Is your Cash Visibility keeping you awake at night?

I consider myself a practical type of a person, I like things to be simple, easy and working for my benefit so that I do not have to spend my time doing the mundane, repetitive tasks. ‘Work smarter, not harder’ is the motto, so when I see treasury and finance professionals struggling with the mundane steps involved in executing and reconciling bank transactions and complaining that cash visibility one of the biggest problems their operation faces! I write a blog on the subject…

Most cash management professionals would by now be familiar with SWIFT and what SWIFT offers in the space of Corporate to Bank connectivity. For those that are not familiar, the Society for Worldwide Inter-bank Financial Telecommunications (aka SWIFT) provides and manages a highly reliable and secure network that enables financial institutions to exchange data between over 11,000 financial institutions across more than 200 countries.

SWIFT is not only for financial institutions, from around 2004 the SWIFT for Corporates (aka SCORE) model has been the main offering from SWIFT to connect corporates to their banks through the SWIFT network. Today more than 1,500 corporates are connected to their banks via SWIFT. In my opinion many more corporate organisations should be taking advantage of the benefits provided by SWIFT connectivity, in fact any organisations that operates a multinational business with more than 3 banking providers should consider using SWIFT. 

Why? Because SWIFT provides you with a standardised single channel to exchange information with your entire banking group, this provides you with the foundation that enables you to build out more advanced financial functionality as indicated by the info-graphic below:

Having real-time, reliable and secure connectivity to your banks provides the basis for your organisation to have an efficient financial operation. Speed and control of information has revolutionised the world, if you do not believe me then I challenge you to turn off your smart phone, unplug your business and see how you go.

To address some of the more common items about how SWIFT connectivity can benefit your business:

Cash Visibility and Liquidity Management

Even smaller organisations can have a complex bank account structure, multinationals with multi-bank providers can have hundreds of bank accounts, each one reported on as and when the information becomes available, sometimes as an end of month process with a paper statement. This makes visibility over cash difficult with a discrepancy between real-time position and when the data is available. To cover this an organisation needs to have a funding buffer which is generally created by maintaining surplus cash in accounts or a debt facility from the bank.

Through SWIFT banks can provide a cash statement (known as an MT940) to give you near real-time cash positions. Better visibility over cash means the ability to optimise liquidity and tighten up working capital, this can reduce overall debt levels and borrowing costs.

Process Efficiency and Transaction Standardisation

Accessing bank accounts through a banks internet banking systems can be very cumbersome. Every internet banking system is high on security and generally has second-factor token based security implemented. Each internet banking system has its own process for making a transaction with unique approval processes, if you have 3 banks you and each member of your staff with access to the bank accounts will have 3 security tokens, 3 different sets of logins and passwords and will have to remember 3 different ways of processing each transaction.

The larger the banking group gets the more people, token and processes are involved, the risk of something potentially going wrong increases which is compensated by application of an even bigger and more stringent process. With SWIFT it is possible to standardise these multiple interfaces to one, reduce the number of bank touchpoints and increase the efficiency of the end-to-end process with a single standard across all transactions and all banks, this greatly simplifies the financial processing and reduces risk.

Automation

With a multi-banked organisation it can be difficult to automate transaction processing. In a similar way to the manual process each bank has their own proprietary interfaces and automation methods, the more banks an organisation has in their group the more difficult it is for IT resources to connect all of them.

SWIFT provides a centralised connection point, this in turn coupled with the standardised message formats allow for multiple back-office systems such as ERP, Payroll or Treasury to be connected to a central messaging gateway for automation via SWIFT to banks.

Cost Reduction

One of the common myths is that SWIFT is expensive, it is true that you need additional infrastructure, systems and skills to setup and operate a SWIFT connection, which does add cost. However, the benefits introduced through improved cash visibility, liquidity management, efficiency, standardisation and automation introduce cost savings across many aspects of an organisation. These all need to be taken into account when creating a business case for SWIFT, each organisation is different and the projected ROI will depend on a number of these factors.

Today there are more options than ever available to organisations considering a SWIFT connection, with SWIFT offering easy connectivity via Alliance Lite2, Service Bureaus offering hosted options and organisations like Praxsys helping navigate the complexity and connect back office systems, just about every type and need is catered for. Information is easily attainable and SWIFT hosts regular corporate business forums the next of which I will be attending in Sydney next week on Tuesday 13th September. Please feel free to contact me at Praxsys for a discussion about the possibilities.