Getting the Most Out of Your TMS

While a majority of corporates have treasury management systems (TMS) there is significant difference in how these systems are used, according to gtnews 2011 Treasury Management Systems Survey. Moreover, the survey found that smaller corporates could be missing out on the full benefits of TMS because they do not have the appropriate internal structure to best exploit them.

A total of 412 corporate respondents participated in this year’s survey, 50% of whom are based in western Europe. Respondents represented corporates of all sizes, with a third posting between US$1bn-US$10bn in annual revenues, 28% with revenues between US$10m-US$500m and 23% from companies that have annual revenues of more than US$10bn.

The survey found that while corporate treasurers at larger companies use TMS as decision support tools, rather than merely as transaction management applications, smaller companies do not necessarily have the internal structure and organisation that will enable them to fulfil the greatest benefits of TMS.

Small companies expect TMS to improve efficiency and support downsizing of staff. Such expectation, however, appears not fulfilled by the use of the systems, according to the survey. This is due either to higher expectations than what is realistically possible, as well as to a lack of internal structure and organisation at these small companies that is a prerequisite to reap the greatest benefits from the application of IT systems, such as a TMS.

“TMS need the presence of trained users,” says the report. “This is not always the case in small organisations where the number of treasury staff is kept to a minimum. While the adoption of an automated system could provide relief from the burden of manual operations, at the same time the implementation of a sophisticated IT system, such as a TMS, requires financial investments that not all companies can afford, particularly the smaller ones in a period when credit is difficult to access.”

The survey’s finding does not surprise Jeff Wallace, managing partner at US-based treasury consultancy Greenwich Treasury Advisors. “What you are seeing is the very real difference between small companies and large companies,” he says. “In any company, you must be able to handle the day-to-day operational flow. Even small companies will handle that, and the first priority of any TMS is to fulfil this function.”

However, says Wallace, small companies do not often have the additional staff with the analytical capabilities to do anything other than just that. While many chief financial officers (CFOs) will say they “cannot afford” the extra staff, it is more likely they cannot see the value of such analysis, he suggests. “You are also seeing the Excel phenomena: most Excel users only use 10% of the capabilities of Excel. Most users of TMS do not fully utilise all of the TMS’ capabilities.”

Wallace recommends that “every company” implementing a TMS should ask the TMS vendor’s consulting team to come back in 12 months after the system has been implemented to evaluate how the company can fully – and more efficiently – use the system’s capabilities. “With a year’s experience under their belt, the treasury staff will finally have familiarity with the system to better understand any such recommendations – recommendations that they probably didn’t understand in the beginning because there was just too much to learn and absorb.”

The difference in use of a TMS between small and large corporates relates to their needs, says Rob Van Peer a partner at Nasarius, a European treasury and cash management consultancy. “A smaller treasury with only a handful of people or less in the treasury will typically have fewer positions and a simpler structure. Therefore, the treasury manager would know the position and the risk of the position just from the daily work. In this scenario the need for a more advanced risk management system [RMS] is less pressing.”

Van Peer adds that the treasury manager of a small or medium-sized treasury department typically won’t have extra staff that could be set aside to do advanced risk analysis. “When it comes to training TMS users, the smaller and medium-sized corporate treasuries have limited resources. They often don’t have enough resources to be able to invest in training for the more specialised parts of a TMS, such as advanced risk management,” he says.

TMS vendors could help smaller companies to better exploit the capabilities of their RMS through the added services that are possible with a hosted solution. “I envisage that in the future vendors may support smaller corporate treasuries in many areas where these corporates lack expertise or time for in-depth analysis, for example in accounting and risk analysis.”

Hosted Solutions

Hosted solutions are growing in popularity, according to the survey. The majority of TMS are located in-house, with 44% delivered on a software-as-a-service (SaaS) basis. SaaS delivery is most prevalent in Asia-Pacific where it makes up 61% of TMS installations. The survey suggests this is because corporations in this region do not have the legacy systems prevalent in Europe and North America and can implement the most technologically advanced and flexible solutions more easily.

SaaS solutions allow a treasurer to build functionality for their TMS piece-by-piece, fitting all the necessary pieces of the jigsaw together, as required, says Paul Wheeler, managing director at Wall Street Systems, a US-based treasury systems developer.

“In relation to the varying needs of corporate treasurers at larger companies compared to smaller companies, our sense is that mid-market treasurers have no different requirements from high-end treasurers. While they have more modest IT support and budget, their needs are very much the same,” he says.

