Spreadsheets: The Ghost of Treasury Past
Today a large proportion of companies rely on a host of spreadsheets as the key technical environment to help run their treasury activities. A survey commissioned by SimCorp last year1 found that as many as 60 per cent of corporate treasuries still continue to depend on spreadsheets despite the availability of more advanced alternatives. The inherent risks and costs associated with reliance on spreadsheets do not position them as a core technology for treasury departments to use in the future.
This article explores the problems of reliance on spreadsheets in treasury operations, the alternatives and associated benefits, the barriers to switching to the alternatives and tips on how to overcome these barriers.
Reliance on spreadsheets in treasury operations almost inevitably leave the treasury exposed to problems of control, visibility, process complexity, increased risk and resource utilisation. These problems all boil down to unacceptable levels of cost and unacceptable levels of risk.
Cost – At a glance, it may appear that spreadsheets are a cost-effective solution. Granted, it is relatively cheap to use a spreadsheet application. Even the cost of developing spreadsheets is not that high (the cost of maintenance can however be surprisingly high). The real costs are those associated with not being able to fully automate processes. Failure to automate results in unnecessary consumption of scarce resources: untimely and expensive manual re-keying of data into multiple systems; manual reconciliation and audit of data; and the cost in time it takes to get any analytical information required.
Risk – Even more significant are the risks associated with reliance on spreadsheets. Multiple entry of data leads to a higher number of errors; a lack of robust audit mechanisms mean these errors are not being spotted. It is not uncommon for the spreadsheets themselves to incur errors when being reconfigured by users (i.e. macros). These errors can be very difficult to spot and can lead to miscalculation of positions and results.
With the ever increasing demands on financial executives to be in control of risks and accountable for the figures they produce – while running their operations on a tight budget – the spreadsheet cannot have a place at the centre of the treasury technology.
The future demands that technology deployed in the treasury offers far greater control and visibility of financial data than can be offered by spreadsheets. We have already witnessed the introduction of Sarbanes-Oxley in the US, and with talk of further corporate governance regulations to be introduced in Europe, there is increasing pressure on financial executives and managers not only to produce financial figures at will, but also to support these figures with details of the exact processes used to generate them. A full audit of the activities undertaken to generate the figures is also a key requirement.
In the future, financial professionals will not just be responsible for the financial figures; they will be personally liable if there are mistakes or tampering. If financial professionals are to put their necks on the line, they need to rely on processes and systems that are inherently robust and not prone to human errors. They need to rely on technology that allows for full audit of all financial activity and for tracking of compliance with company treasury policy. Spreadsheet solutions rarely, if ever, offer this level of control and compliance.
The technology of the future must allow greater visibility into a company’s finances. Finance executives must have confidence that the figures they present are correct. They must also be equipped with the information to make well-founded strategic decisions and to easily identify and analyse potential operational, liquidity and market risks.
We have seen continuing demands on corporates to run their treasury operations on tight budgets. In order to utilise these valuable resources to the maximum, the treasury technology of the future must free treasury staff from administrative, non value-adding tasks to assist the treasury department in improving performance. The technology of the future must be fully automated with one-time data entry and automatic integration into banking and accounting systems. The software must allow rapid consolidation of financial information so that decisions can be made quickly and accurately.
All of the issues inherent in running treasury operations using a host of spreadsheets are solved by replacing spreadsheets with a fully integrated Treasury Management System (TMS). These systems are built with control, integration and visibility as their foundations. In some cases they are developed and supported by organisations that have up to 20 years’ experience in treasury and in building, developing and supporting robust, high-quality software. Some of the more established vendors have hundreds of companies using their software. When you purchase a TMS from one of these vendors you have comfort that the software works well for many other organisations. You also benefit from the best practices of hundreds of other companies that have been modelled in the software.
The fundamental reasons for persisting with this unsuitable technology in the treasury are that spreadsheets are cheap and they are familiar and easy to use. In many cases, corporate treasuries continue to use spreadsheets because they do not know there are alternatives available. Many of those who know there are alternatives do not have the resources to investigate, evaluate and implement alternatives. Of those who appreciate the benefit of a TMS, we have seen that the main reason to stick with spreadsheets is cost: the up-front cost of investigating and buying specialist software; the cost of integration; and the ongoing running costs. The fear of change and the fear of reliance on unknown suppliers are also factors (everyone has heard of Microsoft!).
Most modern TMSs are as easy to use and as familiar as spreadsheets. To reduce the time to evaluate and implement alternatives, some specialist TMS vendors offer software on a try-before-you buy basis with complimentary training. Some have radically reduced the cost entry barriers by offering their software on a licence free basis – making TMS software available to all size of corporate treasury.
There are many problems associated with running treasury operations on a technological platform that relies on spreadsheets. TMSs are designed specifically to create a safe, secure yet flexible environment for treasury operations. Importantly, some vendors have made these tools available to those with restricted budget and restricted time to invest in the analysis, purchasing and implementation of alternative technology.
The recent availability of cost-effective solutions has made the TMS a viable alternative to spreadsheets for all sizes of corporate treasury. These new cost-effective offerings have prompted many corporates to move away from their spreadsheets; the transition has been a lot simpler than they imagined and they are now a lot more in control and better positioned for the future than ever before.
1 Survey of around 200 U.S. corporates conducted in Q4 2003