Imagine you are the group treasurer or cash manager of a
global company who has predicted aggressive double-digit growth in earnings over
the next five years. This forecast is based on a bold strategy of consolidating
existing markets while entering developing ones through organic growth,
maximising the company’s cash reserves. Your job is to make sure that your
treasury’s vision and strategy handling the financial supply chain both supports
and finances the company’s global strategy. Thus, the financial results
published in your reports are keenly anticipated.
Following this scenario,
you know that you face a number of challenges. For example, the cash is located
in several different countries, time zones, currencies and probably with
multiple banks in each country. One of the key questions is: do you have global
cash access, full visibility and (close to) real time reporting to promptly
answer any cash-related question from different levels within your organisation?
Let us assume that, based on the size of your operations, your
geographical footprint and the structure of your treasury, there is a business
case to implement or upgrade your current treasury technology to address these
Your treasury technology tool should be able to comply with
all these requirements, and support several others, such as:
reporting for different accounting rules in each country, including hedge
- Forecasting tools integrated to real time revaluation of your
- Cash management, including accounts payable (AP) and
receivable (AR) invoices.
- Access to all financial instruments that you
may need and relevant risk reporting.
- Commodity hedging.
internal bank to manage your global cash pools.
- Segregation of duties
and a rigorous audit trail.
At this stage, all the technicalities
related to payments and bank statement formats, interfaces to other systems or
the connectivity towards your banks (host-to-host or SWIFTNet), and the hosting
of your treasury management system (TMS) – hosted either in-house or in the
cloud – have not even crossed your mind.
Although the technical side is not
part of the regular set of treasury requirements per se, these questions will
make good sense to any cash manager or treasurer who has participated in a
successful system implementation because he/she knows that such a project should
be led by the business and deeply supported by IT; but it should never be deemed
to be merely an IT or solely a business initiative.
A Narrow Shortlist
The good news is that the list of TMS vendors you need to evaluate as your
system provider is being narrowed. Currently, only few vendors are the true
global players that can meet all the functionalities listed above in the
example. As observed in the 2013 gtnews TMS Buyer’s Guide, there is a long track
record for consolidation in this market, coming not only from the recent
acquisition of IT2 and Financial Software Systems by Ion Group’s Wall Street
More good news: TMS vendors have managed to keep up with the
functional requirements in a turbulent and ever more demanding market. TMS
vendors are constantly enhancing their functionalities to satisfy treasury
trends; from cash management tools and adding exotic financial instruments to
new reporting possibilities. TMS providers (and at least one enterprise resource
planning (ERP) vendor) have surprised the market with their mobile
functionalities, allowing for remote real-time treasury and cash management
approval processes and reporting through smart-phones and tablet devices and
enhancing the treasury technology’s utmost benefits. Nonetheless, other
off-the-shelf solutions for country-specific conditions are still missing; for
example the use of local characters in the Asia Pacific region or specific tax
and reporting management for Latin America – a pain point for many system
It has been said that stand-alone TMS are a dying species,
both due to the better functional offering from different ERP systems in the
treasury area and the costs related to integration (i.e. building interfaces to
accounting systems, ERPs or other enterprise software for financial processes).
On the other hand, we have increasingly seen TMS vendors develop off-the-shelf
interfaces to banks and other systems ready to be implemented. These are
important developments since data gathering from other business areas is crucial
Conversely, it is not to be denied that ERP vendors have been
successful in strengthening their offering to meet most of the required treasury
and cash management functionalities that earlier made standalone TMS offerings
significantly more sophisticated than their ERP counterparties. Moreover, there
is no doubt that in this area of integration, ERP’s treasury and cash management
modules offer much ‘for free’. ERPs such as Oracle and SAP are by definition
integrated with accounting, AP and AR, human resources (HR) and tax – even if
this data is spread over multiple instances.
Pluses and Minuses
does this battle between integration and functionality mean to you, the
corporate treasurer and end customer? The good news is that whatever decision
you make, you will purchase a better product. The flipside of this evolution is
that the decision process to select your optimal treasury solution is more
complicated than before. Nowadays it is more important to know upfront exactly
what you’re looking for to in order to make the right decision. When your
demands are not very specific, multiple system offerings can appear to meet your
needs. Alternatively, if your request for proposal (RFP) is based solely on your
current needs, you risk creating a mismatch with your future treasury state.
At Nasarius, we challenge and support our customers to define their exact
needs and weigh them against each other. This leads to a prioritised list of
requirements that focuses not just on their current needs, but more so the needs
of their future treasury (i.e. post system implementation). The evaluation
process will be based on questionnaires and a careful evaluation through demo
sessions; avoiding ‘cherry picking’ based on pricing for licences,
implementation and maintenance.
One key characteristic we have observed in
a number of system selection processes is how user friendliness can be a crucial
decision driver. Do corporate treasury professionals need to work with an
unfriendly system just because it supports the technical and functional
With this last question we take a leap towards the future
evolution. What are some potential innovative surprises that could influence the
market? They could arise in three main areas:
- System functionality,
flexibility and scalability enhancements.
- Banks to provide TMS-like
- Other functionalities.
System functionality, flexibility
and scalability enhancements: System vendors can tackle this from two angles:
firstly treasury functionalities and secondly further technical innovators
related to format conversion and connectivity. In our experience, system
functionalities to be considered for improvement are: reporting (i.e.
customisation and key performance indicators (KPIs)), bank account management
(the truly integrated electronic bank account management (eBAM)), cash
forecasting and trading interfaces; while adding country-specific
functionalities, as mentioned before.
Banks to provide TMS-like
services: Banks know that they can leverage their electronic banking (e-banking)
systems by providing treasury reporting, based on implemented cash pool
structures and daily dealing. Some banks already provide cash forecasting and
cash positioning tools, while a number have taken a step further by offering
alternatives to holding multi currency accounts. We can see opportunities for
them to expand these capabilities to compete with the above system vendors.
Other functionalities: As mentioned above, experience suggests that
user-friendliness is gaining importance in the decision process. Will the next
step involve integrating social media-like features? Envision having deal
confirmations made with a ‘like’ button. Or what about receiving notifications
when your position is short or long in a pre-defined timeframe? Could a trading
platform within your TMS allow you to ‘add’ a new counterparty with limits
included? Why is master data still a painful process to manage? Shouldn’t it be
possible to have features to securely import master data from other sources such
as the electronic banking system or ERPs, using a similar engine such as MS
Outlook or iTunes when synchronising information?
and ERP treasury modules used to have their competitive advantage on the
opposite ends of the spectrum clearly defined: TMS led in functionality while
ERPs led on integration. This key distinction between the two different system
types is fading as TMS and ERP vendors have come closer together through
investing both time and resources with focus on the corporate functional and
Ironically for the corporate customer, choosing the
‘best fit’ product has become a more challenging process. Your requirements need
to be much more specific and your evaluation more critical. However, the reward
from this additional work more than justifies the effort. It is our view that it
is now up to the corporate treasurers to reward system vendors by choosing the
best fit. Both parties will benefit from making the right decision.
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