By Morne Klynsmith, Head of Treasury Technology
With Excel ruling as King in many organisations and treasury departments, its archaic sceptre cannot compete with cloud-based treasury technology, which is more accessible, user-friendly and cost-effective than ever before. The global COVID-19 pandemic highlighted the risks to organisations that did not have centralised, cloud-based systems. Other unexpected pandemic-related challenges included disruptions and delays in the supply chain for hardware requirements, as well as people not being able to gain access to physical data centres when cities were in lockdown.
Treasury teams that had to rely solely on the limitations of Excel as a Treasury Management System (TMS) were taught valuable lessons regarding the benefits of having access to a cloud-based TMS. Treasurers who spent the time and energy to invest in a TMS were the proverbial “leaders of the pack”. Today, treasury teams can no longer afford to spend disproportionate time collating data across various platforms to make crucial financial decisions. As such, agile teams that work securely from any destination within a SOC-compliant cloud TMS are virtually obligatory in this fast-paced world of change.
When comparing the use of spreadsheets instead of a TMS, there are several drawbacks, such as:
- However well-built the spreadsheet is, it requires a high level of manual intervention, with one treasury team cutting and pasting balances for several hours a day.
- Due to the human element involved, errors can easily creep into large spreadsheets and be extremely difficult to rectify, especially where the staff who first created them are no longer involved in the organisation.
- Excel’s lack of audit trail functionality, ability to do dual administration and varied staff excel skills.
- Managing passwords and security to protect sheets, ranges, or cells could be impossible to edit if passwords were not stored or became forgotten or lost. The risk of ransomware attacks has become more prevalent and can cause havoc in terms of security threats.
During a recent Treasury Dragons virtual round table discussion on Excel vs a TMS, the participating treasurers that still relied on Excel as their TMS were all considering introducing a TMS to reduce risk and to automate many treasury functions. According to the panel, the most significant hurdle in acquiring a TMS was getting Board approval for the expenditure, but so was the diversion of staff and resources to implementing such a change.
This article will explain how cloud-based TMS technology can pay for itself by automating repetitive manual tasks while highlighting significant risks with automated reporting designed to spotlight areas that the treasury teams should focus on. The article also guides on selecting a technology partner to address the critical issues of implementation and the all-important ongoing support of the TMS without over-stressing the organisation’s operational and financial resources and outline the quick process wins.
ROI of a TMS
A business case for TMS should prominently feature tangible estimates of ROI.
The following enhancements derived from the TMS will result in actual savings that can be directly linked back to the TMS investment decision:
Cash optimisation: More precise determinations of cash on hand and cash trends can lead to better spending and investment decisions. For example, opportunity cost reports on idle cash can be used as a fundamental KPI matrix for the treasury team to ensure that the organisation earn a higher investment yield for a more extended period, paying down debt ahead of schedule, or paying invoices early to take advantage of vendors’ invoice-discounting programs.
FX improvements: Improved visibility and efficiency of FX-related processes can help companies more effectively hedge against currency fluctuations. This area can really drive a significant ROI and one that will resonate with CFOs.
Bank Fee analysis and optimisation of banking relationships: Because the TMS becomes the central access point for all banking, the costs savings and increased security in user access are significant. Bank accounts can be managed in one place, including account open/close processes with signatories and document account management. The improved access and visibility of multiple bank relationships provide a wealth of information to analyse and scrutinise bank charges and cost savings that could run into the millions of rands.
Productivity gains: Improvements in the productivity of treasury and IT staff due to automation of repetitive manual tasks and bank connectivity solutions are significant. A TMS that manage and maintain all bank connectivity relieves internal IT teams from managing ERP bank integration tasks and thus allows organisations with more bank processing freedom.
Increased risk and security management, complete audit trails, automated reports, bank and ERP integration and one version of the truth are just some reasons when building a business case for a TMS vs Excel.
The TMS will have several components which need to be reviewed harmoniously to achieve optimal results. These include:
Technology: The TMS is the control hub that connects, schedules and manages all treasury transactions and provides the required reporting to fulfil operational, management, audit and regulatory requirements. When evaluating different TMS solutions, a detailed set of functional and technical requirements need to be listed. Each TMS vendor should be meticulously measured against these criteria to ensure the organisation selects a solution that will best meet needs now and in the future.
