Cash & Liquidity ManagementCash ManagementPracticeTreasury Management Systems: Beyond 2015

Treasury Management Systems: Beyond 2015

Trend 1: One-Stop-Shop

At a global level, treasurers are elevating the status of their function to become the strategic advisor of the company’s chief finance officer (CFO). At the same time, though, treasury must work to find and supply the company with the necessary financial ‘fuel’ to ensure the execution of daily operations and ‘keep the lights on’.

With the use of dedicated information technology solutions – i.e. TMS – treasury departments are able to fulfil their responsibility in a fast and informed way. Treasury offices across the world use TMS to replace and automate manually executed cash management, reporting, liquidity management and cash forecasting operations. While a TMS can be defined as a treasurer’s enterprise information system, such a system proved insufficient to support treasurers during the financial (and now, economical) crisis. Because company decisions must include a thorough overview of data and information, new forms of software applications are needed for treasury.

Corporate treasurers seek central enterprise systems that go beyond operations execution to assist them in their decisions. TMSs are becoming more relevant for decision making and thus, as decision supporting systems, it is important that they gather and integrate more data than ever before. TMS need to sit side by side with enterprise resource planning (ERP) systems, so that it helps treasury to collect all relevant data. Having all of these data – for example, purchase and sales orders, inventory turns, invoice matching and reconciliation data – available and visible makes it easier to make appropriate decisions.

So this will be a challenge for a TMS to integrate a maximum amount of data and interact with more and more platforms or interfaces.

Trend 2: Making treasury processes simple

Corporate treasurers today seek simplification, operational efficiency and standardised processes and technologies, while uncertain economic conditions are leading many corporations to increase their focus on internal efficiencies and cost reduction. The corporate TMS market is characterised by fierce price competition on well-established functionalities for basic bank accounting, cash and liquidity management, reporting, and risk management. This competition is further intensified by the presence of providers of free accounting, tax, payments, banking and other services.

Corporate treasurers are seeking information systems that support treasury management operations that are simple and easy to use. Treasury offices are being shrunk down to small teams and – in order to reduce costs by automating processes – they are only getting smaller. The rush for rapid growth and cross-border expansion often conflicts with lack of talent management and properly skilled resources in companies with smaller treasury teams and with less sophisticated international finance experience. So TMSs need to provide the necessary intelligence to really help the treasurer make the right decisions. This a very important trend for TMS to be user friendly and able to provide valid data that helps decision making processes in more convenient ways.

Trend 3: The 30/70 rule

I believe that what corporate users want from a TMS is 30% of new software functions and 70% of advisory and best practice.

Trend 4: Deconstructing payment flows

A payment is not always just ‘a payment’. Beyond the pure financial settlement of a contractually agreed due, a payment transaction may carry information related to the processes of the value chain that have made the goods or services available throughout the entire value chain, from the first supplier to the end customer.

Modern engineered TMS must support treasurers in managing not just the issuance of payments instructions per se but they must help capture, for instance, data related to the processes (such as date of production, date of shipment, quality inspection results) and the corresponding data fields of an invoice that was sent electronically to the client. This simple step moves the TMS up the value chain, from the payment back to the item that originated the payment, i.e., the invoice. In the not-so-distant future (say three years) I expect treasury systems will move even further up the chain, incorporating the processes that anticipate the invoice, such as supplier sourcing, request for proposals, supplier selection, contract management, and purchase order execution.

Payments are no longer just a ‘black box’ that needs to be made faster and simpler – although of course this is also important.

However, treasurers will need systems able to identify the so-called ‘trigger points’ that are part of the lifecycle of a payment transaction, providing the necessary supporting services such as foreign exchange (FX) services, order matching and reconciliation, reporting, trade finance – all typical solutions that were not part of a treasurers responsibility before, but now become more and more important in the near future.

* This article was first published in Bellin’s magazine Treasury Connected #4

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