When to Have Treasury Management AI Tools

In less than two years, treasurers of midsize companies have gone from "why?" to "we needed it yesterday" when it comes to using artificial intelligence (AI)-driven automated treasury operations. With the pandemic accelerating digital transformation across all industries, treasurers with manual accounts payable and accounts receivable operations are being buried in paper and email remittances.

"Before COVID, many treasurers could appreciate the benefits of automated managed services but didn’t feel an urgency to replace manual processes that had served them well," says Laura Listwan, Senior Vice President, Head of Commercial Payments Products at Fifth Third Bank. "But now we’re getting many more clients wanting more information about our treasury managed services and its AI-driven features. The explosion of e-commerce and the demand from both B2B and B2C customers for faster payments, refunds, and customer service have really tipped the scales."

Moving at the Speed of AI

Adding to the urgency to switch to automated treasury systems are the ability to see cash flows across an organization in real time and the power to boost revenues by analyzing patterns in payments and receivables data. Companies that don’t use data analysis to get actionable insights could find themselves at a competitive disadvantage.

Another key advantage: At a time of labor shortages and high wage inflation, automation can help firms by reducing the manual inputs that are typically required to operate the business, saving on staff expenses.

Assessing which AI solutions to adopt isn’t easy, no matter the size or maturity of an organization. A study by Accenture in 2019 found that 84% of C-suite executives at large corporations felt they needed artificial intelligence of some kind to achieve their growth objectives, but 76% were struggling to work out how to use machine learning, neural nets, and other technology that falls under the AI umbrella.

Meanwhile the AI offerings for enterprises are ballooning. AI start-ups raised $33 billion in equity funding in 2020, and while the uses of AI in enterprises are vast, treasury operations are often the place companies begin their journey, for a host of reasons.

Increasing the speed of straight-through processing (STP), particularly when it comes to email and payment reassociation, continues to be a popular feature of managed services.

Listwan gives the example of a client who used manual management of emailed remittances, which took as long as 10 days to process and clear electronic payments. By replacing it with an intelligent payment routing cloud-based AI system paired with optical character recognition (OCR) technology, the company was able to cut its automated clearing house (ACH) rate to 24-48 hours.

AI can also make it easier to uncover and resolve discrepancies such as customer payments that don’t match existing transactions. Instead of relying on conventional methods of prioritizing collections, like days past due, companies can use AI to prioritize collections based on factors signaling the likelihood to pay in a certain time span. Once problem accounts have been detected, the AI system can send automated emails to sales reps associated with the accounts, notifying them that help with collections might be needed.

AI Keeps an Eye on the Future

Companies realized the importance of visibility of their balances in 2020. Knowing where every cent is at any given moment is just as critical in 2022 and beyond, as organizations seek to expand or take advantage of new product opportunities.

Automated treasury services using AI can get a real-time consolidated view of cash positions across stores and subsidiaries, making cash flow forecasting easier and more accurate. "Once treasurers can see where the cash is, in real time, they can run various models and apply formulas to see sunny-day and rainy-day forecasts based on business expansion plans," says Listwan. "It provides greater insight for their leaders considering expansion into new markets or mergers and acquisitions."

But the real innovation of the future will involve big data. Treasury departments are transforming from back-office physical processing of payments and receivables into data science and analytic centers, scanning internal and external databases to find patterns in consumer and sales behavior. Listwan’s outlook for Fifth Third’s managed services is to add features that help midsize companies find those patterns, without having to hire an army of data scientists. "As providers of managed services, we can provide our clients with actionable insights by analyzing the data. The opportunities are endless."