Real-Time Liquidity Management Strategies

Aaron Ayusa has an excellent article. This is why I am excited about it. We at Baton Systems have been pleasantly surprised by the solid demand for our Core Payments product, where we normalize and orchestrate ALL wholesale payments of a bank irrespective of currency or product type and bring real-time visibility and control to the teams. Our customers' next set of organic demands has been to build actionable intelligence or AI on this. This is a time when everyone is an AI warrior on LinkedIn. Despite being a technologist, I consider myself a "Lazy Adopter" of "Fad Tech." But we jump on it when we find more than one use case where it can be applied to solve today's real problems. We are seeing that opportunity. That is, with actionable intelligence and real-time payments. It is a mouthful and still sounds too salesly. Here is what we are being asked to solve. Problem: Intraday liquidity is a big problem in a high-interest rate environment. Borrowing cash to meet intraday demand is now very expensive. How can we optimize intraday liquidity if you can access real-time information of exposures/obligations/counterparty positions/product positions/pay-in/pay-outs/netting/real-time status of cash and securities in transit and ETA to reach the destination? Now, if I can layer this with the cost of borrowing, can one be more optimal in intraday funding, and what does that mean to risk and profitability for a financial institution? How we approached it: This is where we use AI; again, forget the buzzwords. We build predictive analytics by learning from past (trend data) behavior and real-time information to predict balances, counterparty risks, and inbound and outbound payments by currency and product. By sequencing the inbounds and outbounds, one can schedule the payments algorithmically and optimally rather than wait for the end of the day to make all pay-outs or fund 50% of total obligations at the start of the day. How to make it actionable: This is still a work in progress, but we are leveraging the existing parts of our platform, like the dynamic rules engine and dynamic asser routing, to determine the best routes and venues to fund intraday payables. It is an exciting area where much can be done with better liquidity. Why is this important? (a). Short-term interest rates are going to continue to be high. It may come down in the medium term, but it will be higher than what we have been used to for over a decade (b). Emerging markets and currencies are seeing more demand (c) T+1 of US securities is a start - you will see more of this in the coming years, adding pressure to intraday funding (d). RTGS Systems will move to 24x6.5x365 (if not 24x7) (e) High Sovereign debts and demand are increasing beyond US treasuries, which will apply to securities and cash in the next five years. Status Quo is not an option now. It is time for smarter payments. https://lnkd.in/g2z7rZWG

Don't forget these Cash flow forecasting tips: 1. Adopt a data-driven approach Leverage your actual cash flow data and build forecasts for greater accuracy and insights compared to relying on assumptions. Use revenue and AR/AP data to forecast cash inflows and outflows. Analyze past trends to predict future cash positions rather than starting from scratch each period. — 2. Automate data collection Automated data integration from your accounting and bank systems gets rid of manual collection and manipulation in spreadsheets. This saves significant time, reduces errors, and supports real-time forecast updates. Automation tools can pull invoice and payment data to update AR and AP forecasts daily. — 3. Use a 13-week forecasting period A 13-week cash flow forecast gives enough future visibility to assess liquidity risks and make strategic decisions. It's short enough to base projections on detailed data like payroll, orders, and payments. You can identify a potential cash shortage 3 months ahead and arrange financing. — 4. Build a rolling forecast A rolling 13-week forecast accounts for changing conditions better than static cycles. Each week drops the past week and adds the next week based on the latest data. This agility helps optimize cash deployment as your business fluctuates. — Note: Forecasting transforms cash flow from an afterthought to a strategic lever that optimizes operations and fuels sustainable growth. Make forecasting a priority. P.S. I'm Julio Martínez, founder of Abacum. Follow me for daily FP&A, CFO, and founder insights.

The new way to manage your company’s cash comes at a cost. Since the collapse of SVB, the vast majority of businesses have diversified their banking across two or more accounts. While this is a great way to mitigate risk, it makes cash management a lot more challenging. Determining something as simple as your cash position means manually logging in to multiple accounts, pulling reports, doing any forex calculations that are necessary, and then plugging them into an Excel formula to calculate the total balance. It’s tedious, time consuming, and you never know what’s going on with your money in real-time. Now that cash flow optimization is at the top of everyone’s priority list, it’s more important than ever for finance teams to have real-time visibility into their actuals across all accounts.  It’s time to regain control of your cash with multi-bank visibility with a simple, automated solution that teams can implement and operate on their own. 

Is Treasury Management Really That Broken? YES. Incumbent treasury solutions are clunky and mainly serve large enterprises. It costs $150K just to hire an implementation consultant! Moreover, many treasurers call them glorified databases as they still rely on manual interventions and processes. 🤦♀️ I also see a new generation of treasury solutions borne from payment companies. However, cash and liquidity management are often an afterthought for them. A multi-currency bank account is NOT a comprehensive treasury solution. I am re-energized 💪 , and today's discussion further validates what we are building at Finmo. We are building a next-generation Treasury Operating System (TOS) with deeply interrelated modules that are seamlessly interoperable to perform mission-critical treasury functions by prioritizing the following: 🔹 Adopt "faster" payments with real-time payments (RTPs) ⚡ across the globe. #rtp #crossborderpayment #b2bpayments 🔹 Automate workflows by reconciling multiple payments and workflows across customers. ⚙ #automation 🔹 Optimize cash management with real-time visibility of cash flows and improve forecasting. 📈 #cashmanagement #cashflowforecasting 🔹 Manage multiple currencies without numerous bank accounts and banking relationships. 💹 #treasurymanagement 🔹 Capture, quantify, and mitigate cross-border FX exposures. 💱 #fxriskmanagement 🔹 Seamlessly integrate into a broad set of banking institutions, TMS, and ERP systems, streamlining reconciliation and back-office operations. 🤝 #seamlessintegration We are setting a new standard by consolidating these essential functions into one category-defining product. 🚀 #money2020europe #money2020 Akhil Nigam | David Hanna | Raj Vimal Chopra | Richard Oh | Anthony Yeoh, CAMS, CCI | Jonathan Lew | Ramey Girdhar | Raushan Kumar