Cash & Liquidity ManagementPaymentsCorporate Treasury Technology: An Overview

Corporate Treasury Technology: An Overview

The series will examine different aspects of the
interaction of technology and corporate treasury management, including the
relationship of the TMS with complementary technologies such as bank reporting
systems, enterprise resource planning (ERP); market data feeds, dealing portals
and confirmation management services, and the all-important internal
communications with subsidiary networks.

It will review the key
factors generally used to justify investments in treasury technology, such as
control, cash and risk visibility, regulatory compliance and management
reporting. The series will show how well-chosen applied technology can
liberate treasury departments from repetitive, error-prone and effectively
unproductive drudgery, and free valuable human resources to focus on
value-adding professional activities.

Treasury technology investment
has been buoyant ever since the 2008 global financial crisis. Increasingly,
mid-range corporates are more likely to organise treasury departments and
acquire supporting technology, wherever cost justification is found for
enhancing cash and risk management quality.

A general rule for this
series is that specific vendors and solutions will not be identified. This
function is covered in the annual ‘gtnews TMS buyers’ guide’. Executives of
entry level treasuries will also communicate with local and regional treasury
associations, their corporate peer group and with specialist analysts and
consultants to find out more specifics.

This initial article
focuses on various common interactions of technology with different elements
of this process, to provide a high level overview of the different ways in
which technology can support treasury management in its core daily process, as
outlined here:

Treasury management core daily processes

Download Bank

The organisation’s bank cash position is based on
the collection of bank balance and transaction statements that takes place
early on in treasury’s time zone.

The role of the TMS is to
coordinate, collect and consolidate information supplied by the organisation’s
cash management banks; an operation often complicated by the array of
different bank reporting systems that are found. These can range from
contemporary web-based solutions and SWIFT messaging to older technology such
as bank workstations. The key role of the TMS is to schedule and automate the
various downloads in a standardised manner, and provide control information to
verify that the required reports have been successfully retrieved. The
effective TMS solution schedules and coordinates the process to complete it
before the start of the working day.

Reconcile Bank

TMS reconciliation processes provide an
essential quality and accuracy control on the reported bank position,
detecting significant errors before they are finalised into the cash position.
In outline, the reported actual bank transactions are checked against today’s
expected flows held in the TMS’s cash book.

TMS reconciliation
tolerances are typically set up so that routine small differences, such as the
charging of bank fees, are highlighted but do not hold back the cash
positioning process unless significant. The key purpose of reconciliation is
to detect substantial differences that would materially impact the accuracy of
the cash position, and would cause significant errors if they were to be used
as the basis for subsequent dealing operations. Stand-alone reconciliation
offerings are available for organisations which need to supplement their
treasury technology for this purpose.

Cash Position

The multicurrency cash position is
automatically constructed by the TMS by combining the reconciled bank position
with the maturing flows of FX and money market deals recorded in the TMS
database. The TMS consolidates today’s requirements for cash and surpluses of
cash across the organisation. At this stage, the treasury department has the
information needed to take the day’s dealing decisions, but what happens next
and how it happens depends on specific corporate structure and treasury

There are multiple potential technology inputs that may be
relevant to particular cases; the TMS will be set up to manage and coordinate
these and to generate the necessary reporting so that the treasury team has
the information base needed for determining and initiating appropriate

Most significantly for centralised treasuries and in-house
banks (IHBs), subsidiaries’ cash and risk management needs need to be imported
and consolidated into the action plan. The information may be transmitted via
web based TMS modules, and other means. Subsidiaries’ inputs may be broadly
classified into requests for funding and for investing surplus cash, hedging
requests to cover foreign exchange (FX) and commodity exposures, payment
requests for suppliers and other creditors, and cash forecasts. They may also
relate to other activities, such as netting and trade finance. The TMS acts as
the communications hub for this function, verifying and consolidating the
incoming information.

Cash Forecasting

Many treasuries will additionally use the cash forecast to plan and execute
dealing activities to accommodate future requirements – typically, although
not necessarily, out to one week in the future depending on policy and
forecast dependability. Cash forecasts may be compiled by TMS modules or by
specialist stand-alone applications.

The forecast construction
process may include input from the corporate ERP or accounting systems of
payable and receivable information, typically consolidated in the data
integration as summary totals for each value date and currency. Quite often,
spreadsheet-based forecasting solutions are used, because of the operational
complexities frequently encountered in the implementation of forecasting –
still a challenging area for treasury technology.

An alternative
or additional approach to forecasting is taken by many North American
treasuries, where statistical and history-based forecast approaches may be
employed. The treasury technology is central to the substantial data management
and computation required to support such methods.


The first stage of the dealing process
involves the cash movements that can be made internally to fund shortfalls in
the organisation without recourse to external dealing. Cash movements may take
place through IHB operations automated by the TMS. The available or required
cash will reflect the results of notional or physical cash pooling operations,
and may involve TMS functionality to direct or validate banks’ actions and
calculations, depending on the IHB’s detailed mandate.

The dealing
requirements are also a function of any multilateral netting operations,
typically performed on a monthly basis via the TMS or by a specialist third
party system. The results are reflected as payments and receipts in the
functional currency of each participating subsidiary. Netting operations may
be extended to external counterparties such as suppliers. The TMS process may
include an analysis of the organisation’s FX exposure; this may alternatively
be constructed by an external specialist system.

The required
result is an analysis clearly showing the exposures, borrowing needs and
investment surpluses to be managed. The TMS will have consolidated the cash
position to reflect the day’s movements, combined with the import and analysis
of the organisation’s requirements for treasury dealing activity.

