Despite the many benefits offered by the latest treasury management system (TMS) technology, the humble spreadsheet remains the tool of choice for a significant number of treasurers. For a treasury management system (TMS) implementation project to successfully come in on time and on budget, the initial planning phase has to be carried out well; otherwise there is the risk of ‘garbage in, garbage out’ if the treasury does not clearly define its needs, connectivity requirements and support services.
The treasurer needs to define their requirements for the TMS, both today and going forward, so that it is ‘future proofed’ and scalable to meet business or regulatory risk reporting challenges further down the line.
“In my experience, success is determined very early on in the process,” says Patrick Cannon, executive vice president (EVP) of client services at Reval. “To that end, you want to make sure that there is a clear understanding around the overall vision of the project and areas such as business responsibilities – you need the necessary firepower in the team to deliver. Success is really determined upfront. This is why both the client and the vendor should spend a lot of time and effort on the planning phase of the project.”
According to Paul Bramwell, senior vice president (SVP) of treasury at SunGard’s corporate liquidity business unit, one of the key issues that corporates perhaps don’t consider when they are looking for a new TMS is that they ‘don’t know what they don’t know’. In other words the treasurer hasn’t future-proofed it or clearly laid out the demands that will be placed on the new TMS and associated technology infrastructure. “Having a very clear definition of requirements, based not only upon what is done presently, but which contemplates the future as well is vital,” he explains. “That is where companies can fall down a bit when they start to look for a solution.”
Be Proactive and Beware Regulation
There are proactive steps companies can take to ensure good planning, integration scoping and future-proofing. You can engage a third-party consultant, for instance, who has experience of involvement in TMS implementation projects. There are also peer case studies and articles in the trade press on other companies that can explain how they went about selecting their treasury technology, offering peer knowledge and experience. External sources such as these can provide a good indication of what systems and support is out there and what your treasury can achieve in terms of improving the efficiency and straight-through processing (STP) of corporate operations.
“There are regulatory changes to take into account as well when defining your requirements for a TMS,” says SunGard’s Bramwell. “It may well be that you’re not doing risk management right now, or that you haven’t yet begun planning for Dodd-Frank or the European Market Infrastructure Regulation (EMIR), but things like these are coming down the pipe. You need to understand the ramifications of changing regulation to ensure that you are in a position to report on data and can easily get that information out of the TMS. Otherwise, you may fall foul of regulation and find that you have to do the whole complex exercise on spreadsheets, which is never ideal.”
Another consideration is that a number of vendors offer the opportunity to purchase certain parts of the TMS initially, and then build in additional modules later on as and when they are required. “Treasurers can buy what they need now, but also have that scalability or opportunity to add features later on, so they don’t have to buy everything up front,” says Bob Stark, vice president of strategy at Kyriba. “This makes it a lot easier to match the costs of the technology to the benefits, as opposed to having to buy the full package upfront and hope that it pays off in terms of eventual return on investment (ROI).”
Current treasury, operational and business practices should also be reviewed as part of a TMS specification process, because you may actually find that your workflow is inefficient. Simply automating things is not always an improvement. An extensive review to make sure process improvements are picked up along the way can save on headcount, or at least allow you to deploy headcount more efficiently. A good TMS can also allow the headcount that you have to focus on the strategic element of the business, instead of concentrating on manual tasks. Rather than having a treasury professional monitoring bank accounts for a large part of the day, for instance, a TMS may allow them to consolidate the data two hours earlier and actually get better at cash forecasting and finding out where errors and delays in the process exist.
Getting the Right Vendor Match for the Best Implementation
The TMS market is mature, and it is also a consolidated market that has seen a lot of concentration recently with Wallstreet Systems taking over IT2 and other merger and acquisition (M&A) moves underway. The major players in the market mostly grow via purchases.
Information on the various available technology vendors can be found in TMS guides – such as this one – and if you go to a treasury association conference such as the AFP Annual Conference in the US, you will see all of the TMS vendors in the exhibition halls alongside the banks. Here you can have a look at how each one will actually fit the profile of what you need. A treasurer should also assess how good the on-going support for a TMS is likely to be and the likelihood of development support for future add-on modules.
Companies typically draw up a vendor shortlist, engaging research from companies that they know, press articles and list reports. There is a lot of information out there in terms of which vendors offer solutions that are a better fit, which offer a more holistic solution, which ones excel at things like risk management and reporting, and which TMS’ have a broader fit in terms of cash risk and accounting coverage.
