Should treasurers rethink the value of modern technology?

By Daniel Shaffer July 24, 2015

When competing for a Tour de France win, would a team employ outdated technology and questionably risky practices? Similarly, should business leaders competing for a winning position among their global peers select technology that puts their team at a disadvantage?

Global business leaders face Tour de France-level competition and global financial challenges as diverse and complicated as time trials, hilly climbs and mountain stages, including the grueling and famous climb of Alpe d’Huez. The herculean challenges that finance leaders face are no less technical or wrought with human error: forecasting free cash flow to fund growth; mitigating FX losses; outpacing banking regulations; minimizing financial loss from cyber-attacks are among the many obstacles along the road to success for global business leaders.

Advances in bike racing technology improves a competitive cyclist’s ability to win and impacts the sport of cycling as advancements in financial technology improve global finance leaders ability to support their organization. 

While it may be intuitive that more advanced technology will better serve a professional in any sport or executive function, it’s interesting to compare how two racing bikes from different eras changed time trial finish times for a professional cyclist. In fact, Men’s Fitness did just that with Dale Appleby, an award winning competitive cyclist from Wales, who road two back to back 10K time trials, one with a 1950’s steel frame bike with retro gear and the other with a 2009 time trial racing bike with the latest gear (check out the video here). The purpose of the race is to see what a difference modern technology makes in a time trial.

Dale Appleby finishes his first time trial riding a bike from the 1950s in 18:28:92. According to CyclingUphill, a decent time trial for “for a fit club cyclist is to break 24 minutes on a standard quiet course,” and record time trial times are in the 17 minute range1, and cites top time trial records such as Michael Hutchinson’s in 2012 at 17:452.  For the second race, Dale Appleby rides a modern racing bike and with its technological advancements, he finishes in 16:25:02–if this were a sanctioned time trial, he’d have a record time. After the race, Dale comments on how much more power he was able to get out of the newer technology. The proof is in the result: in Dale’s case, advancements in technology enabled him to shave off more than two minutes from his 10K time trial compared to using older kit.

Competitive cyclists perform better with advanced technology. For finance professionals, however, only 33% are using the most advanced cloud-based solutions3. When global finance leaders are faced with using spreadsheets or a treasury management solution, where steel frame bikes are analogous to doing business with spreadsheets and modern racing bikes are analogous to doing business with advanced treasury management software, a majority of finance professionals are at a disadvantage.

Why are spreadsheets so common among global corporate treasury teams when a SaaS based treasury management software can be deployed? 

Electronic spreadsheets have been around since the 1970’s. Dan Bricklin imagined a better way to do accounting and invented VisiCalc, the first electronic spreadsheet. At the time, digital spreadsheets solved the kind of problems that were executed by hand much faster. The electronic spreadsheet at the time was a foundational technology that enabled business leaders to better predict and mitigate financial risks by exploring multiple what if scenarios in days instead of weeks. You can hear Dan Bricklin talk with NPR’s Robert Siegel about how spreadsheets enable business leaders to ask more questions about their business and consider more options4. The VisiCalc became popular and other technology companies set out to improve the digital spreadsheet solution based on the original ideas set forth by Dan Bricklin5.

The difference between staying competitive in a road race and staying competitive in global business can be determined by technology. Recent advancements in finance technology enable global finance leaders to create complex analysis of their data, ask what if questions, and solve problems so that their business can survive and grow. Many continue to depend on spreadsheet or old finance technology, ignoring the latest technology advancements that could help their business overcome competitive hurdles. While spreadsheets and older financial technology has some merit for smaller organizations with less complex business, mid-market to upper market organizations face intense competition.

The CFO and global finance leaders have recently been given a mandate to better control fraud, ensure compliance and have heightened global visibility on the organization’s free cash flow.

These functions are managed by treasury and the demand is to be proactive and timely, which requires more advanced and reliable technology. The linchpin of these functions is having accurate visibility into the organization’s cash position. A challenge to successful cash positioning is cost effective and timely access to bank reporting. Bank connectivity can be both complicated and expensive, depending on the number of global banks where accounts are held. Technology can simplify the exercise by automatically integrating bank balance and transaction level detail to accelerate the cash positioning process, raise capital or invest cash more quickly, and drive automation with seamless GL postings.

Additional complexities that global finance leaders manage are changes in regulatory compliance such as FBAR, EMIR, FATCA, and Basel III. Treasurers are recognizing the need to think differently about compliance, investing and financing – and turning to working capital programs such as supply chain finance and receivables financing to drive cash flow and improve liquidity. Unlocking cash and liquidity from the internal value chain is a best practice that is quickly becoming standard, in anticipation of the changing landscape.

As Global CFOs all well know, a strengthening USD, ongoing geopolitical events and increasing cyber attacks to internal payment systems further highlight the importance of a world-class risk management team. The shift in currency valuations such as those in 2015 present challenges for a company to mitigate FX risk while continuing to support their local businesses. The increased threat of “spear phishing” has exposed vulnerabilities that cost companies both hard cash money and impact reputational value. Cyber-attacks are all too familiar and concerning to global corporates as many recent reports will tell you that multi-national corporates are frequently targeted. While there’s not a silver bullet to stop external or internal fraud attempts, hosting your data off-site with bank grade encryption, IP filtering, two-factor authentication and signatory controls puts an organization in a better position. 

Unfortunately, many CFOs are in the mindset that if it’s not broke, it doesn’t need to be fixed. Those who make it to the winners circle may also be those who were able to stay in the race by avoiding pitfalls and outpacing the competition who were using antiquated technology.

References

1 10 mile time trials – training and racing: CylingUphill.com

2 Time trial records: CyclingUphill.com

3 2015 AFP/gtnews Treasury Management System Survey: Association for Finance Professionals

4 How The Electronic Spreadsheet Revolutionized Business: NPR

5 A brief history of spreadsheets: University of Maryland

 

img
Activate Liquidity.

Transform how you use liquidity as a dynamic vehicle for growth and value creation

Find out how