FinTechSystemsTreasury Management Systems – Today and Tomorrow

Treasury Management Systems – Today and Tomorrow

As a famous comedian once said, ‘it is not over until the fat lady sings’ and this could definitely apply to the world of treasury management. One could be forgiven for thinking that with the technology advances over the last five years, treasury management systems (TMS) should be able to deal with every aspect of corporate treasury requirements – especially since the fundamentals remain relatively unchanged.

At Wall Street Systems we have been working hard to deliver state-of-the-art functionality that provides our customers with consistent improvements in shareholder return. This is possible by enabling them to achieve 90 per cent + straight-through processing (STP), set up true global treasury capability with in-house banking functionality and reduce cash management exposures. The benchmark for TMS suppliers is based upon the fundamental instinct that the treasury can add value while cutting personnel and other intrinsic costs.

The other factor that is continuing to drive change is risk management. TMS must now cope with sophisticated requirements from Sarbanes-Oxley to the new IAS 39 accounting standard. The implementation of processes around these initiatives will occupy many institutions over the next year. There will be much time and effort spent replacing multiple spreadsheets with vendor-supplied solutions.

So how exactly have systems evolved from a functional perspective? Over the last five years, corporate treasurers have been spoilt for choice as far as system functionality is concerned. The main issue they have had to address is to decide what financial bracket they are in when it comes to making a capital investment in a TMS. As with many markets, it is a case of getting what you pay for. Standard functionality includes: a single database for static data; standard reporting capability; STP and automated processing for treasury transactions; automated accounting entries for accruals and journaling; basic workflow controls including audit trails; and security policy. These are the fundamentals that are required for a TMS supplier to be invited to the party.

Advanced functionality is where the real change is noticeable and where significant developments in treasury management are taking place.

A good place to start is with the rising concern of coping with the compliance headache. Many treasurers have struggled to attract the investment required to achieve the true levels of automation needed to integrate treasury processes with the demands of internal subsidiaries and their external suppliers. Hence, the argument is a strong one to automate many of the controls associated with Sarbanes-Oxley for instance, as opposed to setting up costly manual workarounds. Once controls are automated and tested, the ensuing change within a system can ensure compliance without further major capital expenditure.

As mentioned above, technology has advanced dramatically over the last five years. It is a minimum requirement that the TMS is not a ‘black box’ solution with integration capability as another fundamental issue. Many corporations have made long term investments in enterprise resource planning (ERP) systems, which while automating the physical supply chain, have yet to truly address the financial supply chain. This is the domain of established TMS providers. Good integration capability with the ERP systems is definitely a bonus but the ability of a TMS to provide a richer set of functionality associated with treasury products will continue to set the two systems apart.

However, seamless communication is definitely an advantage when it comes to particular areas of cash flow management and payments and allowing affiliates to review their outstanding cash balances once the payment files have been released.  New software and communication channels are opening doors to real-time processing. File transfers used to be scheduled events, done at a prearranged time. Treasury operations were built around processing deadlines at the banks and the times certain reports were made available. That is clearly set to change with an increasing number of treasury operations managers programming systems to continuously poll the bank to download the latest postings, confirmations, balances and payment information.

As STP with their cash management providers improves and expands, treasuries can also improve their cash flow forecasting significantly. This is a must if companies are to get the most out of their cash. This area has seen a particular rise in the area of internet-enabled software to provide this functionality to increasingly dispersed affiliates or subsidiaries. This definitely assists a more proactive approach to forecasting beyond the traditional two weeks – allowing for better cash conservation and associated charges from unwinding hedges put on for bad forecasts. Typical functionality would allow the subsidiary to enter and view their forecasts across a consolidated matrix in order for them to get a holistic view across their position.

The other significant area where the union of technology and service providers are coming together is in the area of payments. Service providers, like the major liquidity providers, are now looking to utilise their skills learnt in the agency treasury business to move into higher value services. Hence we are seeing significant investments in online and file-based capability to provide services that will dramatically improve efficiency and reduce cost associated with the entire payment process.

In summary, the technological landscape for the corporate treasurer resembles a busy junction with many roads leading off it. Service providers and the vendors are continuing to invest in new process and technology to improve the choice available to the treasurer. This will pay dividends for all concerned as the role of the treasurer and the treasury department continue to evolve in this increasingly complex and regulated environment.

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