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NextGen Treasury: Your Digital Roadmap

Treasury Services COVID-19 Insights February 09, 2021

 

Digitizing payments has become more important than ever as organizations look to increase working capital, create efficiencies, potentially reduce costs and minimize risk. Furthermore, the COVID-19 pandemic has pushed many businesses to adopt automation as a way to address these concerns across the broad community of suppliers, customers and partners.

According to a 2020 survey by the Association of Financial Professionals (AFP), nearly 60% of respondents said their organization was very likely or somewhat likely to convert the majority of their B2B payments to suppliers from checks to electronic payments. Only 5% indicated they have no plans to convert.1 

But what does that journey to implementing a digital payments infrastructure for corporates look like? Susan Witteveen, who heads the Treasury & Payment Solutions group at BMO Canadian Commercial Bank, recently moderated a discussion with three experts to discuss best practices:

  • Robert Lowther, Senior Vice President of Finance at MNP, one of Canada’s largest accounting, tax and business consulting firms

  • Megan Kells, Head of North American Treasury and Payment Solutions, Product at BMO

  • Matthew Bleecker, Director of Payments Optimization Strategy at BMO

Following is a summary of our conversation, edited for length and clarity.

MNP’s Digital Evolution

According to Lowther, MNP began its transition to digital payments about four years ago. At the time, the company took a more traditional approach to payables and receivables, with checks representing the primary payment method. Not only did MNP’s treasury team want a more efficient system, its customers were beginning to express interest in alternative payment methods, making the transition what Lowther called “an exercise in trying to make sure that our vendors’ and clients’ voices were heard.”

Lowther noted that MNP prides itself on its entrepreneurial spirit and dedication to innovation, and it saw upgrading its payment system as an opportunity to apply those principles to satisfy both internal and external stakeholders. Getting MNP’s treasury team to buy-into the plan was a critical factor to its success, but the task was made easier by the fact that the initiative was driven by the team itself.

“It started from some of the ideas that they brought forward,” Lowther said. “They've been the driver of the changes. It not only helps the business, but it helps them in their day-to-day work. The business reasons for these changes are what drove the decision-making process.”

That’s not to say there weren’t a few obstacles along the way. While some of MNP’s clients and vendors were eager to use electronic payment methods, others weren’t so sure. That’s where communicating the benefits of digital payments from a vendor’s perspective—such as timelier payments—can help make the case.

“Convincing some of our other vendors and clients to move on to the different forms of electronic payments was a challenge,” Lowther said. “The way we overcame some of those conversations was just talking through some of the benefits that they were going to see.”

When it came time to choose a solution, MNP understood that a digital payment infrastructure had to serve its purposes, not the other way around. That included making sure the tools easily integrated with its enterprise resource planning, or ERP, and banking systems.

Of course, having the right tools in place is only meaningful if you have a way to measure success. To that end, MNP established clearly defined goals for its external clients and vendors. “We set initial targets to convert a certain percentage from checks to a variety of different electronic payments, and that goal was based on a percentage of clients and a percentage of vendors,” Lowther said. “Our goal was to see incremental improvements over the course of a period of time. We started three or four years ago, and we've seen those incremental improvements happen each year.”

An Ongoing Journey

What’s notable about MNP’s implementation was how closely it adhered to best practices for adopting digital payments. As Kells pointed out, setting clearly defined goals and milestones in the process was critical, as was the time MNP gave both the treasury team and its customers to transition to increase their overall percentage of digital payments within the company. It’s a classic example of how following best practices can lead you to the right tools for your organization.

“The more that your bank partners can understand what those goals are, they can talk about helping you from a tactical perspective of achieving those goals,” Bleecker said.

Lowther said MNP has transitioned to a nearly full digital treasury function, but that’s only the first step in what is an ongoing evolution. Moving forward, Lowther expects a next-generation treasury system to allow the team to focus on the more strategic aspects of the job.

“I think we still have some work to do,” he said. “Our real focus has been on the transactional piece—how do we eliminate a lot of the transactional elements and allow our systems and tools to manage those for us? Where we continue to look for ways to improve is on the longer-term planning pieces of our cash flows. How do we continue to automate our cash flows? How do we integrate it with some of our budgeting and forecasting tools? There's a number of strategic projects that we can focus on to better manage the long-term capital of our business.”

Along with providing more flexibility for its external stakeholders, the transition to digital payments has been well received by MNP’s treasury team. Lowther cited the speed and efficiency of their new system, as well as providing the ability to focus on more client relationships.

“It impacts the finance team, but it also impacts the decision makers that are approving transactions,” Lowther said. “It also impacts our regional teams that are trying to deal with clients. The less time that they're spending on administration is more time that they're spending with clients. It really allows our team to focus and move from transactional work to strategic priorities and allows our team to grow with the technology. It allows them to be more involved in trying to drive decisions.”

Speeding Toward the Future

At BMO we’ve seen firsthand the reluctance of some suppliers to make the transition to digital payments. As Bleecker noted, his customers are increasingly making the change because the benefits are more easily attainable, including improved cash forecasting, speed of settlement and stronger customer relations.

“They’re used to getting that check in the mail, and the bottom of the check stub had all their invoice information,” Bleecker said. “That’s what was primarily driving that hesitation to change: Will I receive the data that is so critical to close my AR items that are open for that invoice? The data and the dollars need to travel together. The other piece that has happened is we made it simpler for suppliers to be able to be registered to get a digital form of payment. And by removing that friction we've seen a higher adoption and we'll continue to see that adoption rate increase over time.”

And just as the pandemic accelerated the adoption of new technologies across business types, it’s done the same for the transition to next-generation treasury systems. “While COVID has been obviously awful for the economy and small- and medium-sized businesses in general, it has really pushed everyone forward five years to transition to an electronic environment,” Lowther said. “That's what we've seen in our business as well.”

As Kells put it, “Digital payments don't discriminate. Regardless of the size of company you have, the geographic footprint or the type of industry you're in, there's a role for digital payments in your payment mix. With a very receptive community overall to sending and receiving electronic forms of payment, now is the time to move your company forward in that direction.”


TRANSCRIPT

1 Association of Financial Professionals

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Marc-Andre Bergeron Managing Director & Head, Global Corporate Transaction Banking



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