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For Treasury Management Teams, a Chance to Help Stressed Clients

Companies around the country are struggling, providing an opportunity for bankers to step in and help by deferring loan payments and setting new pricing structures. This is also a unique time for banks to build loyalty by stretching beyond the traditional lending-deposit relationship.

For bank treasury management teams, it is a chance to help corporate clients solve financial problems in ways that go beyond providing routine transaction services. These efforts can improve the client’s financial position and deepen customer relationships. Three ways to accomplish this are by encouraging digital adoption, simplifying pricing and, of course, providing business advice.

Identifying Where Clients Need Help

Even before the pandemic swept the country, company treasurers were hungry for better forecasting capabilities. A survey of corporate treasurers conducted early this year by Treasury Strategies Inc., a division of Novantas, found that improved forecasting capabilities were the top priority for 2020. That was up from second place in 2019 and the third spot in 2018. (See Figure 1.) Furthermore, a majority of organizations indicated they were “less than satisfied” with their cash forecasting processes and forecast accuracy.

COVID-19 has only amplified this need. Many companies are now forecasting cash needs on a daily basis instead of weekly or monthly. The pandemic has created a structural break in historical models, making them far less reliable than before and increasing the need for good data on a timely basis.

The shutdowns and quarantines have also caused an unprecedented disruption to businesses’ working-capital cycles. Careful management of liquidity is the top priority for companies, but they often struggle to optimize working capital (See Figure 2.) While many businesses saw payments volume decrease at the start of the crisis, March fund transfer volumes were up 56% among corporate clients as companies consolidated liquidity. Volumes decreased after the initial surge, but April transfer volumes were still 24% higher than April 2019. Novantas expects companies to continue this focus on cash concentration, deployment and liquidity information reporting.

The pandemic has forced many businesses to modernize overnight. For years, payments have been steadily moving from physical to digital; checks shifted from 57% of total non-cash payments in 2000 to 16% in 2012 and only 8% in 2018, according to the Federal Reserve. Companies that still rely on paper are facing even more challenges during this pandemic because many businesses can no longer support a physical location.

Figure 1: Top Treasury Priorities in Early 2020

Rank 2020
Rank 2019
Rank 2018
Cash Forecasting
1
2
3
Best Practices
2
11
9
Bank-Relationship Management
3
4
5
Working-Capital Management
4
1
Operational Efficiency
5
13
7

Figure 2: Biggest Challenge In Optimizing Working Capital

Accurately predicting payments from customers

0
26
%

Quality data inputs from people and systems

0
18
%

Reconciling direct (Treasury) vs indirect (FP&A) cash forecasts

0
42
%

Tracking variance of forecasts

0
13
%

Source: 2020 State of the Treasury Profession Survey

Figure 1: Top Treasury Priorities in Early 2020

Rank 2020
Rank 2019
Rank 2018
Cash Forecasting
1
2
3
Best Practices
2
11
9
Bank-Relationship Management
3
4
5
Working-Capital Management
4
1
Operational Efficiency
5
13
7

Source: 2020 State of the Treasury Profession Survey

Figure 2: Biggest Challenge In Optimizing Working Capital

Accurately predicting payments from customers

0
26
%

Quality data inputs from people and systems

0
18
%

Reconciling direct (Treasury) vs indirect (FP&A) cash forecasts

0
42
%

Tracking variance of forecasts

0
13
%

Source: 2020 State of the Treasury Profession Survey

Novantas expects this shift to accelerate further, with an increased focus on electronic payments, remote deposit capture and digital documentation such as e-signatures. Banks can provide discounts to encourage companies to adopt lower-cost digital services, such as remote deposit capture.

This digital acceleration also has created new opportunities to take advantage of process weaknesses, prompting bad actors to jump at the chance to flood businesses with fraudulent activity. A recent survey by the Association of Financial Professionals found that 40% of respondents said they have already started working with banks and vendors to mitigate fraud attempts during the pandemic; another 15% plan to do so. Banks can help in this area by offering trial periods of fraud protection services.

Simplified Pricing

Pricing for corporate services has always been complicated and complex. (See New Strategies to Modernize Commercial Pricing.) Yet, it is one of the quickest and most effective levers banks can pull to help their clients through this crisis. Beyond the obvious fee waivers and discounts, banks can get more creative to help stressed clients and win customer loyalty.

The crisis is an opportunity to test new approaches to pricing. Simplification of treasury management pricing has been on bank wish lists for years, but implementation success has been limited. By offering customers a lower flat-rate fee for treasury services (potentially tied to past usage), banks can help customers plan cash flows better, provide additional fee relief and test a new pricing approach for middle-market clients.

The crisis is an opportunity to test new approaches to pricing.

Offering Advice

Banks also can’t underestimate the value of providing timely advice to clients about how to manage their business. A 2018 survey by Novantas showed that 82% of companies consider it important for their primary bank to provide business advice. With all the uncertainty in the industry, this is more important than ever. Banks need to arm their bankers with the right tools and information to be effective advisors to their clients.

This requires relationship managers to be well-versed in the changing financial and regulatory environment that relates to clients. Relationship managers need to know the bank’s perspective on important economic issues, such as the potential for negative rates. They also need to understand how these issues will impact individual clients.

Digital Adoption

As noted above, the adoption of digital processes should be one of the most important capabilities in a bank’s wheelhouse, providing benefits for both the bank and its clients. Banks that don’t already have digital documentation capabilities should make this a top priority since it is quickly becoming table stakes in a world where clients are working remotely. Banks that can’t open accounts digitally will lose corporate business.

Banks can help corporate clients navigate the problems they face when their vendors don’t accept electronic payments. The creation of approved vendors networks, for example, can also boost electronic payments and counteract common sources of fraud. These programs can be enhanced with proactive vendor outreach on behalf of clients, much like banks already do for commercial cards.

Companies often re-evaluate their banking relationships during times of stress. Banks that prove to be good partners over the coming months will exit the pandemic with a stronger brand and deeper client relationships. By focusing on pain points, banks can ensure clients are getting the most value from these partnerships.

ryan schulz

Ryan Schulz

Director – Treasury Management Pricing

jeff diorio

Jeff Diorio

Director – Corporate Treasury Technology

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