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What is Digital Treasury?

Technology adoption in treasury is moving at a lightning pace. Treasurers view legacy processes such as printing checks, aggregating prior day cash balances and gathering manual foreign currency exposures as (soon to be) things of the past.

Much like technology has become an integral part of our personal lives, the landscape for Treasurers is evolving rapidly. As a result, many of these underlying technologies are being deployed in new ways for corporate Treasurers.

Digital Treasury

In its simplest form, digital treasury is about real-time transparency of an organization’s cash flows and other treasury information with seamless integration of systems for reporting, processing and compliance. It offers many benefits to treasury organizations by smoothing out common points of friction. This includes:

  • Using virtual banking to streamline the administration process of adding or deleting signors and opening and closing accounts
  • Managing FX gain/loss reconciliation with hedge accounting software that lets you analyze balance sheet hedge program results without manually combing through data
  • Auto-centralizing foreign currency exposure management and reporting
  • Predictive analytics based on past transactions
  • Cloud-based, SaaS models that update for compliance and regulatory changes automatically

Treasurers welcome these new tools and concepts because it allows them to do more with fewer resources.

The Trade-Offs of Digital Treasury

Transforming your Treasury to its digital best is not without some compromises. The main reason for this is because a holistic solution does not exist at this time – everyone is digitally transforming a little differently.

If your department implements an all-in-one digital system, you could be sacrificing optimal functionality for the perception of a single streamlined solution.

On the other hand, if you integrate the best systems together, you’re technically trading off the “ease” of a streamlined, all-in-one solution. Arguably, functionality should be prioritized over ease of implementation. And the difference in ease between implementing an all-in-one versus a best-of-breed are minimal. Today, technology integrations have never been easier.

So, when you examine these trade-offs, it’s clear that it’s more effective for Treasurers to integrate best-of-breed solutions. You’re getting the best of the best for each niche Treasury function while still maintaining a reasonable level of ease with implementing the system. (Plus, many “holistic” systems aren’t even holistic — in many cases they are multiple systems in the background with an interface that makes them look like the same system.)

What can be seen as a compromise is actually a way to optimize your Treasury’s processes, reporting and compliance. If one vendor is superior at cash management while another excels in derivative accounting, then consolidating the best solutions into a holistic approach may be the right solution for the organization.

When it comes down to it, Treasuries may favor a seamless connection between best-of-breed solutions over a comparatively mediocre all-in-one model. Integrating the best solutions for each niche function can be a better option for departments who are not realizing maximum ROI from their treasury workstations.

It’s unlikely an all-in-one digital solution will be as diligent and nimble at managing market changes.

The Future of Corporate Treasury

Digital treasuries are the future.

Implementing a digital treasury can help you turn raw data into actionable analytics for better management decision-making and automation of routine processes, such as cash positioning or currency exposure gathering.

There are a variety of best practices that can push Treasuries into the digital age. While there is no one-type-fits all technology solution that does everything the best, integrating best-of-breed solutions together is an ideal option.

Ready to take the next step in digitally transforming your treasury department? As a best of breed solution, CapellaFX monitors changes to hedge accounting rules, guidance interpretations, compliance and accounting standard updates with a laser focus. Click here to learn more.


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