Let’s rewind to January 2020, a couple of months before the world was turned on its head. If at that time, someone would have asked Citi Managing Director and Global Head of Domestic Payments and Receivables Anupam Sinha how long it would take for corporate treasury organizations to fully embrace digital, he said his answer would likely have been something along the lines of, “Don’t hold your breath.”
It’s not that automating invoice generation, banishing checks, automating the cash application process and systematically removing all the manual touches from accounts payable (AP) and accounts receivable (AR) workflows weren’t unknown concepts among chief financial officers (CFOs) and treasury departments at the time. But as Sinha told PYMNTS’ Karen Webster, at minimum, they were a decade away from reality. Eliminating checks, he would have said, would take the better part of a generation.
His answer as of January 2021, however, is very different.
“If you ask me that question today, I think we will easily get to 70 percent or 80 percent of our clients’ AR processes being fully digitized in the next year or two,” Sinha said.
And these aren’t small shops created to nimbly pivot, Sinha said. These are incredibly large, multinational enterprises that may take time to change due to the complexity involved . They’re making changes now, he said, for a very simple reason: They have to.
“The finance organization does not have a choice in terms of embracing digital, and all of us have learned the hard way in 2020 based on the impact it had,” Sinha said.
But the digital transformation goes far beyond adopting electronic payments or automating invoicing. Rather, Sinha explained, corporate treasurers and CFOs today are grappling with evolving business models and transforming cash management strategies. With so much change afoot, finance leaders must be tactful in how they lead their corporations’ modernization efforts.
The Transformative Power Of Data
If the pandemic has taught the enterprise anything, it’s the value of flexibility.
Amid the drive toward digitization, many firms began to see the value in shifting their business models, with online channels becoming an increasingly important focus in that change. For some companies, that means a migration away from the traditional dealer-distributor model and toward B2B commerce and direct-to-consumer (D2C) strategies.
Sinha noted that this online migration provided far more insight into customer buying behavior. But it also created new challenges for finance leaders who were seeing funds flowing in and out of the enterprise via new channels. Historically, payment volumes flowing through digital channels were too low to warrant much focus. But when digital channels account for half of an organization’s overall sales, the data is too valuable for treasurers to ignore.
As models in the front end of an organization digitize, this prioritization of data has carried over into the back office, too. Sinha said today’s CFO should focus on how to access, interpret and monetize data. And we can see that data goldrush is omnipresent. When Sinha talks to clients about digital-first developments like 24/7 processing and instant payments, the conversation is not about speed, he said.
“It is the quality of data that instant payment brings in that is getting them to look at completely rearchitecting their processes,” Sinha said, highlighting the opportunity for finance leaders to automate key functions like reconciliation and AR. What Citi is working with now, he said, is considering how to empower businesses that are adjusting traditional B2B business models toward a B2C offering through the use of that data.
“The question is increasingly [about] how we can try and pull all of that together to provide a more holistic proposition,” he said. “From a back-end perspective, they need to be able to integrate seamlessly and provide that visibility to their own CFOs and treasurers.”
Recreating The Backend
Key to that integration and visibility are technologies like application programming interface (API) integrations, artificial intelligence (AI) and machine learning (ML), which will not only be key to connecting finance leaders to valuable information, but also to shifting back-end models of how CFOs strategize cash management.
The rise of real-time transacting drives treasurers and their banking partners away from the legacy batch model of payments, with strict cutoff time and end of day process toward an always-on cash management strategy. According to Sinha, this evolution will further increase the need for treasurers to embrace digitization, and for finance leaders to standardize their processes on a global scale.
“Rather than doing a lift-and-shift and digitizing individual processes, how can they look at it more holistically, standardize their processes, then automate it — and, at the same time, make sure they’re moving toward API-based processes?” he explained.
For large, multinational corporations that operate with multiple bank accounts, embracing virtual account technology can further data connectivity and propel CFOs “toward a more centralized and more sophisticated treasury process,” added Sinha. This can be especially valuable in the areas of cash application and AR, which Sinha said remains the area in need of the greatest work when it comes to digitization.
But the modernization push is underway and, as Sinha said, there is no reverse button for the great digital shift, which means the only option for firms that want to remain competitive is to keep moving forward.
“If there’s one thing that everybody needs to do, it’s accelerating the whole digitization journey,” said Sinha.
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