By Ali Al Bajati, Head of Product at Volopa
At the mid-point of the year, CFOs’ briefs continue to be focused on driving efficiencies whilst managing risk, with time and cost savings always front of mind. However, the tools at their disposal and the environment in which they are operating is constantly shifting. Against this evolving backdrop, we take a deep dive into the main challenges and changes facing finance teams and some of the exciting opportunities available to ensure that not only can finance teams better forecast the costs coming down the line, if handled correctly, they can reduce them, too.
Forecasting FX fluctuations
One of the main difficulties which CFOs face is the increased threat of currency volatility, brought about by ongoing policy changes and economic inconsistency. This instability invariably leads to challenges in estimating future costs and can lead to huge risks and deficits for businesses with international operations, or even those who have international networks. With increasing numbers of firms expanding their operations and provenance of suppliers, we are witnessing a marked growth in clients seeking support to enable them to better forecast and manage their FX risks.
Businesses looking to gain control on this volatility may wish to consider a provider who can offer an FX-fix. This can be provided as an open forward contract, enabling users to lock in an agreed-upon exchange rate for a specified future date – often up to a year in advance. This allows businesses to convert currency at that rate at any time before the contract expires, providing protection against currency fluctuations and giving companies greater control and visibility over their future costs in the short, medium and long term.
Accessible systems
With more and more providers offering a range of products, serving different needs and at differing rates, finance teams find themselves at risk of working with a plethora of distinct entities operating across diverse platforms. This issue is further compounded when you consider legacy systems which operate at different speeds to newer models and which require unique log-ins and tools to operate.
This, of course, can lead to a siloed and disjointed experience, impacting finance teams’ efficiency and frequently leading to a greater strain on internal resources – and worse, unhappy customers. For many, the idea of migrating to an entirely new system is too costly and time consuming, yet the option to stay using a multitude of providers is not feasible either.
The answer here is an integrated and agnostic financial ecosystem. Businesses need platforms and the providers with whom they work to be efficient, secure and offer seamless transactions with all users and third parties. Agnostic systems, to which any provider can “plug and play” are critical to ensure the success of both existing and future products – delivering the efficiencies which all FDs are ultimately seeking. What’s even better is that most don’t even require a system migration, meaning CFOs can rest easy (on this front at least!).
Transparency
Finally, payments transparency and optimisation continue to be top of mind, especially when it comes to cross-border payments. Here, understandably, customers want their payments to arrive complete and on time, and, critically, they want to understand what and why they’re being charged.
However, all too frequently, the fees that are levied aren’t always transparent. Some banks will show one rate, without additional costs, which can result in a nasty shock at the point of transfer when all fees and spreads are added on top of the original quote. Businesses are looking for providers who offer an alternative to the traditional, bank-led payment rails and who show all costs up front, giving clarity at the outset on how much customers will be charged – and why.
Using alternative payment rails, which are typically local country payment rails, means customers can avoid the legacy correspondent banking system – and therefore avoid the corresponding bank fees. What’s more, as a secure communication platform providing standardised messages, using alternative rails ensures an efficient, low-cost and most importantly, transparent, option for businesses making cross-border transactions.
What’s next?
What’s clear is that the payment and expenses landscape is continually developing – with new risks and threats emerging as well as exciting products which can improve efficiencies at all points in the payment process. We’ve touched on just three of the core areas which are impacting finance teams at the moment, but the list is seemingly endless – encompassing digitalisation, Open Banking and, of course, AI.
H2 is set to be a busy one for finance teams across the UK and beyond, but with the right partnerships and providers, the scope to create a seamless and intuitive ecosystem, might just be within reach.
