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Staying on top of your transactions and credit lines in a digital world.

Staying on top of your transactions and credit lines in a digital world. 3

Staying on top of your transactions and credit lines in a digital world. 4

By Jacco de Jong, Head of Global Sales, Bolero International

Corporate treasury departments have been under a lot of pressure in the last few years. The department is expected to keep companies running with smooth, stable access to credit facilities with banks and insurance providers. At the same time, they have been under extreme pressure from audit comittees, shareholders and chief financial officers to improve profitability and reduce risk rather than take more risks.

To make matters worse, treasurers are finding it exceedingly difficult to continue to use manual and, in some cases, multiple complex workflows that involve various systems and many points of contact. This is especially true in the management and optimisation of credit lines and important instruments such as bank guarantees, letters of credit (LCs) and standby letters of credit (SBLCs) with Multiple Banks.

In this piece, we will be addressing how treasurers are able to streamline their workflows and streamline communications with their banks to optimise their credit line utilisation, transaction management and leverage the advancing trade digitisation of banks and insurance providers.

Leveraging the banks’ advancing trade digitisation

It’s an open secret that digitisation and consolidating the communication between treasury departments and banks in trade has been tortoise like, mainly because workflows have historically relied on the transfer of paper documents, e-mails and at best using multiple bank portals, between trade parties in largely laborious processes.

Whilst in the past year we have seen the adoption of recent technologies in the trade space become increasingly prevalent as the pandemic has put a strain on the supply chain, most corporates are yet to figure out how to manage their transactions across supply chains in an efficient way. But also how they can reconcile all of their transactions (usually handled by multiple banks), streamlining communications with their banks, and consolidating their guarantees on a regional or even global scale.

In order to enhance efficiency, corporate treasuries must move away from using paper in transactions, and reduce their reliance on Excel sheets. Data from the International Chamber of Commerce (ICC) has shown that despite increasing digitisation among banks, many treasury departments still rely on sluggish and cumbersome paper-based processes despite banks themselves transitioning to digital variants of bank guarantees and letters of credit.

In industry and construction, we see huge volumes of performance and warranty bonds being passed around between banks and treasuries using every form of communication available. In international trade, lost or delayed documents spanning different continents are seen as a normal occurrence.

These very documents are also prone to forgery and need to be safely stored and manually reconciled. At issuance of these documents, the process is burdensome for corporates and any delays mean that they are not open for business. During the pandemic, these delays were highly exposed through the inconsistent forms of communication mentioned between different parties. This highlights the needs for corporates to transition to the latest solutions that enable multiple bank workflows.

Reconciliation of all transactions

Advancing technologies and the adoption of digital tools have become a priority for corporates in a post-pandemic world that will force them to adapt.

Today’s corporates need digital solutions that provide them with reconciled and consolidated views of their credit lines, letters of credit, and bank guarantees for every bank they deal with.

Speaking to many of the larger corporates, we still see reticence in the adoption of digital technologies as they sometimes require lengthy and costly integrations that may not present clear and tangible benefits relative to their cost. Therefore, it becomes important for digital providers in this space to provide user-friendly solutions that require easy adoption and importantly plug-in to an extensive network of banks to keep on top of credit facilities, transactions, and bank guarantees.

From a single interface, treasury departments need to be able to manage and edit their letters of credit, bank guarantees and electronic presentations. This is particularly important for large, multi-national corporates with subsidiaries or treasuries distributed across the globe, they need greater visibility across borders and organisational boundaries, providing efficiencies at scale in use of credit lines, working capital and transaction management.

Increasing visibility and control

Banks are increasingly adopting digital trade finance solutions, enabling corporates to communicate with all of their banks in a seamless yet transformational manner and finally moving away from antiquated paper processes and multiple communication channels.

We’ve seen many prominent examples in the digitisation of international trade over the course of the last year in part because of the impacts of the pandemic. With working habits changing and remote working becoming the norm, the adoption of multi-banking trade finance solutions allows treasuries to manage and optimise their LCs, bank guarantees and credit line relationships with banks with an ease and efficiency that has previously been impossible but, now very necessary.

Although we are highlighting the benefits of moving to a digital solution, and with good reason, the right solution can also future-proof treasury departments. With the SWIFT Guarantee messages changing towards the end of November, having a clear understanding of the compliance and concurrence of standards is key.

Today, treasury teams working with banks rely on a variety of manual processes to manage relationships and maintain the infrastructure for transactions, including Excel spreadsheets and complex error-prone manual processes. By digitising important paper documents and reconciling all transactions in one place, the technological landscape for trade and treasuries has paved the way for many advantages building open communication channels with financial institutions.

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