ Even more alarming is the fact that 57% of all serious fraud involves an internal perpetrator.⁶ Leveraging a technology platform that automates enforcement of internal controls with auditable approvals and reporting, along with payment confirmations, helps to mitigate these risks.

Accelerating Treasury Technology Adoption

Midsize organizations represent roughly one-third of the U.S. private sector’s GDP and employment⁷, making them even more vulnerable to the impact of the Great Resignation. As a result, many organizations are looking to accelerate their adoption of new treasury technologies to protect themselves from reliance on internal subject matter experts.

However, implementation of these technologies poses another challenge, especially where connectivity between multiple internal systems and external partners may need to be established. Leveraging internal resources is an option that some companies just can’t afford given the limited bandwidth of internal IT and realized skills gaps in management and leadership, data analytics, machine learning, cloud computing, and data science.⁸ Connecting with a technology partner can help to bridge these gaps, ensuring a successful and efficient time-to-value implementation without overburdening internal resources.

Midsize companies have learned the lessons of not being ready to reshape their future with a solid foundation in technology. Automating and standardizing practices to scale without additional overhead, as well as optimizing liquidity management and mitigating risk, are at the forefront of these initiatives. The advancement of technology is making the digitization of liquidity management more assessable to midsize companies, something that was once thought of as a luxury for only larger enterprises.

For further insights, read the fact sheet on Kyriba’s solution for Midsize Companies.

References

¹ https://middlemarketgrowth.org/capital-one-middle-market-bouncing-back/
² https://www.capitalone.com/commercial/insights/middle-market-investment-priorities-and-trends/
³ https://cfoallianceinc.com/blog/cash-flow-is-more-important-than-your-pl/
⁴ https://www.citizensbank.com/corporate-finance/insights/payment-trends-2022.aspx
⁵ https://middlemarketgrowth.org/2022-guide-to-dealmaking/
⁶ PwC’s Global Economic Crime and Fraud Survey 2022
⁷ https://hbr.org/2021/03/the-middle-market-is-stressed-but-resilient
⁸ https://middlemarketgrowth.org/capital-one-middle-market-bouncing-back/