Key Benefits and Use Cases of Real-Time Treasury Management

With real-time financial data, businesses will track liquidity with certainty and compress complex processes to a single click


Consider the value of an always-open channel connecting your accounts at your financial institutions to all the platforms your company uses to manage its financial operations. This would include separate systems for functions like accounts payable (AP) and accounts receivable (AR), or an overarching treasury management system.

Think about the efficiency, control and real-time insight you could gain. Through real-time treasury management, you’ll be able to:

  • Eliminate duplicative data entry
  • Automate processes across platforms
  • Calculate your cash position at any moment 

Currently, real-time treasury management is a work in progress, but that is changing. The financial industry is working to develop the application programming interfaces (APIs) used to tie systems together. The following use cases will give you a flavor of what the world of real-time treasury management will offer.

Managing Cash Flow Precisely

Perhaps the easiest way to understand the potential of real-time treasury management is to consider what it might mean for managing cash flow. It would be advantageous for almost every business to have a minute-by-minute understanding of their cash balances. This becomes even more valuable for those who participate in the financial markets on a daily basis. 

Currently, companies rely on electronic BAI files from their financial institutions, but these can arrive hours after transactions are completed. To address this lag, corporate treasurers are forced to adopt a number of defensive strategies. They can maintain a cash cushion to avoid overdrafts, which means they are not using their capital efficiently. They can rely on forecasting tools, which are only as good as the assumptions behind them. Or they can use some combination of the two. 

The eventual introduction of APIs that connect financial institutions to a customer’s treasury management systems (TMS) in real time could put an end to this uncertainty. Over the course of a day, corporate treasurers will be able to constantly monitor transactions at their financial institutions, watching their cash position ebb and flow as they make and receive payments. 

This will enable companies not just to avoid overdrafts and utilize their cash more efficiency, but also make smarter, quicker investment decisions. 

Processing Application Fees

Real-time treasury management could also be used to automate and streamline specific processes. One use case that’s often cited is invoicing, where a real-time payment system could help businesses take advantage of potential discounts for paying early; however, there are other processes that could benefit from real-time treasury management. For instance, many businesses and governments use application fees to cover upfront expenses required to vet customers, whether these customers are renting an apartment or renewing a license. 

One problem for these organizations is keeping track of the many application fees they receive. With real-time treasury management, the process of monitoring and recording a payment could be done without any human intervention. It would happen automatically. Consider this example of a loan application fee for a commercial real estate property.

  • Payment requests: The process begins in the lender’s customer relationship management (CRM) system. When the borrower agrees to move forward with the loan, two things happen: the CRM uses the borrower’s data to generate a request for payment (RFP) from the borrower’s bank. At the same time, the CRM sets up a receivable in the lender’s treasury management system (TMS). 
  • Payment: The next step is the actual payment. Having received the RFP, the borrower’s bank sends an approval notice to the borrower. When the borrower approves the payment, the funds are transferred to the lender’s financial institution. 
  • Receipts: This event kicks off a series of notifications. The bank instantly pushes a receipt to the TMS, closing out the transaction. And the TMS pushes the receipt to the CRM system, which notifies the lender that underwriting can proceed.

The Real-Time Revolution Is on the Horizon 

The introduction of APIs, which form the backbone of real-time treasury management, would be incremental. The first generation of APIs will be limited in their functionality and facilitate simpler kinds of information exchange. But as the decade passes, APIs will gradually grow in power and sophistication. 

As this transformation takes place, it’s important for treasury teams to stay in touch with their financial partners to gain a better sense of their API plans and timetable. With a strong understanding of the kinds of problems that real-time treasury management will solve, you’ll be able to find more value from implementing these technologies. 

 


The information contained herein is shared for educational purposes only and it does not provide a comprehensive list of all financial operations considerations or best practices. This information does not represent any commitment, financial obligation, advice, opinion, guidance or recommendation, whether formal or informal, of Capital One, National Association, or any of its officers, directors, employees, advisors, attorneys, consultants, affiliates or subsidiaries (collectively, “Capital One”). Nothing contained herein shall give rise to, or be construed to give rise to, any obligations or liability whatsoever on the part of Capital One. 

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