Treasury departments continue to rely heavily on manual processes, and those that do automate often find they are disappointed with the results, according to the Association for Financial Professionals' second annual benchmarking survey.
That gap between companies' expectations about automation projects and the results they get might be attributed to "ineffective sponsorship" of the projects, rather than technical complexities, says Jeff Glenzer, AFP's managing director for product development and policy. "The biggest source of failure in automation projects, at least according to our respondents, stems from weak management, which leads to inadequate resources," Glenzer says. "Not having a champion or not having an effective champion, and also resource constraint after the project had begun–staffing being redirected, dollars being restricted."
Spreadsheets still rule, with the survey showing that 82% of companies still use them for cash-flow forecasts, 70% to analyze bank fees and 59% to manage financial risk. Areas where automation has made more headway include managing in-house bank accounts, where 42% use some sort of software or workstation; producing treasury accounting entries, where 60% use some sort of system; and processing electronic fund transfers, which 95% have automated.
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Glenzer says the survey data show that in many areas, including cash-flow forecasting, detailing cash positions and integrating treasury operations with an ERP system, companies felt their expectations of the benefits of automation had not been met. There are also areas where benefits exceed expectations, Glenzer notes, including improving payments efficiency, reducing transaction processing time and providing audit trails.
In many cases, treasuries that have automated processes experience little improvement in the amount of time the task takes, according to the AFP data. For example, the median time it takes to develop a short-term cash flow forecast–four hours–is the same for companies that have automated and those that still do the work manually. The cycle time for pooling cash and coming up with a daily cash position is two hours for both companies that have automated and those that have not, as is the time–one hour–that it takes to produce a treasury accounting entry.
Where the survey does show a dramatic effect from automation is in increasing treasuries' productivity in high-volume activities, says Kevin Roth, AFP's managing director of research. With automation, the median number of cash receipts processed annually per full-time employee is 45,551, versus 10,612 when the work is done manually, and the median number of internal payments processed for subsidiaries is 7,797 per full-time employee, versus 3,750 when the work is done manually.
"You don't see the cycle times improve but the sheer volume of transactions they're able to handle is dramatically higher at the automated companies," Glenzer says.
Overall, the survey shows the median cost for treasury operations is 69 cents per $1,000 of annual revenue, and the world-class cost, defined as the 80th percentile, is 26 cents per $1,000. Cost varies by company size: Companies with revenues from $6 billion to $10 billion spend a median 29 cents per $1,000, while those with revenue from $100 million to $499 million spend $1.50 per $1,000.
Looking ahead to next year's survey, Glenzer says he'd like to figure out why the results show such a huge gap across the board between the median and world-class results. "If it's not automation and it's not whether you're centralized or decentralized, what is it that's driving those huge performance gaps between the typical company and the benchmark company?" he says.
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Susan Kelly
Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.
