Enterprise resource planning (ERP) providers are developing extra features for their treasury modules to provide customised services that could compete with treasury management systems (TMS). They are also developing cloud computing products that are more affordable for small and medium-sized enterprises (SMEs).
However, companies with advanced treasury needs, such as management of a lot of trading activity, require specific financial forecasts and up-to-date information, which may mean that they still prefer the niche services of a TMS.
Treasurers and other financial professionals need to consider a number of questions to decide which one is best:
- What is the budget?
- How much time does the treasury department have to migrate?
- How uniform does the company’s IT security need to be?
- How integrated are treasury’s approval processes with the rest of the business?
ERPs provide end-to-end accounting services, from budgeting to invoicing, and are used to create a uniform process across the company. TMS provide treasury-related services, such as analysing and forecasting cash flows in various currencies.
A major benefit of ERPs is that they allow treasurers at large companies to connect with the rest of the business.
A Wider Remit
Treasury departments no longer stand alone, but now manage working capital across the whole company. They take decisions while looking at third party, country or currency risk, to name just a few. Treasurers also have to take into account the commercial impact their actions may have on suppliers or customers.
In many cases huge amounts of data need to be shared between them, the procurement and accounting departments to achieve all this.
ERP treasury modules ensure this vital communication happens quickly, without any loss of information, because they give all departments access to one ‘golden source’ of information. This allows any treasury decision to automatically update the company’s accounting position if relevant, and keeps financial partners informed.
Accounting platform treasury modules also offer flexibility around processes. Banks often see payment requests prepared by treasury departments and co-signed by the accounting team for release – with great efficiency because it is all on one platform.
These benefits tend to apply only to large companies, however. The vast majority of SMEs do not have such complex concerns. As installing an ERP is often too expensive for them, treasurers in these smaller firms prefer to focus on automating treasury tasks, handling simple reporting and communicating with their banks.
A good TMS can meet all these needs. It can also handle a basic connection to the company’s broader accounting system.
However, ERP providers have now improved their treasury management modules to provide more sophisticated reporting as well as greater customisation. They realised that treasury teams were shrinking further – with more being asked of fewer people and to tighter deadlines – and saw the chance to provide much-needed services to make their lives simpler.
The ability to use mobile devices for approval processes, alongside cloud technology, has enabled ERP providers to offer a more user-friendly and cost-effective system that may, one day, make them attractive to smaller businesses. Other features such as invoice handling could be used to help further enhance working capital management.
TMS are improving too and can work better with ERPs. They have enhanced their ability to offer tailored services and access to market data, and are also tapping into the flexibility of cloud technology. If the treasury has an urgent, ad hoc need for a particular service, TMS can provide it quickly and easily.
Treasury systems can provide more niche services for different sectors as well, recognising that the needs of an insurance firm will be very different from those of a healthcare company or retailer.
In the light of these changes, deciding whether to use a TMS or ERP should be on a case-by-case basis and the final choice will be different for every company. Treasurers need to decide how integrated they really need to be with the rest of the firm and how customised their services should be.
Businesses should speak to their peers about the pros and cons of each option. They can also get advice on which providers to use as there are lots to choose from and they vary widely in quality. Banks are well placed to make the introductions and arrange those discussions.
They can also help by continually adapting their own products to clients’ changing technical needs. They must always be able to send up-to-date banking information to companies’ treasury systems in real time. There doesn’t come a point where a business’s various teams set up the right systems, sit back and say ‘job done’. Instead, it is an ongoing journey. Companies are always evolving, buying and selling new products or changing their global footprint in line with economic factors and client demands.
The services provided by TMS and ERP treasury modules are getting closer but the two types of system remain fundamentally different. Treasurers must fully understand their own needs and those of the business to ensure they have the right one.
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