Buried treasure: Maximizing analytics for treasury management

Learn how data and analytics can help streamline the operational and strategic functions of your treasury, including liquidity and cash flow management.

Tags: Cash flow, Analytics
Published: November 07, 2018

In many ways, the day-to-day tasks of managing a treasury for an organization are similar to how you manage your personal finances. You closely track the inflow and outflow of your money. When you have extra cash for any period of time, you strategically invest or save it. And you try to maximize the benefit of your money by making smarter decisions.

The scale is just much larger for corporate treasurers and treasury managers. And the processing tools needed to turn raw data into actionable insights are considerably more robust than the math used at home. Data is the underlying raw information created while doing business. Analytics – the insights gained from reviewing and examining all your data – should help streamline the operational and strategic functions of your organization.


The analytics software continuum

Building your organization’s analytics program requires expanding how you track data and determining what tools you use to harmonize and mine the data to make it actionable. Here’s how the use of technology will likely evolve as you go from a simple tracker to a multi-stream analytics master.

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Here are four ways that using data can help you streamline the operational and strategic elements of your treasury.

Strategy 1: Make use of excess balances

Let’s say that you send payments to your bank and get a report that 80 percent of the payments are 10 days ahead of their invoicing due dates. That data can be useful for your operations: Adjusting the timing of these payments can help optimize your working capital. That money could be reallocated in your company to fund more pressing matters, including other payments.

“The point is if you knew how much excess cash you are likely to have in the coming week, you can plan ahead and deploy those funds more efficiently,” Chakraborty says. “That would be a good actionable insight – you can change your payment practices based on that. Either you start taking advantage of the early payments you’re making by requesting a discount from your vendor, or you can reduce your working capital.” Overall, making a change will help you optimize the amount of funding you need for your organization.


Strategy 2: Improve management of currency risk

Analytics can help you see the trends and risk in your foreign currency payments and receipts. Currency hedging involves the purchase or sale of currency for delivery at a future date. This allows you to lock in an exchange rate or buy insurance against adverse changes in exchange rates. By reviewing the data, you can make more informed decisions about how much currency risk your organization faces and how best to act and reduce that risk. 

“If all of your receipts are coming in British pounds (GBP), but your vendor payments are due in dollars (USD), your profit margins will be impacted by changes in the GBP/USD exchange rate. Many companies elect to hedge this risk,” says Chris Braun, managing director and head of FX Sales at U.S. Bank. By better analyzing the data, you can gain a deeper understanding of your exposures and make better decisions on how much to hedge. “If the exchange rate between pounds and dollars moves adversely, you’ve protected your margins,” Braun says.


Strategy 3: Monitor payments trends

Now let’s say your typical biweekly payroll runs around $500,000, but it fluctuates every time you send it to the bank because of temporary staff and additional consulting fees. Using insights derived from your analytics, your bank might be able to track all of your previous payroll files and establish an average. If your next payroll week is much higher than, say, your last 12-week average, you could get a message alerting you to the inconsistency. 

“If the bank gets a file worth a million dollars that says you have 750 employees, that would be a red flag,” Chakraborty says. “You would know that you didn’t hire 250 employees last week. Maybe there’s an error in the system or maybe there’s a fraud, but whatever the issue, you would immediately know so that you can halt the payroll and investigate. Operational uses of analytics like this are critical to the ongoing health of your organization.”


Strategy 4: Benchmark for efficiency

Your analytics dashboards can be set to trigger alerts based on the number of manual payments or payments exceptions, which can help you benchmark your processes for efficiency.

“You might get a report saying that, in your peer group, only 5 percent of the payments are being stopped because of human error, whereas 25 percent of yours are,” Chakraborty says. That would provide an opportunity for you to improve your operational process.

Buried treasure infographic
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6 steps to implement an analytics strategy

Whether your organization is new to advanced analytics or you just want to refresh your treasury department’s view of the company data, these six steps will help you implement a new strategy.


Step 1. Prep your data

Review the internal and external data you’re tracking and consider what else you should be tracking.

TIP: Make sure the details of what you’re tracking are clearly defined.


Step 2. Get buy-in

Talk to your stakeholders, including IT, senior management or advisory boards to make sure everyone understands the new strategy.

TIP: Before you bring your plan to others, fully work through the implementation timetable and costs.


Step 3. Partner up

Talk to your data and analytics partners to see how existing services or products can be modified to fit your new strategy.

TIP: Relationship managers at financial institutions can help you find the right partners and products.


Step 4. Choose the right tech

Your software and hardware solutions need to give you useful analytics, but they also need to be serviceable. Work with your IT department and stakeholders to develop the right architecture.

TIP: Software applications are often modular and can be modified to work with your existing analytics solutions.


Step 5. Implement

Your goal is usable analytics, so make sure the data inflows from your new system can transform into what you need. Also, make sure IT has reviewed the security of your system.

TIP: Leave time and budget in your plan to test and reconfigure during implementation. 


Step 6. Monitor and refresh

You’re up and running! Make sure you work with your banking relationship manager to monitor the system’s usefulness and make changes as needed.

TIP: Assess the effectiveness of your strategy on a yearly basis.


Source: U.S. Bank Global Treasury Management Senior Vice President and Head of Product Management, Sayantan Chakraborty.

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Visibility and insights

Collecting the right data creates visibility into what’s happening at your organization. However, converting that data and visibility into actionable insights is what makes analytics so much more powerful.  

“We can help treasury managers and corporate treasurers make better decisions,” Chakraborty says. “They can improve their own internal processes, how they conduct their banking, or how they perform against their peer group.”


For more information on how your business can best track your data and analytics, contact your banking relationship manager.