Finding a Cash Management Solution: the Treasury Management System

Today’s business world is a fast-paced global marketplace
that requires companies to react quickly. Treasury departments are seeking
solutions to achieve the greatest level of efficiency, while accurately
forecasting financial positions. The days of carrying out mundane tasks are
numbered and treasury departments are looking to focus efforts on completing
value-added activities.  Effective treasury managers are now in the game of
predicting trends, which requires them to organise the company’s finances to
ensure or improve profitability, as well as report results to executives.

How is this done? Treasurers can employ a treasury management system (TMS) and
within that offer a cash management solution. The focus of cash management is
the process of collecting and managing cash and a TMS provides the most
effective solution to gain insight on your organisation’s cash and liquidity
while maintaining accuracy and efficiency.

Cash Management

For any company, regardless of size, it’s vital that the
treasurer ensures it can cover its day-to-day operating cash requirements.
Confronting insolvency it something that no one would wish to experience. 
Poorly managing your organisation’s cash can lead to a maze of bank accounts
across a multitude of banks incurring excess fees, which cut into the bottom
line. Furthermore not having an adequate handle on your cash positions will
restrict your company’s ability to act or react to any problems and/or
opportunities presented within a short window of time.

Treasury managers
are responsible for organising and reporting crucial data to their executives.
If this data is reported in format that is easy to read and understand it will
allow management to capitalise on opportunities.  For example, providing up to
date and accurate cash positions enables treasurers to select suitable
short-term investment vehicles. Alternatively, adequately preparing for any
unforeseen expenses will ensure they are able to deal with recurring events such
as payroll.

The Simple Solution

TMSs provide a wide array of
solutions to corporations looking to automate and streamline their daily
treasury processes. These solutions are broken into three major areas:  cash
pooling and reporting, cash forecasting and in-house banking.

cash data starts with bank reporting. A treasury analyst could spend his or her
entire day logging in and out of bank websites with various key fobs and
passwords in order to collect cash positions but this wastes time, energy and is
extremely inefficient. A TMS automates connectivity into any financial
institution, thereby creating real-time access into cash balances and
transactions while allowing users to know their cash levels sooner to facilitate
more timely borrowing or investing decisions.

Once the data is
automatically retrieved, executive dashboards allows organizations to place it
within a comprehensive view of their cash in a real-time high level view. 
Within a treasury workstation users can also automatically setup future forecast
scenarios and model future forecasts based upon historical actuals, allowing for
more timely and accurate predictions. After these predictions are collected and
organised, treasurers can then proceed to forecast the demand for cash and
determine, as and when appropriate, to find a suitable short-term investment.

Some organisations have a difficult time managing, tracking, or accounting
for funds or expenses across internal entities, or consolidating cash by
currency. The majority of treasury workstations provide in-house banking
functionality to help streamline these activities. In-house banking allows users
to create virtual or in-house accounts, instead of opening real accounts and
unnecessarily incurring fees. This feature gives users the flexibility to pool
accounts in any way that best suits their business, which results in decreased
external borrowing costs and elimination of unnecessary bank accounts.

This flexibility simplifies inter-company lending between internal entities.
With currency volatility still a major issue, foreign exchange (FX) exposure
management is crucial for treasury managers. Consolidating current activity
grants instant access into your net current exposure which can help alleviate
headaches caused by traditional tracking of FX. The entirety of a cash
management solution assists in the treasury manager’s pursuit of achieving their
main goals; namely to optimise liquidity, make sound financial investments for
the future with excess cash and manage risk.

By shedding light into an
organisation’s cash and liquidity treasurers can reduce working capital, as well
as improve internal controls by maintain audit trails. Spreadsheets do not meet
today’s audit or management standards, and it is becoming an industry best
practice for corporations that carry ample level of financial risk to organise
their treasury departments with a full-bodied TMS.

Additionally, due to
the demands of increasing regulatory compliance, such as the US Dodd-Frank Act
and the single euro payments area (SEPA), it is essential to have the
appropriate technology. These industry trends mean the number of organisations
in the market for a TMS is increasing and with that so are their treasury needs.

Technology and globalisation factors have sent the business world into
overdrive. Fortunes, both personal and corporate, can be made or lost in a blink
of an eye. The TMS chosen, implemented, and managed by treasurers plays a major
role in their companies’ profitability and ultimate success. So the big question
is: which one treasury platform are you going to choose? 


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