Wheeler says for both sets of treasurers, the challenge is interoperability. Mid-market treasurers are left with two options: either invest in a new system, which can be a tough sell to the business, or streamline their existing TMS to allow them to do what they need to. A SaaS solution, manages the operational issues for the treasurer by providing a hosted solution, and therefore allows them richer functionality without the cost a high-end treasurer would incur.

“More than 350 of Wallstreet’s clients have hosted solutions, and we are encouraging our clients to leverage their existing systems, managing the process via Wallstreet, rather than beginning a lengthy, and costly, tendering process for new TMS solutions,” explains Wheeler.

A SaaS approach to TMS is often “substantially cheaper”, says Greenwich’s Wallace. “This is a big selling point for corporate treasuries that don’t have much budget clout. It’s OK to pay tens of millions of dollars on ERP [enterprise resource planning] systems, but US$500,000 for a TMS is considered to be an outrageous, unnecessary expense.”

While SaaS solutions are an “obvious fit” for smaller companies, Paul Bramwell, senior vice president (SVP), treasury solutions at SunGard AvantGard, says they are becoming increasingly common for large enterprises with extensive IT departments. “There is a growing acknowledgement in these firms that having a solution managed by the solution architect yields significant benefits over in-house implementations. The core competency of most large corporations’ IT departments tends to be around the ERP solutions, whereas a solution vendor is best placed to manage and maintain the treasury solutions.”

Hosted solutions are seen as a means to outsource the operational risk associated with commissioning and operating treasury technology, says Tatiana Liber Soudier, marketing director at IT2 Treasury Solutions in the UK.

Vendors can offer a spectrum of hosted services so that the detailed solution offered in a given case can be scaled to fit the client’s requirements. “A solution can range from a straightforward technology outsourcing arrangement to a fully managed service solution in which IT2, for example, is the one-stop shop for all aspects of technology support, as well as application support.

“The key benefit of a hosted solution is that it accommodates a broad range of client IT policy requirements. For example, IT policy may demand that a sensitive financial application such as treasury should use a dedicated database. IT2’s opinion is that clients should first select the TMS that best fulfils their treasury business objectives, and then investigate the hosting solution that best fulfils corporate IT policy,” she says.

Nasarius’ Van Peer points out that new solutions, such as Kyriba and Reval, are available only as hosted solutions and are proving popular. He believes vendors of the more traditional TMS, such as Wall Street Systems and SunGard, are now basing their strategies on selling hosted solutions, although they still have installed, in-house options. In the future, he says, Saas will be the preferred solution for the majority of treasuries.

There are three advantages to hosted solutions, he says: technical, cost and added services. “The technical advantages include the fact you don’t have to train IT specialists in-house, as system tuning is done by the provider, or deal with backup services and disaster recovery sites. Costs are saved because there is practically no need for upfront investments in hardware, operating system and database software. Added services could include automatic delivery of master data, pre-defined interfaces to banks, integrated dealing platforms, back office processing, and premium hotlines for processing issues.”

At present the main reasons for choosing a hosted solution are related to technical advantages or cost savings, but Van Peer says in the future, as more added services are developed, they will prove to be key differentiators for the different offerings.


Additional functionality is a topic addressed by the survey, with respondents asked what additional functionalities would bring the biggest improvement to their TMS. Cash flow forecasting was the most popular at 51%, but respondents also cited electronic bank account management (eBAM – 48%), risk management (40%), SWIFT connectivity (34%) and integration/interoperability (33%).

Cash flow forecasting’s position at the top of the list of requirements is not a surprise for Van Peer, but he does question whether it is a functionality problem. “Cash flow forecasting is not where TMS system vendors focus their investments, and with good reason. The majority of TMS solutions on the market are actually very good at cash flow forecasting already. Nasarius’ experience with the cash flow forecasting at corporates isn’t the lack of functionality of the systems but is about getting access to the right data, and getting data with good quality.” Treasury systems cannot help with this, he adds, as the sources of data are ERP systems, budgeting systems or information supplied by production planners or sales people.

Wallace agrees, saying cash flow forecasting will not improve until the TMS “have their hooks into the ERP systems” so that they can access the payments data in the accounts receivable (A/R) and accounts payable (A/P) files. “I don’t think many, if any, vendors, can do that.”

Wheeler says it is interesting to see a high number of respondents in the survey identifying eBAM as one of the most significant improvements to be made to their TMS. “Our own research and increasing experience of eBAM has shown that while corporate treasurers see it as a priority, banks are playing catch up to an extent. Wallstreet is working with banks to bring increased automation to corporate treasurers. It’s great to see treasurers themselves driving this change and encouraging banks to move towards collaboration on such initiatives faster.”

Click here to download the free gtnews 2011 Buyer’s Guide to Treasury Management Systems.


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