At this stage, treasurers may use TMS or third party risk management tools,
to evaluate the theoretical impact of different deals or strategies before
executing in the market; such decision support functionality often requires a
formidable combination of logic and computing power. Risk management analysis
requires that the underlying system be served with current market rates,
prices and volatilities, so interfacing with a market data source is required
here, as well as for subsequent accounting and management reporting purposes.

The subsequent actions will involve borrowings, including facility
drawdowns, investments, FX swaps (where these provide cost effective funding
and investment alternatives) and FX and commodity hedging.

The most
advanced treasury dealing workflows involve an intimate interaction between
the TMS and a range of complementary third party systems, combined with the
application of treasury policy to ensure (as far as possible) that operations
remain compliant with the mandates authorised by corporate finance management.

A substantial volume of treasury FX and money market dealing
activity takes place through the agency of a third party electronic trading
portal or platform. Such offerings combine the benefits of best available
price execution, together with appropriate back office administrative follow
up. The interaction between TMS and dealing service requires a dynamic two-way
interface. The TMS exports the parameters of the deal, and the TMS database is
subsequently automatically updated with execution details fed back by the
service. The process should accommodate management of counterparty limits as
an essential element of risk management.

Deals transacted by
telephone are either entered manually or imported into the TMS, so all deals
enter the treasury settlement workflow regardless of execution method. The TMS
monitors each deal against treasury policy, and reports all exceptions detected
against pre-defined conditions, such as limit breaches of all kinds. Policy
documentation held within the TMS provides an essential information source for
treasury dealers and the TMS will update the FX and other positions in real
time, enabling dealers and their management to monitor progress against the
day’s objectives.


Interacting with electronic confirmation management services is another
crucial treasury technology process. The TMS formats and exports electronic
confirmation messages, which the service matches against information received
from the deal counterparty. The information fed back to the TMS either
indicates that a match has been verified, or provides information about
mismatches so these can be researched, necessary corrections made and the
process repeated. Independent automated confirmation matching represents best
practice in the control of the treasury dealing workflow, and a successful
match can act as a switch to open the settlement gate.

The print
or otherwise generate confirmations that are not accommodated by an electronic
service. A manual verification against the counterparty’s confirmation is
needed to retain control.


include payment export processes, which are heavily secured in terms of the
permissions, validations and authorisations that must be correctly performed
before payments are exported to the external banking system. As with statement
imports, payments management can involve interactions with multiple bank
technologies, or it may be standardised using SWIFT. The essential role of the
TMS is to create payment messages in the required format, and manage them
according to the security and control dictates of treasury policy.

TMSs are used to varying extents to manage commercial payments and wires.
Primarily this is a function of its capability to manage large volumes of bulk
payments, as is needed in some corporations’ IHBs and payment factories. A
specialist bulk payment system may be used as a standardised channel to manage
all the organisation’s payments, where the TMS cannot accommodate high volume
requirements. In such cases, the TMS simply exports its payments, and there may
be a status feedback to control the process.

and Controls

TMSs support robust and controlled treasury
operations. Often a TMS project secures authorisation and budgeting in
response to a crisis generated by an adverse audit report, highlighting
unacceptable levels of financial and operational risk in treasury.

As noted earlier, a key element of control is the advanced TMS capability of
holding and enforcing treasury policy. TMS audit trails track all events
occurring in the TMS database, thus providing the means for alerting urgent
issues to management, and for generating the required reporting that provides
independent proof that treasury is indeed operating within the boundaries of

Regulatory compliance demands on treasury operations grow
more demanding each year, and TMSs provide a convenient means for transparent,
efficient compliance with legislation and regulation such as the US
Sarbanes-Oxley Act (SOX), International Financial Reporting Standards (IFRS),
the European Market Infrastructure Regulation (EMIR) and the Foreign Bank
Account Report (FBAR).

Treasury Accounting

Historically, the TMS has supported accounting requirements to varying
degrees. All modern systems include functionality to perform cash flow-based
and accrual accounting, and to produce robust accounting records such as
balance sheets and profit and loss (P&L) statements via TMS nominal ledger
functionality. A virtually universal technology feature of treasury accounting
is the export of journal entries (in summary or detail) to corporate ERP and
accounting systems.

A key benefit of a TMS is the
facility its database provides for generating a practically unlimited set of
operational and management treasury reporting; the storage and manipulation of
data are classic bases for the use of technology in business, and the power
and flexibility of reporting facilities enable treasurers and their management
to enjoy faster, more complete and more penetrating analysis than ever.

Both internal and third party tools are used to build reports, and
systems generally have intuitive ad-hoc report building tools that are user
friendly enough for use by all levels of treasury personnel. Technology
provides the means to generate timely and dependable management reporting on
treasury activity, positions, risks and results without extensive additional
team efforts.

A common technology development is the adoption of a
specific set of treasury key performance indicators (KPIs) to provide
objective analysis and management reporting of treasury activity against
pre-defined standards and benchmarks. An example is an analysis of the
variance between subsidiaries’ cash forecasts and actual cash flows, which may
be used to set objectives and measure performance as a group effort to improve
forecast quality.

TMSs may be interfaced with management reporting
tools such as consolidation systems, which some organisations use to provide an
enterprise view of corporate positions and risks. The web provides an
excellent medium for effortlessly communicating all kinds of reports to a
global network of corporate subsidiaries; including deal confirmations,
external and in-house bank reports, position and risk analysis and forecast


articles will explain and analyse the various treasury technology applications
outlined in more detail, for anyone who is seeking to understand how
technology enhancement could help their organisation. They will demystify
technical jargon; explain the potential benefits that can be achieved at all
levels of treasury evolution, organisation and sophistication, and aim to help
treasurers make better informed and hence more effective technology decisions.

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