A key feature of sound treasury management—the smooth integration of planning, tracking, reporting, reconciling, and forecasting—went right out the window during COVID-19. Treasury tasks became challenging to perform and required a different approach with new solutions.
The rush to implement remote working models meant treasury operations were increasingly dispersed outside of corporate headquarters. This change required rethinking processes within consolidated treasury management.
“When sales are going through the roof, companies focus on internal controls and process improvement—enhanced working capital strategies aren’t at the forefront,” said H. Chip Spiegel, Director of Treasury Solutions at Bank of the West. “COVID was a catalyst for greater awareness that’s forced treasurers and companies to look for efficiencies within their internal operations as they persevere through this environment.”
Remote work is expected to remain mainstream post-pandemic as more companies adopt hybrid working models. Prior to COVID-19, less than 40 percent of employees were home-based at least one day a week, according to PwC’s US Remote Work Survey, but that level jumped to 77 percent during the pandemic and is expected to remain at 55 percent once the pandemic recedes. Some estimate that 70 percent of employees will be remote at least five days a month by 2025.
“COVID was a catalyst for greater awareness that’s forced treasurers and companies look for efficiencies within their internal operations as they persevere through this environment.”
—H. Chip Spiegel, Bank of the West
Given this new environment, the global impact of the COVID-19 pandemic and the shift to remote workplaces have focused new attention on six key areas within treasury operations.
6 Remote Treasury Lessons Learned During the Pandemic
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The Lines Between External and Internal Risk Have Blurred
Remote work created an immediate need to attend to controls surrounding system access and rapid deployment of hardware outside the office. The treasury risk function was historically focused on transactional risk with clients and suppliers, but that risk expanded to internal cybersecurity controls for the flow of information.
The need for external protections and defensive protocols increased as employees accessed networks and internal systems from an array of external sites. To protect data and systems, additional security parameters like log-in recognition and sophisticated encryption capabilities provided necessary multilayered, risk-based protection.
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Liquidity Is Key
While liquidity has always been a business priority, the pandemic’s impact on production and supply chains, as well as customers and financial partners, profoundly affected balance sheets and liquidity management.
Investment decisions, debt management, portfolio restructuring, and other changes in cash management helped companies prepare for an unknown economic future. In the first six months of 2020, for example, US banks saw the addition of $2.2 trillion in deposits*—three times the amount of any previous comparable period.
While ensuring supply chain continuity is not a treasury function, the aging of receivables and production monitoring feeds directly into treasury planning. These challenges are magnified for companies that sell into the international market or import materials and products.
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Real-Time Reporting Helps Treasurers Keep Up
Faced with a rapidly changing marketplace and economic conditions, companies needed to carefully monitor payments and receivables on a real-time basis.
By incorporating application programming interfaces (APIs), treasurers turned to systems that could access and control real-time updates from anywhere. Always-on account activities that give treasurers the ability to track transactions and data among accounts enabled systems to go beyond the historical method of periodic batch reporting.
Supply chain disruptions required tracking scheduled payments to align with suppliers’ shipping confirmations; to ensure liquidity levels, reliable reporting was used to verify customer receivables. Also, transaction messaging and programmed alerts were key for remote cash management without requiring treasury managers to repeatedly check for updates on payments or pending transactions.
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Unattended Scripted File Reporting Creates Valuable Efficiencies
Many treasurers also leveraged unattended scripted file reporting. This automatically populates reports into the company’s enterprise resource planning (ERP) system and matriculates through the organization in various formats.
This information, in turn, could be distributed without a treasurer’s immediate intervention. Payments received were posted and recorded, and when a receivable was returned, a file was sent to credit and collection, which could then put a credit hold on a particular customer.
This enabled remote management of payment initiation—whether through bank wire, same-day ACH, or check, for example—as long as predetermined authorities and controls were in place. Also, scheduling consolidated reports containing cash balance information, snapshots of payables and receivables, and line-of-credit utilization was also possible.
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Business Forecasts Are a Whole New Ballgame
While many simulation tools exist to create forecasting models, each depends on rich, granular, historical data applied to future expectations. Unlike in past years, generating reliable predictions in today’s environment was problematic.
“Forecasting is probably the greatest source of angst for any treasurer, simply because what was predictable in the past is no longer predictable,” Spiegel said.
Recognizing and reassessing risk components within receivables, as well as incorporating risks on the supplier side, are vital activities in a treasurer’s current role. With the constantly changing business landscape, reliable business forecasting is dependent on the ability to access and update financial information.
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Consistent Communication Is Central to Morale
For any business function that occurs in a remote environment, communication ensures high employee morale. Maintaining contact with managers and direct reports helps ensure that teams can discuss new ideas or issues while helping colleagues feel that they’re valued and supported.
Information sharing has become more important with the recent disruption of key supply chains, customer relationships, and business operations. In-person meetings, impromptu conversations in the office, and the distribution of paper reports are no longer possible at many companies. Because of this, security for internal communications and file-sharing has heightened importance.
Navigating the New Treasury Environment
The treasury function has rarely been this challenging. With so much uncertainty surrounding the global economy, supply chain efficiencies, and customer behavior, the inherent challenges in attending to the traditional treasury responsibilities became larger in just a matter of months.
Establishing secure protocols for report distribution, payments tracking, and the dissemination of financial information helps companies achieve success as they transfer the treasury function to a remote environment.
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