Digitisation, an ally of corporate treasuriesThe pandemic, for good or for bad, is transforming our economy into a digital one.
Of all the impacts that Covid-19 has had on corporate strategies, digitisation and automation have veritably stood out. The pandemic has coerced organisations to pivot to new operating models and added pace to digital adoption. In the process, it is transforming our economy into a digital one. Digitising the economy holds deeper ramifications for governance, transparency, efficiency, scalability and resilience. More importantly, a digital economy ushers in new drivers of growth in every sector of business. Despite all the calls for action, corporate treasuries in Nepal have not adopted digitisation for various reasons. However, this is going to change soon.
The payment infrastructure in Nepal was manual and fragmented, and systems were not integrated for interoperability. This is rapidly changing. The development of payment systems like interbank payment system, real-time gross settlement and instant payment capabilities is expected to bring a perfect storm in the management of working capital. Banks, in partnership with financial technology companies, have begun to use technology to transform the corporate payment space that was being run in a traditional mode for years. While corporate treasuries have been pushed by the pandemic to adopt electronic ways of processing transactions, banks have realised that the cost of processing electronic transactions is far cheaper than processing manual transactions. These developments are bound to add pace to the process of digitisation in corporate treasuries.
Lots of multinational corporations and development organisations in Nepal are beginning to adopt automation, shift towards centralisation of treasury roles and use shared service centres to process their accounting requirements like payment and reconciliation. This is only possible with the adoption of digital tools. In the post-Covid-19-world, the focus of the corporate treasury will shift to strategic tasks like managing risk, optimising financial resources and supporting profitability goals while continuing to perform the traditional role of a working capital manager. To do this, treasurers will look to their banks to provide automated solutions and replace costly and unscalable manual processes and optimise treasury functions.
One of the key bottlenecks in digitisation has been a lack of transparency and good governance. After having my car serviced at a high-tech service station, I noted that the attendant at the counter was writing out the invoice by hand. Obviously, this was intended to add opacity to the accounting. This is beginning to change too. The discussion has now shifted from ‘how do I enhance my profitability by window dressing my accounting’ to ‘how to make ourselves competitive in the age of the digital economy’.
With the change in the role of corporate treasury functions and clients’ expectations, the value proposition offered by banks is changing. Banks will become true, integrated and innovative extensions of the client’s corporate treasury team. Technology has enabled banks to integrate with a client’s enterprise resource planning system to provide solutions that can facilitate automation of manual activities and enable treasurers to create value in their expanded role. Capabilities that can provide real-time visibility, auto-posting of bank transactions, multi-bank reporting using a single platform and advanced analytical data are going to come in very handy as competition intensifies and the ability to monetise information becomes critical. A bank’s digital channels then become a medium to share advanced analytical data with the client.
An application programming interface is like a switch that enables two different systems to talk to each other, which was not possible earlier. Fintechs and application programming interfaces have already made headway in the payment industry in the country. Soon, this interface will allow banks and fintech companies to join hands to provide innovative solutions that leverage automation and technologies to strategically shift the role of corporate treasury.
Today, accounts receivable management and cash flow forecasting are clerical processes for most corporate entities in the country. In most cases, this is manual and rule-based, and companies spend a lot of time and resources in this activity. With the advent of the application programming interface, it is increasingly becoming possible to automate these activities and create an improved cash conversion cycle. This will enable corporates to consume bank statements and accounts receivable information (in various formats) and auto-match the invoices with the receipts to enable straight-through processing. Once digitisation is adopted, a host of similar digital treasury tools become available, and this will continue to evolve rapidly.
While Nepal is yet to witness the coming of millennial, tech-savvy chartered accountants, this is bound to happen soon. When they replace the baby boomers, they will demand more from their technology partners and financial service providers. The new generation of chartered accountants will quickly learn and adapt from their counterparts the need to transition away from manual processes. I must mention the case of a financial controller who, after moving from a multinational corporation to a family-owned business organisation, convinced his new traditional owners to adopt host-to-host payment and automate the process. With this adoption, the banking service value chain will shift from traditional points of connectivity to integrated digital platforms.
Leaders need to embrace the changes and consume technology to bring a transformative effect on how banks and corporate treasuries connect. For banks (and Fintechs), it is an opportunity to fuel differentiation and innovation, and raise profitability through new, emerging drivers. For corporates, the benefits come by way of becoming agile, resilient and innovative which paves the way for the treasury to be a strategic input provider without diluting its traditional responsibilities. The pandemic, for good or for bad, has become the catalyst for adopting these changes and opportunities for everyone to rewrite the rules.
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