Automation and automated optimization are completely different things. I came to that conclusion when I looked at technology from Oniqua, a company I encountered earlier this year. The business impact of its software was what caught my attention. This is not to disparage the technology used, which was a well-engineered BI capability that integrated well with ERP environments. The software collectively optimized corporate procurement, inventory management and facility maintenance in a joined-up manner. And that was the point. You can automate  inventory management and it saves labor, but when you optimize it, it saves more labor and it reduces inventory costs in a big way.

CSC and the Cash Management Process

At the analyst conference with CSC I attended a month ago, I ran into a very similar type of application, but in a quite different area of business. CSC gave a demo of software that optimizes cash management. In effect, it does for cash management what Oniqua’s Analytics Suite does for inventory, procurement et al.

The easiest way to understand what it does is to define the primary problem it solves. Imagine that you are an accountant who is managing the cash flow of an organization. You mustn’t ever run out of cash, because that will prevent you making necessary payments. However you cannot predict precisely how much money will come into your accounts on any given day.

Currently this process in normally managed by extracting data from the accounting system and building spreadsheet models of the flow of cash. Whenever there is a shortfall it is necessary to borrow short-term money to cover the situation – and naturally that has a cost attached to it. The weakness is in the modeling.

So what CSC has done is to build a fully fledged analytics capability that looks at the historical pattern of payments, analyzes the outstanding debt and balances everything – including balancing the cash management across multiple currencies and multiple accounting systems. You need to see the software to appreciate how smart it is, but in the end I guess, it’s just well engineered analytics. The business impact is a cash management capability that is dramatically more efficient than is currently deployed by companies and which rapidly pays for itself, by collapsing the need for short term loans.

Technically this is pretty much a no-brainer for anyone that has the need, which means most companies you can think of. The bigger the company the more likely it is that its cash management is inefficient. If the company is multinational, it is guaranteed. But this is also something that small companies have a need for.

The Broader Picture

Think of it this way: Money is very much like stock. If you hold too much (as a contingency) then it isn’t being deployed where it could yield the greatest benefit. It cannot be made available to on-going projects, or marketing campaigns, or whatever. This proposition is proving so attractive that some banks are adopting the technology so that they can offer optimized cash management as a service to their customers.

Of course the technology, which CSC currently refers to as a Cash Management capability, has a knock on effect within an accounts department. If you can manage cash flow better then you can also use the same technology to manage budgets better, manage purchasing better and manage investment better. You begin to work towards an end-to-end management of money within the organization.

If you work in finance, especially if you work in banking, you should take a look at what CSC are doing here. It’s going to catch on.