The key to smarter, more decisive treasury management may lie in getting not just reports that supply data, but intelligent reports in which data have been aggregated, sorted and analyzed, reports that may even point out the best steps to take to control risk, optimize returns or improve efficiency. While there’s still a gap between the potential and the reality of such reporting, the gap is closing.
For example, if street protests erupted in a foreign capital, threatening the stability of the government, a corporate treasurer with some of today’s best analytical reports could easily determine the company’s investment exposure to that country’s debt, including holdings in money market funds. This represents significant progress from 2008, when treasury investors worried about how much Lehman Brothers paper they were holding indirectly, through money funds. “It was virtually impossible to find out,” recalls consultant Mike Gallanis, a partner at Treasury Strategies.
For treasury managers, better forecasting typically is the goal. The explosion in captured data has led to more sophisticated mining tools and more accurate, longer-range forecasts, reports Chuck Colliton, treasury practitioner executive in the global business solutions group at Bank of America Merrill Lynch.
Traditionally, forecasts were guesses that reflected history and intuition, but now they’re quantitatively derived and more accurate, making treasury staffs more confident about taking action based on those forecasts, adds Daniel Doran, client engagement executive in BofA’s global business solutions group.
But industrywide conversion to new reporting standards such as electronic bank account management (eBAM) often takes time. Banks have been slow to adopt the standard, Gallanis says, and currently only large global banks are offering eBAM functionality to clients, he notes.
Corporate treasuries also have shown initiative in writing their own filters and analyses to highlight changes in inventory, collection times or payment outflows that affect working capital so they can manage it more tightly, Gallanis says. (For examples of homegrown reports, see “What’s Paying Off.”)
Nevertheless, banks are aggressively selling their versions of intelligent reports. One improved product is statistical benchmarking, reports James McKenzie, executive director at the treasury advisory solutions group at J.P. Morgan. “We leverage the data from over 30,000 corporations to provide benchmark reports to clients showing them how they stack up within their industry or peer groups—where they are, what the industry average is, what defines the top 10%.”
To measure accounts payable or accounts receivable working capital performance, the bank buys market data. For other activities, it uses its own aggregated client data without revealing the identity of one client to another, McKenzie explains.