Request for Information/Proposal
When a treasurer has gone through all of the available information and has a clear idea of what they must have, what they’d like and what ‘might be nice’, a list of approximately five TMS vendors can then be drawn up and a competitive tender process launched. These needs and requirements will usually be issued with a request for information (RFI) and a more comprehensive request for proposal (RFP) and tender later on. This should include all the information that a treasurer has pulled together so far in the project, covering the current state of the treasury, what they want to achieve, the workflows, and what they could/should achieve with the right TMS in place, soliciting vendors to pitch for the contract.
Results from the RFP process give the treasurer enough information to whittle the vendor shortlist down, usually to around three strong candidates. The treasurer will then organise workshops, presentations and demos with the shortlisted vendors to make sure that the software is seen in the light of the corporate’s own data and their own typical work day, assessing its suitability. This allows for an informed decision to be made about which TMS will be a better fit for the corporate’s specific needs.
The Implementation Process
The key to any TMS implementation project running smoothly is to have a solid project manager in place. Companies can sometimes underestimate the value that a project manager adds to a TMS implementation, but they shouldn’t. While the vendor could provide the project manager, it is much better if this role is filled by someone from the corporate itself – remember, the vendor does not have access to control the corporate’s resources to get things done on time. Implementing a TMS can be a very complex procedure to go through. Everything from cash, accounting, hedge accounting and risk should be considered. Then you need to make sure that what you are actually going to finally build and configure will meet everybody’s requirements from the treasury to supply chain partners, with appropriate bank and payment connectivity. Having a project manager to put all of these disparate resources together is very valuable and should ensure that you end up with a successful implementation.
With a project manager in place, it is also vital to make sure that every department within an organisation, which will be affected by a TMS installation in any way, are also consulted before the implementation begins. “With an implementation project, it is important to involve all of the relevant people and departments up front, even when you are going through system selection,” says SunGard’s Bramwell. “The last thing you want to do is to decide on a vendor, sign a contract and begin implementation only to find that the accountants haven’t been consulted and the TMS doesn’t do what they need it to. Similarly, you don’t want to discover that your IT department has security concerns about how the system will be deployed once you’re already so far down the path.”
It is also important to make sure that there is a very defined timeline agreed between the corporate and the vendor. The project manager’s role is to make sure that everything is kept to the plan and on timetable, but these goals should be realistic. Many vendors will define the scope with the client ahead of the project to make sure that both are in agreement with what is going to be delivered, and that there is sign-off with the vendor and the corporate to make sure that the goals are completely articulated and agreed ahead of the project launch. That way, there are no unexpected events throughout the lifecycle and no assumptions are left untested. Defining the project scope clearly at the start of the implementation process can save costs.
“Outside of possible costs such as budget over-runs, there are also opportunity costs,” says Reval’s Cannon. “There is an investment in terms of resourcing and staff that is needed by the client. Not having this key internal support can potentially hurt a project.”
“If you align what you need with the TMS you select, you can be very focused on that outcome when it comes to implementation,” says Kyriba’s Stark. “When these needs are priority items, which have high visibility and achieve significant productivity and efficiency aims, it is really much easier to keep the team focused. If things aren’t linked to the team’s goals, it becomes much easier to let things slide and you may not get the full benefits that an implementation can provide.”
A typical TMS implementation is a staged ‘rolling live’ process. There is a finite live date at which point any old technology is switched off or decommissioned. Everything has to be migrated over to the new TMS by this date, so you should plan the migration process too.
During the course of a project, different areas of the TMS will be tested. There will be some duplication of work, but that is a necessary evil, as the TMS has to be tested before it is fully launched.
The shorter the duplication period is, however, the more cost efficient the process will be. Long timelines can introduce their own inefficiencies and mean valuable future development modules are not included in what should be a modern TMS. Scalable, flexible solutions can help here in reintroducing new functionality, but ideally you don’t want to be doing this until a good few years after an installation.
Most companies would probably like a ‘big bang’ approach to a TMS implementation where everything is switched over to the new system in one go, but testing is vital to ensure that nothing needs to be fixed once the TMS has gone live. Operating parallel systems for a brief time gives you the chance to once again check that all of the necessary calculations, regulatory reporting and workflows are correct. When they are, the TMS is ready to go live and the efficiency and ease-of-use benefits of a TMS should start to accrue.
- This feature is taken from the 2013 gtnews Treasury Management Systems (TMS) Buyer’s Guide. To see the other features and the entire 42-page pdf document please click HERE.
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