1. a buyer’s guide to Treasury ManageMenT sysTeMs 2011
Where’s
the Cash? At a time when having the best possible visibility
over cash is a critical issue for treasurers, how
can using a treasury management system (TMS)
provide this visibility, while also enhancing cash
management techniques?
Words: Ben Poole
As cash flows around a company, it can create errors, particularly when trying to consolidate Treasury Solutions, says this means that as
large financial risks for the organisation. information from various different systems,” much cash as possible can be generated
The treasurer needs to know what cash the Nelson notes. from internal sources, minimising the need for
company has and where it is, as well as have external borrowing. “This will have a further
In this context, a TMS can be used as a
visibility over accounts payables (A/P) and positive effect of improving the organisation’s
secure and stable destination to aggregate
accounts receivables (A/R). The topic of cash creditworthiness. Additionally, it will enable the
forecasting data from remote business
visibility is particularly relevant today, as many organisation to plan the accurate deployment
units with the organisation’s bank positions
corporates are choosing to optimise their of cash where and when it is needed, to
and treasury transactions. This enables the
working capital position in order to rely less finance business operations efficiently and
treasurer to construct the cash forecast
on bank funding. effectively,” says Higdon.
over a defined time horizon. Jason Torgler,
Many corporate treasuries use a treasury vice president of strategy at Reval, says Beyond the potential for improved cash
management system (TMS) to support their that a TMS enables quicker analysis of a forecasting, a TMS can also enhance the A/P
cash management activities. The first area company’s historical bank transactions and and A/R processes. Serving as a payment
where a TMS can prove its worth is in the vital more streamlined data integration from other factory can do this for A/P. A bank-agnostic TMS
discipline of cash flow forecasting. financial software and remote operations. can import A/P from a variety of systems, batch
“Additionally, a TMS maintains an audit trail payments and send the payment instructions
Enhancing Cash Management Techniques and provides sophisticated forecast to actual to partner banks. “This method creates a single
variance analysis. These are critical tools point of payment execution and forecasting,
Cash flow forecasting is perennially one of
when the treasurer is attempting to enforce while outsourcing the payment format
the top three disciplines that treasurers cite
performance and accountability of the reporting maintenance to the TMS vendor,” says Mauricio
as in most need of improvement. As Tom
subsidiaries,” explains Torgler. Barberi, chief marketing officer at Kyriba.
Nelson, cash management specialist at Wall
All articles © 2011 C-Stream Limited
Street Systems, says: “Cash flow forecasting A key benefit of a TMS is that the treasury Barberi also points out that consolidating all
is perhaps the most important function a will be able to match the projected cash flow A/R in the TMS will help build an accurate
treasury provides and everything else flows over time against known demands, including forecast and allow for aggregated days’ sales
from that, for example investment, hedging operating flows, dividend, interest and royalty outstanding (DSO) reporting by payer. “This
and funding decisions.” But the process can payments, and non-routine costs such as those will give the corporate the ability to identify
face many problems. “Manual reporting is relating to new investments and acquisitions. vendors and suppliers who pay outside of
an inefficient process, which can lead to Paul Higdon, chief technology officer at IT2 stipulated terms and follow up with those
7

2. a buyer’s guide to Treasury ManageMenT sysTeMs
parties,” he explains. In addition, a rolling can work in the same environment, adding • What support is provided by the TMS
date adjustment can be made to the cash their specific business knowledge and share on a local basis?
record upon import, which can automatically the information with HQ,” explains Parren.
• What are the additional costs involved
adjust the expected receipt date by the late Technically, for a decentralised TMS to be
in the doing the above?
pay history of that counterparty. feasible, it is necessary to have a web-based
or enterprise resource planning (ERP)-based Finally, Soan argues, the system should fit
According to Paul Bramwell, senior vice
architecture that is able to be accessible into the organisation, rather than forming
president (SVP) treasury solutions for SunGard’s
everywhere at the same time. the organisation around the restrictions
AvantGard, one recent trend has seen some
TMS vendors make acquisitions within the of the system.
“In my point of view,” argues Parren, “a
A/R space to leverage the value of accurate centralised environment only becomes
A/R forecasting through accurate cash possible with a TMS.” For example, Demonstrating Visibility - Reporting to
management and also short-term debt based centralisation has increased administration Senior Management
on securitising receivables. “Key aspects of costs in in-house banking (i.e. when cash is While cash visibility is critical for an
receivables of interest to the treasurer are pooled and internal current accounts have organisation to maximise its working capital
quantity and quality, and both of these variables to be maintained). A TMS enables a quasi- position and in turn reduce its dependency
control the amount and margin of borrowing automatic administration, which is vital for a on bank funding, treasurers are also under
securitised on balances,” notes Bramwell. centralised treasury structure. increased pressure to demonstrate their cash
visibility competency to senior management.
