The Challenges of Corporate Cash, Treasury and Risk Management

Challenge 1: Right information for right decisions

In most cases, the biggest challenge in liquidity planning and management is data acquisition. Roughly speaking, cash management first of all needs to know what liquid assets it has and what incoming and outgoing payments are expected in the future.

Trinity TMS helps to manage this information. It provides a financial status for daily cash management and a cash forecast for the following days. Here, only cash-effective transactions count, i.e. instead of the booking date, the value date is decisive. Accordingly, the cash flows considered should have a high probability of occurrence in order to take appropriate control measures.

For greater reliability, past planning data is replaced by booked cashflows (actual data). This task is usually performed by the Treasury Management System as part of the automated bank account statement reconciliation. The confirmed balance is then again supplemented by planned inflows and outflows. Cash flows from financial transactions managed in Trinity TMS are reflected automatically and immediately after storage in the financial status, cash forecast and liquidity planning. Operational cash flows are regularly imported in the background in order to achieve the most complete possible basis for decision-making.

Challenge 2: Reliable preview and planning

Incoming and outgoing cash flows that will take place further in the future are often not yet certain in terms of their exact amount, value date and the bank account used, which is why medium- to long-term liquidity planning is category-based. The cash flows are differentiated, for example, as taxes, salary payments, supplier payments or sales revenues for certain products. Trinity TMS takes the data from different sources and can update it continuously as needed.

The closer one gets to the present, the more precisely the amount, date and account can be determined, so that the reliability of the short term cash forecast increases. Such planning is often done in spreadsheets, but it is error-prone, not audit-proof and usually dependent on one person. Treasury management systems solve these problems with secure processes and workflows.

Challenge 3: Identify and reduce risks

Within the framework of securing liquidity, various risks must be taken into account depending on the industry and size of the company, e.g. the

Liquidity risk as the danger that the company itself will become insolvent
Interest rate risk: Financing becomes more expensive than assumed
Currency risk: Values of imports and exports change due to exchange rate fluctuations
Credit risk: Sales revenues, credit commitments default

Measures to reduce or eliminate such risks are taken in cash, treasury and risk management, although it is not uncommon for these departments in SMEs to consist of only two or three people. This makes it all the more important to use a software solution that helps maintain an overview of all financial transactions and cash flows, whether local or global.

Trinity offers a system that can be modularised according to individual needs to best meet the requirements for managing account balances, foreign currencies, financing and investments, interest, liabilities, planning and reporting. Trinity TMS effectively supports the classification, quantification and reduction of the aforementioned financial risks.

Challenge 4: The consideration of economic efficiency

Once all cash flows have been planned, risks hedged and available liquidity secured, the next step is to optimise effort and income. To do this, bank conditions are compared, fees are reduced and interest rates for borrowing and cash investments are optimised. Internal financing potentials are preferred to external financing and working capital management is carried out.

When making a selection, it should be noted that not all cost saving measures are equally suitable for all companies. For example, the implementation of automated bank fee control only makes sense if the investment for it pays off in the foreseeable future and in the long term.

Of particular importance in achieving savings, however, is in any case the time spent by one's own resources. The more routine tasks are automated by a treasury management system, the more time finance managers gain for their actual tasks.

The compilation and preparation of decision-relevant information, the comparison of planned and actual values, account clearing, the offsetting of receivables and payables, the conversion of currencies, the checking of hedges, the allocation and posting of financial cash flows, the creation of reports and evaluations and much more can be carried out automatically with Trinity TMS. Rule-based processes ensure secure allocation and avoid time-consuming error searches and time-consuming corrections.

Challenge 5: Process and audit security

The clear advantage of a comprehensive software solution is the concentration of all data relevant to financial management in a central location. The creation of new users and the recording of certain master data and financial transactions are subject to the dual control principle. All cash flows in cash management and liquidity planning from financial transactions managed in Trinity TMS are available "in real time", operational data are imported regularly. The flexible definition of allocation rules and automated plausibility checks increase the reliability of the decision-making basis in this context.

The origin and changes of data can be traced at any time due to the audit trail and are therefore audit-proof. Historical information can be used as a basis for future forecasts, e.g. in the context of predictive analytics or for pattern recognition based on artificial intelligence.

Challenge 6: Efficient processes and digitalisation

The replacement of cash by book money was a very important step for professional financial management in companies. However, many processes still exist today that require a lot of paper - and not only in trade finance. While electronic bank statements have replaced printed ones, there is still plenty of business documentation and applications, balance confirmations, account authorisations and much more to be digitised.

With ISO20022, formats have already been defined for all messages important in the financial sector, which could be used as a global standard. SWIFT is planning to convert the previous message types (MT) accordingly to XML-based files, with which far more information can be transmitted than before. Trinity supports you in the changeover to the new standards and also develops modern processes with new technologies (e.g. API, web services), via which companies can efficiently apply for and manage digital guarantees at credit institutions and insurance companies - completely without paper!

Challenge 7: Data security

Data protection is important. Especially the company's financial data should not be seen by unauthorised persons. However, all employees who can contribute to improving liquidity planning can be given secure and simple access via the web. Local users do not have to do more than is necessary: the system only displays an individually tailored selection of functions and data. The import of bank statements is automated and the entry of planning data is made as simple as possible. In certain cases, it makes sense to set up an in-house bank with Trinity TMS, which provides the subsidiary with liquidity and guarantees without the need for a local bank connection.

Who is allowed to see and do what in Trinity TMS is regulated in the authorisation system of Trinity TMS. The coordination takes place module by module and in detail according to functions, workflow steps and companies. Users are never allowed to check their own entries in security-relevant areas, and the dual control principle is a must there. The login with user name and secure password is additionally secured by two-factor authentication and keeps unauthorised persons out.