Techniques for Treasury Resiliency

The events of the past few years have forced treasury teams to adapt and find new ways to function efficiently, effectively, and securely. Given the essential role that treasury plays in organizations, it is paramount that treasury professionals are able to perform at a high level in any operating environment, regardless of market conditions. To this end, the pandemic accelerated the adoption of new technologies and tools to optimize treasury management. Digitization and automation have become the norm as organizations seek to build resiliency in treasury while positioning themselves to capitalize on new opportunities. As we enter into a rising-rate business cycle the need to improve efficiencies in working capital management will become even more critical for every company.

For treasury professionals facing this new normal, we offer the following best practices and a library of video content featuring practical advice and industry insights from treasury experts.

Looking to discuss your treasury challenges with a member of our Transaction Banking team? Contact us at: transactionbanking@santander.us

Maintain banking access, flexibility and security

• Review user rights to make sure critical payments can be made remotely and still meet standards for controls. Confirm there are enough members of your team who can enter and release payments, as well as perform other critical tasks, in the event that someone is out of the office and a coworker needs to provide back-up.
• Make sure your digital banking users’ security tokens and laptops are functioning, so they can log in and perform secure transactions.
• Update contact information for mobile phone, home phone and email, if appropriate. Identify all users who are to receive positive pay exceptions and instruct them to update their preferred email information used for these alerts. This is done directly in the online banking system.
• Your employees’ contact phone numbers for cell and home, if appropriate, should also be shared with your bank, including members of your team who receive positive pay exceptions. Not all payment instructions will be communicated by email.
• Update your password. Password resets are validated with a one-time passcode that is delivered to you via text or email. Notify the bank’s client services team if the URL to the login to online banking appears unusual or in a format unfamiliar to you. The bank will always notify its customers of any upcoming changes. Notify the bank’s client services team if you receive a request for your password or token authorization codes. Be vigilant of any email, call or letter asking for confidential information.

Automate payments for speed, security and reduced risk

• Set up wire and ACH capabilities in digital banking to ensure critical payments can be executed. Document how payment instructions will be communicated and what the approval process will be for sending wires and ACH payments.
• Notify the bank in advance of payments that exceed established limits, to ensure continuity.
• Encourage any employees who are still paid by check to sign up for direct deposit, so that they can be paid electronically and have faster access to their funds.
• Consider automated solutions from your ERP or accounting system for wires, ACH, check printing and virtual card payments—which can also improve your working capital visibility.
• Maximize efficiency in invoice processing by moving to integrated payables. Not only does this automation help to improve productivity, it can help reduce the risk of fraud and errors.
• Encourage colleagues to continue using contactless technology in Commercial Cards to aid in increasing security and improving working capital. And paying by card and virtual card also works to improve payment predictability and help reduce costs.
• Use virtual card payments to convert manual check payments to an electronic alternative, while helping to extend working capital and generating potential rebate revenue. Because virtual card payments are created to pay for a specific business transaction, the account numbers are not shared with the suppliers, minimizing the risk of primary account fraud.

Speed revenue capture

• Document wire and ACH payment instructions for customers who currently pay by check. Santander can provide details to ensure payments are correctly applied to your accounts.
• Use a receivables lockbox, so checks are deposited the same day they arrive. Arrange provisions for payments mailed to corporate offices if staff is working remotely. Adding eLockbox services can streamline and accelerate collections.
• Reduce AR balances, generate cash flow without increasing bank debt, and reduce payment risk by exploring receivables discounting solutions for qualified buyers.
• Use remote deposit capture (Check Deposit Link) to scan and deposit checks, to make deposits without going to the bank. If you are currently a Santander Check Deposit Link client, you can download scanner drivers to your home computer or laptop and use your bank-provided scanner at home.
• Remember to store checks for 30 days after deposit using a safe that’s fireproof and waterproof, then shred them for secure disposal.

Tighten your defenses to combat increased risk

• As fraud attempts continue in the post-pandemic environment, businesses of all sizes should buttress fraud detection and prevention efforts.
• Equip employees with information on how to spot common cyber threats, including business email compromise (BEC), phishing, ransomware, and social engineering. Establish and share standard procedures for reporting threats and verifying any urgent email requests for funds or banking information.
• Consider implementing more stringent time-out limits to log out inactive users and reducing the number of failed login attempts that trigger automatic disablement. Ensure that encrypted passwords are set to require regular updates.
• When initiating wires and ACH transactions, always require dual authorization—particularly important in a remote work environment.
• Set up alerts designed to notify administrators of payments above specified thresholds, or changes to payments or entitlements. This will help protect against suspicious activity, but also errors.
• Carefully monitor online usage and account activity. Review all transactions initiated by your company each day for authenticity.
• Help thwart check fraud by using Positive Pay services designed to alert you to any disparities against your check issue data.
• Surface potential fraudulent transactions by using ACH Positive Pay filters to help identify any incoming debits that do not match your pre-defined criteria.
• Set up ACH blocks and filters designed to allow only transactions that match your criteria, or even stop all credits or debits from posting.

Focus on liquidity and financial resilience

• After many businesses experienced a revenue slowdown during the pandemic, maximizing working capital in the next normal is a priority, especially in a rising interest rate environment. Steps you can take include: delaying discretionary spending, deferring elective contracts, accelerating receipt of funds and prioritizing required expenses using working capital-friendly payment methods.
• Assess how your sales and receivables are likely to be affected and forecast your cash flow requirements for the next 30, 90 and 180 days. Stress test and update these projections as your situation changes. Validate your borrowing capacity and credit card limits and outline a plan for funding any unavoidable shortfalls.
• Utilize commercial cards and virtual cards where appropriate to help provide a cash flow cushion between purchase and payment.
• Stay in touch with your bankers to help maintain alignment about any capital needs and to discuss options for extending financing and managing liquidity. Explore alternative financing sources to preserve core bank funding appetite. Review debt covenants.
• If you have not already implemented a hybrid account, now may be an opportune time to do so. By earning interest on funds in excess of those required to offset fees, you can maximize the benefit of your deposits.
• Improve visibility and control over cash positions abroad where possible.
• To improve liquidity across overseas markets and currencies, consider implementing cross border cash pools. This structure can allow optimization of excess cash in subsidiaries abroad and reduce dependency on bank debt in other countries at a partner level. Certain jurisdictions, like some Western European countries and some APAC countries, allow efficient structures with limited implications from an operating tax perspective.

Strengthen trade networks, support supplier diversification

• Help steady key suppliers and maintain their ability to meet your demand by supporting their working capital needs using supply chain finance solutions.
• Utilize tools such as accounts receivable or letter of credit discounting to potentially allow your customers to extend their payment terms with minimal impact to your working capital.
• To support rapid trade network diversification required to maintain your supply chain, consider letters of credit as a solution to expand your reach and help accelerate negotiations with new vendors.
• Alternatively, use letters of credit when selling to new customers to reduce your risk of slow or non-payment while taking advantages of risk mitigation and financing tools such as confirming or discounting the letter of credit to manage your working capital needs.
• To better provide protection to both buyer and supplier in cross-border trade, use documentary collections.
• Help mitigate the risk of increasing currency volatility in cross-border trade by using FX hedging.

Contact us

If you have questions, please contact your Santander Treasury Team or email transactionbanking@santander.us.