Supplement: Technology in Treasury Management Guide
Sponsored by SEB
Accurate cash flow forecasting is key to improving liquidity management across an organization. But it takes cutting-edge technology and client-driven design to truly create a solution that will meet the unique needs of a top-tier corporation. Few have the resources and adaptability to provide such a service. SEB is one of those few.
Driven by exacting blue-chip clients in the Nordic region, an area that is renowned for its innovation and first-in adoption of new technologies, SEB offers an end-to-end solution to analyze and improve internal processes for measuring cashflows and to accurately forecast flows on a short-and longer-term basis. Combine that with a full suite of solutions geared at driving efficiencies across the Cash Management Value Chain, and a strong alliance with pan-European partner ING, and you have SEB - a service provider that is second to none.
Forecasting has been a central theme of cash and treasury management for quite some time. But in recent years, the growing need to improve liquidity management and pull excess cash out of the financial supply chain has put forecasting in the spotlight. Without a clear understanding of where cash is located in an organization, and without the ability to predict when and how cash will move across the organization, it is impossible to truly streamline cash management and make much-needed excess liquidity available for use.
Erik Zingmark, global head of cash management sales for SEB explains: We saw a gap in the market in terms of cash flow forecasting. Over the years how many articles have there been about the desire for a high-quality cash forecasting solution? And yet, this gap remained. There was a clear need from our clients for such a solution.
Liquidity is essential for any cash manager, and the amount of liquidity you need is dependent on the outcome and quality of your cash flow forecasting, adds Krister Billing, global head of cash management development at SEB. With poor forecasting, you require more cash on hand to support your daily operational cash management needs. He notes, however, that forecasting is only a part of the picture. Billing says: This is only one piece of the overall Cash Management Value Chain, but it is critical for creating efficiencies throughout the value chain.
That notion of the Cash Management Value Chain is the central theme in how SEB conceptualizes and creates cash management solutions. It is broken down into five main sections, or mega processes, that drive the cash management function in any organization, and all of which are interdependent. Those processes consist of: purchasing and sales; cash positioning; cash flow forecasting; short-term investment and funding; and payments.
In order to address any one, or ideally all, of those processes, SEB works by first discussing the value chain and then, through a process of discovery, determining where the problem areas are for that client. Billing says: We look at where they have best practice in place, and where they may be able to create more efficient processes. Then we discuss how best-of-breed clients are doing it and take them through how we see their processes changing to approach best practice given their unique business needs and organizational structure.
The goals are many: by creating a clear view and understanding of cash flows, it allows simplification of internal processes to remove the complexities of forecasting; improved internal reporting from business units, and also streamline external processes. This presents the opportunity for improved cash flow forecasting and thus more efficient use of working capital. Increasing automation of these processes improves internal control, both for current positions and risk, and being able to quickly obtain more accurate information through that automation can help improve the quality of decision-making.
Cash flow forecasting is a key element of that, according to Zingmark: We really see the forecasting process as central to having good liquidity management.
With cash flow forecasting, the first steps are to streamline the process of developing that forecast and ensure uniformity across the organization. Billing explains: We feel it is critical that all parts of the organization are managing this the same way. After analyzing company flows, SEB works with its client to begin implementing the forecasting solution.
SEBs Web Forecast module, as with all pieces of its Cash Management Value Chain solution, involves cutting-edge, web-based technology: group-wide forecasting information is uploaded from all business units of the organization, and from relationship banks, on a daily basis. Once the software is uploaded to the web server then all parts of the business can access it via the internet, says Billing. We integrate that module with balance end-of-day, and when a client logs on they will see their forecasts and be able to compare that with actual liquidity. They can then make adjustments based on that.
Zingmark adds that it takes away all the problems of aggregating information: It makes this process really simple. Normally when you have a forecast in place you can only report what is in the ERP system. All other items are put in the calendar and you must add them into the forecast manually later on, he says. With this tool you can put all items in the system automatically, be able to view them at any time, and make adjustments on transactions as they develops.
The contingency aspect of Web Forecast is also key. If and when a company runs in to a liquidity problem, the liquidity becomes a question for the CEO. With the right tools in place it is much easier to deal with that. In addition to analyzing forecast accuracy and allowing for continuous improvement of the forecast, the system provides auto reminders on items that are expected to come in, and the database is an excellent tool for planning. Notes Zingmark: For a treasury, real-time information of balances is not enough. They want to know exactly how much they will have at the end of the day. Having a precise forecasting tool and transparent processes is the only way to achieve that.
SEBs Cash Management Value Chain solutions were developed in conjunction with clients, and were designed specifically to meet the unique needs of the banks top-tier, and diverse, client base. Zingmark says: We work primarily with the largest multinational corporations and financial institutions in the Nordic region and Northern Europe. This is a highly technologically advanced group of companies, and as a result our solutions must go beyond the cutting edge in terms of both of technology and service provision.
Our clients have already done a lot of core streamlining, so what we provide is really the next step. Working in partnership with this group, it was natural to extend the financial supply chain and incorporate that into our idea of the Cash Management Value Chain, he says. With its client-focused approach, SEB Cash Management is also unique in its internal structure. The group is segmented based on the needs of its client-base, as opposed to a more traditional split based on industry or size.
SEB Cash Management has five customer segments: Financial Institutions; Advanced Treasuries, including large corporations with a technologically advanced treasury set-up; Multinationals such as US groups that are active in Northern Europe; Mid Corporate; and Large Corporate. Coming out of the Nordic market, in the frontline of technological evolution, SEB works hard to leverage that in its product offerings. Zingmark says: We have a unique position, being in a fairly advanced market, and we try to benefit from that. In some ways we think of ourselves as IT providers, so we work very closely with the big software houses in our delivery. For example, the group works with the main ERP providers and other providers on host-to-host integration. Third-party integration is critical to the success of the value chain offerings, he notes. We are quite in control of our IT infrastructure, thus when we need to change anything to improve integration, we can do that very easily, says Zingmark.
With its base in the Nordic market, SEB is a global leader in cash management solutions. Through its alliance with pan-European partner ING, the two have the strongest footprint in the European market, and very competitive product offerings. They provide fully integrated cash management solutions - from a complete range of local services to automated pan-European liquidity concentration and payment factory solutions.
Says Zingmark: This is no loose correspondent banking relationship. Together we can help clients move liquidity seamlessly between accounts, and on the back of that we also have fully coordinated approach from sales through implementation and support. Clients are thus confronted with a very well-tuned product offering with full integration between the two of us. With the need to drive greater efficiency into liquidity management processes, having best-practice cash management across the value chain is critical. SEB is a clear leader in this space, with top-end technology driving its offerings and client-driven solutions for the distinct needs of different segments of the market.
Having a good cash forecast is clearly a critical element of this. SEB has taken the lead in developing a working solution for accurate short-term and long-term forecasts. With a high-end backbone and the knowledge base of SEB at their fingertips, clients receive the best of care, as well as the best of breed.