David Soan, managing director of BELLIN
A Centralised Approach to Cash Visibility This is a legacy from the credit crisis and
Treasury Alliance, comes to this point from a
it is here to stay. Many modern TMS are
Treasurers will want to take advantage of the slightly different perspective. “When the right
equipped to help the treasurer generate either
TMS benefits already mentioned, but does the TMS has been selected for the company, it
summary-level or detailed cash management
effectiveness of using a TMS for corporate should not matter whether the treasury is
reports for senior management.
cash management purposes depend on the going to be centralised or not,” says Soan.
organisational structure of that treasury Rather, he suggests that the following points “The key to providing complete and up-to-
department? Fortunately, according to Bart need to be taken in to account: date information needed by management is
Parren, director of product management the automatic updating of the TMS database
• How will the users connect to the TMS?
at Hanse Orga, there are benefits to be with all relevant information in real time, as
had whether your treasury structure is • How easy will it be to roll out the TMS if the data is inputted, uploaded or detected,”
largely decentralised or centralised. “In a additional subsidiaries and users need to says IT2’s Higdon. With such a solution in
decentralised environment, local subsidiaries be added? place, senior management can depend on
Figure 1: An Example of a TMS Dashboard Reporting Cash Management KPIs
All articles © 2011 C-Stream Limited
Source: Hanse Orga
8

3. a buyer’s guide to Treasury ManageMenT sysTeMs 2011
the accuracy and completeness of their support the level of data accumulation integration of cash and liquidity management
on-demand cash management reporting, of a TMS. “This means that data is re- with the front office as an example. “The same
including summaries of cash positioning and keyed extensively, similar to working on a liquidity position that is used to assess how
cash flow forecast. spreadsheet,” he says. much cash the business makes in the medium-
term can be used as the basis for an evaluation
“Additionally, the database can support the
of credit lines and loans, as well as for foreign
derivation and reporting of key performance Future Developments exchange [FX] positions,” says Parren.
indicators [KPIs] for management The potential for TMS to provide greater
benchmarking of the accuracy and timeliness support for corporate cash management in Wall Street Systems’ Nelson suggests that
of quantities and events, such as forecast the future comes from technical innovation regulation will continue to play a part in
accuracy, bank account reconciliation that vendors can make in this area. A large the role of the treasurer, placing increasing
performance and payment execution, part of this will be seen in the delivery channel pressure on issues of reporting, risk
to support proactive, best practice cash of the TMS itself. SunGard AvantGard’s assessment and visibility of accounts. “There
management operations,” says Higdon. Bramwell suggests that cloud-based TMS will be a continued demand for stronger global
offerings are starting to become more systems, as well as a desire for reducing the
TMS Versus Bank Cash Management Portals accepted and will be the big growth area for number of systems in use,” he says.
There are a variety of options for treasurers cash management solutions. “Coupled with
to consider when it comes to choosing mobile device technology - where reports, Conclusion
support for their cash management practices. metrics, payments and approvals are done on
Corporate cash management is a complex field
For example, some choose to use the cash a wireless device - companies will be able to
that requires tools capable of managing the
management portal offered by a bank, operate without being tied to a single location
workflow and reporting needs across the entire
sometimes at the expense of a TMS. Bank or bank,” Bramwell says.
organisation. SunGard AvantGard’s Bramwell
portals are central sites where users can view Reval’s Torgler believes that software-as- notes that, while ERP extensions and bank
balance and transaction information and make a-service (SaaS) will continue to dominate portals can offer some of the functionality,
payments, primary for that specific bank. the TMS adoption landscape. “Organisations a TMS can provide comprehensive tools to
“For organisations with one cash will demand rapid deployment from a manage an entire organisation’s cash, risk,
management bank and limited need for single solution, without the headaches of bank account structure and consolidated
integration of other activities, bank portals are internal IT resourcing and scheduling,” he reporting. With the prolonged elevated
useful,” says Reval’s Torgler. However, he adds says, while also making the point that the importance of cash, this breadth of functionality
that a TMS is adopted when requirements TMS marketplace will no longer tolerate the is vital for treasury efficiency.
exist across global, multi-bank environments frustrations of costly upgrades, post-purchase.
and include cash positioning, reconciliation, “Too many treasury departments have been
cash flow forecasting, accounting integration, left high and dry and unsupported due to older
portfolio management, cash pooling and TMS software versions,” Torgler notes.
intercompany lending and financial risk In addition to developments in
management - requirements that many technology, Hanse Orga’s
treasurers of multinational corporations will Parren believes that
have. The additional advantage here is that a treasurers should
bank-agnostic TMS gives treasurers freedom be looking out for
over which banks they give their cash integration and
management business to, rather than being efficiency as a trend
tied to a particular bank via their portal. over the next 18
Barberi from Kyriba makes the point that months, citing the
bank portals provide very basic cash position
worksheet functionality and do not
All articles © 2011 C-Stream Limited
9