Earnst & Young's Treasury Management System Overview 2013

To see an excellent Treasury Management System Overview go to: http://www.ey.com/Publication/vwLUAssets/Treasury_Management_Systems_Overview_2013/$FILE/Treasury%20Management%20Systems%20Overview%202013.pdf

WHAT IS A TREASURY MANAGEMENT SYSTEM?

DEFINITION:

A “Treasury Management System”  (also known as a Treasury Workstation) is a term for a treasury-oriented system or software package that specializes in the automation of manually-intensive, repetitive steps needed to manage a company’s cash flows.  The system allows a company to efficiently and effectively communicate with financial institutions in order to manage cash, transactions, forecasts, FX, and even investments and debt.   The Treasury Management System can seamlessly interface with a company’s general ledger offering an instant financial dashboard.  The financial crisis has heightened the need for better transparency into a company's cash positions as the traditional lines of credit have become increasingly scarce.  Through the proper selection and implementation of a Treasury Management System corporate treasurers can efficiently respond to the financial needs of the company. 

WHY UTILIZE A TREASURY MANAGEMENT SYSTEM?

WHY A TREASURY MANAGEMENT SYSTEM:

Over the past two years our global economy has experienced a meltdown.  The financial markets are fraught with uncertainty and caution.  We have witnessed several large financial institutions collapse, experienced the scarcity of tightened credit, stressed over increase of liquidity risk, lost sleep over tanked investments, and were burned by the exposures to fluctuating currencies.  All this sheds light on the need for better controls, quicker access to information, and better transparency.  As this transformation has taken place the corporate needs continue to emerge.  They need real-time access to information, system integration, and consolidated global reporting capabilities with the ability to create on demand reports for senior management.  Excel spreadsheets have their place but are manual and risk prone.  Companies must open their eyes to the need for treasury solutions.  In short, to remain competitive companies need to ensure optimal use of treasury technology such as a Treasury Management System.          

SELECTING A TREASURY MANAGEMENT SYSTEM

SELECTION PROCESS:    

With a large variety of Treasury Management Systems and vendors available today (over 40), the selection process can be a daunting challenge for a treasurer to navigate.  To further complicate matters the market is maturing, meaning the available systems currently meet the functional needs of most companies.  So a treasurer must look into the future and select a vendor whose Treasury Management System will be flexible enough to evolve with the rapidly developing technologies that surface. 

As you can imagine there is corporate (and personal) risk involved in selecting a Treasury Management System.   This risk is derived from cost and time.  The cost can be from $20,000 to $250,000+ plus while the resources and time spent on selection and implementation can range from 5 month to 1 year. 

Whether you are selecting a bank-offered system, in-house installed application, the treasury module of an ERP, or an Application Service Provider (ASP) system you can see the importance of utilizing a structured and disciplined selection process that ensures all requirements are met. 

My approach is quite simple and intuitive but it helps to have a website where you can come back and review the steps again and again.   Here we go….

STEP 1 - BUILD THE TREASURY MANAGEMENT SYSTEM SELECTION TEAM

Step 1 – Build the Treasury Management System Team

First and foremost - ensure that you have executive support.  The CFO or Treasurer must understand and believe the need for the new system is critical.  They need to understand the complexities of the project and the critical nature of its success. Once on board, you can lean on him or her for support and resources.  What you do not want, is to be in the process of selecting or implementing and at the same time explaining to the executives what you are doing.   Get support before you move on.  The lack thereof can be career-ending.   

This is a large undertaking at best.  It is critical that you get a solid project manager on board right from the beginning.  The best project managers are those that bring a combined skill set of project management methodologies and treasury knowledge. As IT, Treasury, Accounting and other departments will be stakeholders you will need someone to manage the players to ensure timelines, approvals, and issue resolutions are met. 

You will also need a proficient IT person who has an understanding of treasury concepts and a good grasp of technological advances.  This will be a lengthy project, so secure someone who is solid. 

Lastly, ensure that there is representation from each of the stakeholders.  This would involve Treasury, IT, Accounting, Investor Reporting, etc.  Make sure every and any department that will be touched by this project is represented.  This involvement assures that the selection and implementation process will be clear, approved, and disciplined.

STEP 2 - DEFINE THE TREASURY MANAGEMENT SYSTEM PROJECT

Step 2 – Define the Treasury Management System Project

From the beginning, the project should be clearly defined. At a minimum a proper project definition should include:

1-     A task list - which includes forecasting start and completion times and dates.

2-     A list of resources - details what is needed for the completion of these tasks.

3-     A list of dependencies among the tasks.

4-     Project milestones - allowing the tasks to be assessed and the progress be noted.

The milestones should be realistic so that the defined project can be strictly adhered to.  A clearly defined project that is communicated from the onset will ensure that the stakeholders are clear as to what their responsibilities will be and time frames associated with those responsibilities. 

STEP 3 - DEFINE THE PROJECT REQUIREMENTS

Step 3 – Define the Project Requirements  (Build Your Wish List!)

Correctly defining the Project Requirements is critical to the project's success.  This can take anywhere from a week to a few months to complete depending on the complexities involved.  It is important to draw up the requirements before any vendor presentations are given.  This way you will stick to defining the core features needed by your company and not get caught up in the bells and whistles of the vendor presentations.  Also, through defining your requirements in this manner, you may find that all you need is an additional module or change in process rather than a new Treasury Management System. This process will also help you highlight the weaknesses in the existing system in relation to the required core functionality.  Properly documented requirements facilitate the creation of a benchmark by which a comparison to proposed solutions may be evaluated.  This document must describe in sufficient detail the treasury features and the environment in which it will operate.  There are many ways to obtain the requirements but I suggest the following steps:

1-     Capture What You Know.  This step must be provided by the users of the system.  Review your current system and detail each feature you use.  Define the weaknesses if any.  Note the functionality and features you want to retain from your old system as well as the required improvements from the new system.  Add this to your list.

2-     Automation.  Analyze the treasury processes.  Break them down into step-by-step tasks to identify where a new system could improve efficiency through automation.  Add this to your list of requirements.

3-     Dependencies and Integrations.  In detail, list out how your old system integrates with other systems, i.e., banking, general ledger, reporting and market data.  What dependencies do you have and what is the timing of those dependencies?  Are there other departments that utilize your old system for balances or transaction information?  Does investor reporting utilize the BAI download for transaction information that you were not aware of?  Add this to your list of requirements.

4-     What Is The Plan.  Understand your company’s strategic plan.  The selection of your Treasury Management System must be in harmony with the plans of the company.  Is your company going from a decentralized to a centralized treasury group next year?  Is there significant growth planned for the future?  Is your company diversifying into other product categories?  This will help you in the selection process as to whether you need a moduler (scalable, flexible, deployable) solution or a canned solution (one that will not change over time). 

5-     Your Wish List.  List all the treasury features you would have in a perfect world.  In addition to balance reporting, cash positioning, and payment processing this may include:

a.       Real-time information consolidation

b.      Elimination of multiple banking cash management systems

c.       Fraud detection

d.      Bank Fee Analysis

e.       Market updates

f.        System interface with A/R, G/L, A/P

g.       Intracompany

h.       FAS 133 compliance

i.        Timely and accurate exposure identification and reporting

j.        SOX Compliance

k.    Forecasting

l.    Remote Access

By correctly defining the project requirements you will be able to quickly appraise the value of the future vendor presentations.  If nothing else, you have defined the core features that are required by your treasury group, created a wish list, eliminated any inefficiencies, and understood the true need (or lack thereof) for a Treasury Management System.