Although functionality is usually the main driver when organisations decide to select and implement a TMS solution, aspects such as upgrade cycles, security, embedded bank connectivity, costs associated with monthly/annual licence fees, first-line support, as well as its ability to integrate with the business’ current ERP/BI/3rd party systems in various formats cannot be overlooked. Integrating the organisation’s ERP is particularly important as the TMS can replicate the necessary GL entries for all treasury transactions and automatically post them to the GL – further enhancing straight-through processing, control and transparency and relieving the administration pressure on typically a small treasury team.
Security Infrastructure: With fraud and cyber-attacks being executed with greater sophistication and many staff working from home, it is crucial to ensure that treasury information is protected.
The Treasury Management System’s security infrastructure can be used to further protect an organisation’s infrastructure by using it to replace and act as a single banking platform to all selected banks to encrypt, authenticate and administer transactions between the company’s ERP and banks.
Thus, the TMS selected should strengthen the business’ security protocols by providing the following functions as standard functionality:
- Two-factor authentication (2FA) to create a randomly generated one-time password that is delivered to a predefined hard token (YubiKey) or soft token (via SMS to a user’s smartphone).
- IP filtering to restrict login to the TMS to predetermined users.
- Enterprise single sign-on (SSO) for authentication so that each user’s security credentials (such as Windows user ID and password) is used for logging in to the TMS.
- The TMS should also monitor workflows and treasury activities within the application to detect unauthorised use and potential fraud. As a general guideline, it should be able to monitor and analyse:
- Bank connectivity failures, including files expected but not received
- Payment files where final acknowledgement was not received
- Escalation and summary of pending workflow approvals
- Real-time status alerts of additions, deletions or modifications of data
- Stoplight status for detection of task errors
Connectivity: The TMS infrastructure initiates and controls the required information flows between third parties such as banks and accounting systems.
An optimally implemented TMS setup allows the treasurer strategic freedom to negotiate banking relationships and incorporate new territories seamlessly into the group, knowing that the TMS will handle the required connections and transformations quickly, thus avoiding significant disruptions to operations and very little reliance on IT internal resources.
It is therefore vital to review the connectivity experience and bank relationship capabilities of your implementation partner. Choose a partner that can demonstrate their connectivity capabilities locally as well as in Africa. Cash management is at the heart of a corporate treasury department’s core functions. If nothing else, treasury is expected to stay on top of its cash position, future cash needs, and cash outlook. However, treasurers can’t think about those until cash management is under control. And that remains a challenge if connectivity is not robust and your partner is not experienced in ensuring 100% visibility.
Implementation and Support Partner: Many TMS implementations fail once the implementation team signs off and return to implement other projects. The system’s complexity makes it difficult for the users to understand and then communicate across geographical areas and time zones become a major hurdle in the success and further rollout of the TMS solution. A local implementation partner with a support SLA that can be independently verified will ensure that your TMS implementation runs smoothly and that continuous training are provided to new employees.
Reference Checking: Because of the time and effort spent selecting a TMS as well as an implementation and support partner, rigorous reference checking is critical. Few treasurers get the chance to implement a TMS more than once in their careers, and many have burned their fingers on botched implementations.
The following are some questions/points to consider:
- Senior employee stability and succession planning at the TMS solution and implementation partner.
- What technology enhancements are in the pipe line for the next 24 months?
- Service level agreement and penalties should be standard in the agreement.
- The bank integration and relationship experience of the implementation partner.
- Support desk – No of treasury users supported, average time to close call, support SLA
- Support in a local language, local time at local rates.
- Training, training manuals and ongoing training options and costs.
- Implementation partners project scoping and management abilities.
- Disaster recovery plans and testing results.
- Other products/support services offered.
When verifying implementation partner references, try to align your priorities and operating environment with the provided references. For example, if you plan to deploy a SaaS solution, be sure to talk to a SaaS client. This step is strongly encouraged as performing it can help save significant time, money and frustration in the long run.
Secure automation of treasury processes and the facilitation of straight-through processing, coupled with the need for the treasury team to be more strategic, have become two sides of the same coin. You cannot have one without the other and certainly not when Excel is your TMS. Take care to ensure that the TMS selected for your organisation gives greater independence from ERP systems and banks, is scalable to incorporate new functionality, incorporate best practice security protocols and seamlessly integrate with your ERP (and other business systems), banking partners, online dealing platforms and market rate providers. And finally, your implementation partner should be experienced in various TMS platforms, be able to assist in building the business case so that the ROI is a logical and reachable KPI for the treasury team.