The Road to Treasury Excellence
There have been many trends within the corporate treasury area, from centralisation of the treasury function via new financial instruments, the challenges of new accounting regulations to globalisation of treasury operations. In order to provide a deeper insight into future trends in treasury, BearingPoint conducted its International Treasury Survey with a focus on treasury management systems (TMS) this time. The study is based on a sample of 60 companies across all industries with an international focus.
The key findings of the study are grouped into different sections, business related topics and evolving trends:
Centralisation: The trend towards increased centralisation of the treasury function continues, but it is more specific depending on different treasury areas. The degree of centralisation is higher in the areas of financing, asset management and long-term financing and bank relationship management, but lower in cash management and short-term liquidity planning. Overall, the survey participants are running fairly centralised treasury operations, more than two thirds of the companies have the majority of all functions centralised.
Single euro payments area (SEPA): With regards to the new SEPA regulations, it is clear that companies are adopting a ‘wait and see’ attitude. There is little eagerness among companies to make the changes early with only 20% of companies having already taken measures towards SEPA readiness.
New accounting regulations: No major influence could be identified relating to new accounting requirements, such as IFRS 7 and IAS 39. The importance of these regulations is considered less significant to respondents, although the effort of compliance is clearly seen.
The section about TMS first focused on the expectations of companies towards their system. Several clear expectations were identified:
This can be compared to the current level of automation, being highest in cash management, in-house banking (if used), transaction management, collection management and accounting.
We see that several of the focus areas do already offer a high degree of automation that leads to increased reporting capabilities and availability of information. This then supports the decision-making process by providing more up-to-date information. On the other hand, the integration potential often remains unused due to an insufficient integration of group companies.
When looking at efficiency in automating treasury processes we noticed that the highest efficiency lies in automating the financial accounting (daily postings, valuations and accruals) followed by streamlining the transaction process. Surprisingly, little automation exists in areas like liquidity planning, working capital management and also interest exposure.
The greatest savings potential in improving these processes lies in a reduction of the manpower required and optimised IT processes. Further, but less significant savings can be achieved in optimising the organisational structure in the treasury department(s) leading to streamlined processes.
An additional advantage in using TMS systems lies in an improved external rating of the company due to the implementation of a TMS. These can be explained by a better overview of exposures provided by the TMS and the availability of a more comprehensive database for decision-making leading to efficient financing decisions and ideally an elimination or reduction of an external financing of subsidiaries.
With regards to the maintenance and update of IT systems, it is clear that one-third of all companies are running a version that is more than three years old. The reason could be the high upgrade costs and efforts and perceived lower benefits.
One of the key findings with respect to implementation projects was that no review of project success took place after completion of the system implementation. Only 13% of the companies reviewed the performance of the new system and the implementation itself afterwards.
Within the project, frequent delays occurred. The main reasons being technical problems, roll-out and design changes during the project.
Additionally, a few trends could be identified for the use of TMS. The main focus areas of future systems implementations are cash flow forecasting/liquidity planning (greatest benefit as currently manual processes are predominant), payment factory, working capital management and risk management. Further opportunities exist in the following areas:
We can see that the main trend for the future is improved data quality and availability of the system throughout the group.
All in all, the improvement potential exists largely in cash flow forecasting, liquidity planning and global payment processing. Growing integration and automation increase the value of corporate treasury within the company. This goes hand in hand with the existing centralisation tendencies.