Automated transactions removing cash-flow uncertainties


Kimberley Long
Published on:

The automation of sophisticated treasury methods by assessing data flows is enabling expanding companies to reduce the uncertainty around cash flows and FX rates.

The ability to sweep funds into an account is a treasury process taken for granted by more sophisticated corporates.

Increasing automation and detailed data analysis now allows companies that might lack strong treasury operations, but have an expanding remit of international payments, to benefit from these account structures.

JPMorgan has developed ‘just-in-time’ funding to push local currency payments from one central account.

Rolled out globally in June, it removes the need for companies to hold accounts in each country of operation. Treasurers are able to view their cash balances from a single account and in one currency.

The cash held in this central account might come from across the company’s international operating divisions.

Phillip Lindow,

Phillip Lindow, global head of liquidity and escrow services at JPMorgan, says traditional cash management methods support the concentration of the cash, but just-in-time goes a step further, explaining: “The cash is only deployed when the company needs to make a payment, helping manage multiple currency exposures and transact more efficiently.”

As companies internationalize, they often lack the treasury experience or back-office platforms that are able to manage multi-currencies.

Lindow explains that, traditionally, treasurers would need to forecast cash flow across various operational locations to ensure sufficient funds were available in separate accounts for each one. To ensure adequate funds were available, treasurers would transfer excess funds ahead of time.

While reducing the need for detailed monitoring, it was not efficient in terms of avoiding local currency exposures or trapped cash pools.

Lindow says cash sweeping improves working capital management.

“The use of centralized cash deposits in a company’s functional currency better supports their strategic cash management and investments,” he says. “This is in addition to the cost savings which result by preventing trapped-cash situations along with efficiency gain as a result of an automated self-funding mechanism.”

With just-in-time, it is possible to assess payments data to deploy funds only when they are needed. As well as ensuring the payment is made on time, it guarantees it is made for the correct amount, rather than having funds sitting idle or even falling short of the required amount. Funds will only be transferred one day ahead of when they need to be paid.


Lindow says the companies set the parameters on payments, adding: “The amount of cash deployed to the local currency account will be based on the payments information provided by the company, and clients can also set a target balance in the account.

In principle, just-in-time works in the same way as traditional cross-currency sweeping. Funds are swept from one account to another, to improve cash flows in certain currencies and manage FX risk by transferring funds to one location, often in the company’s home currency.

Treasa Fitzgibbon,

Treasa Fitzgibbon, global head of liquidity product sales, Bank of America Merrill Lynch (BAML), says the bank is well-versed in providing sweeping solutions for its international clients.

“Our global liquidity platform monitors the balances participating in the pooling arrangements and automatically manages them according to the parameters set by the client,” she says.

Fitzgibbon says for BAML’s client base it is about streamlining operations through sweeping, adding: “As the result of conversations with our clients, we found many treasurers wanted to minimize credit and FX risk within their operations, but also take advantage of structural efficiencies and cost savings on transactions and ongoing maintenance.

“These solutions when used either singularly or in combination assist the treasurer in achieving these goals.”

The differentiator being seen now is how data can aid companies with less-sophisticated treasury structures that are making payments in multiple countries.

“It is favoured by those corporates who have centralized structures, but still require local presence and the ability to make payments in those local markets,” says JPMorgan’s Lindow.

“In addition, just-in-time funding with FX is a preferred solution for multinational companies who are required to make payments in a currency which they would not necessarily have corresponding inflows; for instance, companies who require Nordic currencies to make payments but are euro functional.”