Making the Right TMS Decision - Part 2: Identifying the Need

The project to select a treasury management system (TMS) is an excellent opportunity to review everything you are trying to achieve within treasury, whether you are considering the implementation of a TMS for the first time and replacing spreadsheet and manual systems, or whether you are replacing existing outdated technology or upgrading to a more powerful solution. It is also an opportunity to revisit your treasury mission statement – does it still reflect the true role of the department? Plus, it is an opportunity to dust down and review the original treasury policy document providing the parameters within which the treasury operates for risk, cash and investment management, funding policy and performance measurement. And if you have neither a mission statement nor treasury policy, then this is an excellent place to start – with a clean sheet.

Build the Project Team

The project team must be put into place early on in the process. It need only be small but the project manager is the most important appointment. The project manager will manage the job right through to final selection (a different team may be put in place for the implementation of the selected system – this will be discussed in the fourth article in this series) and will need a thorough grasp of the needs of the company and the individuals who will be affected. They will need good treasury experience and excellent people management skills. Do not be tempted to give the job to an untried member of the treasury team – be sure of their ability to handle the problems that will undoubtedly come their way.

To ensure that the requirements of the company are fully identified and supported, it is necessary to aim for a wide project buy-in from treasury (this goes without saying), associated central departments (accounts, IT, audit, etc.), any regional treasuries and the relevant business units. All of those areas do not require a representative on the project team of course, but their needs should be incorporated. The project manager should ensure that is the case, and also that their team includes all of the necessary skills with the required resources in place.

Fundamentally, the project team should be a focused group and as small as possible. Other personnel can always be seconded at specific times for specific purposes.

Most importantly, the project will require a sponsor to ensure that any major internal hurdles are cleared and that there is a communication link to and from senior management.

Get the Budget

It is important to get a management commitment for the new TMS before a full requirements view is under way. At this stage, it will be difficult to assess the exact cost of the system and its implementation, but there should still be an estimated total cost that the company is willing to support the project. Senior management should provide confirmation that funds will be made available and that they are fully supportive of the forthcoming project. It may be a three-stage approach:

1. High-level requirements and cost benefit analysis for initial go-ahead.
2. Estimated system and implementation costs obtained after first round of system demonstrations (see the third article in this series) for confirmation to continue the selection process.
3. Final sign-off of quoted system cost and implementation.

Before the Requirements Definition

The requirements definition will detail all of the system needs of the company in relation to its treasury operation. But in order to build that document, it is essential to understand all of the processes currently undertaken within and around treasury. Although procedures may have been laid down in the past, practice changes over time and so the current reality may be very different. Similarly, the original procedures may have been written for a different set of circumstances that were relevant then. A full review of the current processes carried out, in conjunction with a sound knowledge of what can be achieved through an optimum application of the latest technology, can deliver valuable benefits to the company. New technology does not only replace existing inefficient processes but allows treasury to move forward with new opportunities. Increased efficiency and security are clear advantages but the additional ability for the treasurer to add value to the overall business is a powerful advantage to grasp.

The Requirements Definition

With a clearly identified treasury mission statement and policy in place, and an acquired knowledge of treasury procedures and any inherent shortcomings, the time is right to build the definition of the company’s requirements for a TMS. A documented and agreed requirements definition is necessary because:

• It encapsulates the ‘new’ treasury, agreed by the project team and by management;
• It provides a common base against which the TMS vendor presentations may be measured;
• It assists the selection process through the demonstration and workshop stages; and
• It prohibits team members from developing individual agendas and ideas.

Review front, middle and back office operations

The present treasury operation is to be thoroughly reviewed with all functions covered to include:

• Cash and debt management.
• Cash forecasting and planning.
• Risk management (FX, interest rate, market, counterparty and limit).
• Treasury dealing procedure.
• Reporting output – treasury and senior management.
• Deal confirmation and settlements.
• Treasury accounting issues – within treasury and accounts.
• Security and control.

This is the time-consuming section of the exercise but it should never be skipped or shortened. Each aspect and task of the treasury operation must be examined and understood; as we have seen it is not sufficient to study written procedures because these may often be different to actual practice.

The key questions that need to be asked are:

• How is the process currently carried out?
• What is the reason for the process?
• What does the process achieve?
• Would the process be better carried out elsewhere (another department, outsourced, etc.)?

In order to build the requirements definition it is necessary to examine what is currently done, define what you want to be able to do (taking short/medium/long-term views) and blend in experienced systems knowledge. The process will necessitate interviewing everyone within treasury (for larger companies this may be restricted to specific personnel but may also extend to regional treasury centres). Key business personnel in the business units may also need to be consulted in respect of treasury reporting and cash forecasting. The introduction of new technology could have a positive impact on the relationship between the units and central treasury in respect of information flows and service levels. It is also essential to involve:

• The central accounts function for treasury accounting matters;
• Internal audit and control for system audit issues and security and control policy checks. Input and buy-in from them is vital as the TMS is one of the key control components in the financial area.
• The IT section, especially at the beginning of the project, to incorporate any essential technical requirements and company standards and then towards the end of the selection project to discuss any issues with the system vendor. A hosted solution may also be an issue for discussion.

Review the current use of technology

Make sure that all existing technology used within treasury is thoroughly assessed and see how it can be replaced by or integrated with a new TMS. Look at all options because there are some very valuable straight-through processing benefits to be gained.

The requirements definition should include:

• The clearly defined requirements of treasury and other involved sections of the business;
• Requirements in both functionality and technical structure;
• What you want to be able to do both now and in the foreseeable future;
• A prioritisation of requirements from ‘nice-to-have’ to essential; and
• The document should be clearly drafted, agreed and signed off by the project team and management.

Conclusion

This article has stressed the importance of the review process because it will lead to the production of a well-balanced and challenging requirements definition document. Whatever the size or complexity of your treasury function, a review of the existing operation is an essential step on the road to a successful project conclusion.

Comments are closed.