bob’s guide to treasury management systems: How to tell if it’s time to invest in a TMS

By Leonie Mercedes | 8 June 2017

Since the financial crisis, the treasurer has taken on a more strategic role, meaning they must know at a moment’s notice the financial standing of their business. Treasury management software gives treasurers a way doing this with real-time reports, and visibility of the flow of transactions within their organisation.

But given the cash and time investment required for successful implementation of the TMS, are they right for every business? For many years, spreadsheets have proven sufficient for the job, but according to bobsguide’s treasury management system survey, conducted earlier this year, 33% of treasurers are concerned about spreadsheet errors. With greater regulatory pressures and ever-shifting market conditions, how can treasurers determine whether it’s time to invest in a TMS?

In the third article of the bob’s guide to… treasury management systems series, we’ll look at the different capabilities of the market’s many treasury systems, what they could do for organisations of different sizes, and what businesses need to consider before they invest in their own solution.

How popular are treasury management systems?

Before we look at what a TMS might achieve for an organisation, let’s refer to the main finding of our survey from earlier this year. Three-fifths (60%) of treasurers are using treasury management software in their organisation. Of those who are using a TMS, 82% are at least ‘somewhat satisfied’ with the software’s capabilities, citing full automation, centralisation of all treasury positions, efficiency and good connection to banks as reasons for their satisfaction.

However, nearly one-fifth (19%) have no future plans to invest in treasury management solutions, and nearly half (45%) of all the organisations that took the survey rely on spreadsheets ‘to a great extent’, or ‘fully’.

Cost and perceived difficulty of integrating the new solution seamlessly into existing solutions emerged as the top two concerns about implementing a new TMS, or augmenting it. But could there also be a case of fear of the unknown – as there are many different systems with many different functionalities available. How to determine which system is right for the needs of the business? First, it’s important to understand what a TMS lets the treasury function achieve.

What should a treasury management system allow treasurers to do?

So, broadly speaking, what’s the main purpose of treasury management software? “It allows treasurers to sleep well at night,” says Dimos Dimitriadis, partner and founder of Treasury Technology Associates, a UK-based treasury technology consultancy.

“Having a system allows you to control things better,” he adds. “You can set it up in such a way so you know the flow of activities within the treasury – it’s all captured somewhere – and that is a very powerful tool to have.”

These are perks that aren’t just office-based, too. As Dimitriadis explains, with some systems, it’s now possible to access your TMS via mobile or tablet, and review the situation in real-time.

“There are two things that a treasury management system should do,” says Lars Schroeder, senior engagement manager at consultancy SkySparc. The first basic requirement is an automation of processes, from front office to back office and accounting, and the second is a centralised place to store data, he adds. “You can then also run data analysis and use this to make more strategic decisions, such as investment decisions.”

Dimitriadis continues: “A TMS gives you quick access to information, because everything is in the same place. The treasury information is at your fingertips. You’ve got the full lifecycle of a trade, of a deal and provided that your system has a good reporting functionality, you can access this information in an instant, which means that you can then react to anything.”

For example, if a business is looking to acquire another, they know exactly how much is in the bank, and how to fund the acquisition. If the business is being taken over, it’s possible to show what its position is to the interested party. And if the business is being monitored, it can prove that its treasury works in a robust way, Dimitriadis says.

What are the key differences between all the treasury management systems on the market?

There are many different treasury management systems on the market – in the bobsguide directory, it’s possible to browse more than 300. Which system, however, would best suits the needs of a particular business?

“There is a TMS out there to suit any budget,” Dimitriadis says. These systems run the gamut from simple and easy to implement, to complex systems that take more time to integrate into the working practices of a business, and these tend to track with price, Dimitriadis says, quickly adding: “Just because something is cheap, it doesn’t mean that it’s not good, because every TMS out there will suit a particular treasury.”

The three main differentiators between the systems, according to Dimitriadis, are user-friendliness, functionality and coverage, and whether the solution is truly software as a service, a point that has caused some confusion.

Schroeder identifies out three main different types of treasury management software. Some have a “high level of completeness”, and can be used by corporate treasuries, central banks or asset managers. Other systems are specialised in many different ways, or have certain functionalities for specific tasks, Schroeder explains. Another type covers the full front to back automation, but are developed for specific industries.

It’s also important to consider the demands when it comes to hosting. Schroeder adds: “The simpler systems have some limitations and the complex systems have more flexibility, and the demands when it comes to hosting, whether it’s on site or not, make a difference.”

How can a TMS help me overcome challenges present by a volatile market, or new regulations?

Along with shifting market conditions, treasurers and the banks they work with will soon also be subject to new regulation, including MiFID II and PSD2. How can a TMS help treasurers cope with these new challenges?

“Having all of your data in one place is key to overcome challenges with regulation,” Schroeder says. “It is very helpful to have it in one system rather than spread over multiple systems, because usually what is connected to the regulation is a lot of reporting requirements,” he adds. Treasurers need to combine the different types of data from their system to meet those requirements laid down by the regulation, and they need to be able to access it quickly.

Dimitriadis adds that a TMS can also help treasurers cope when there is a change to regulation that affects the banks.

Is now the right time to invest in a TMS?

The decision of whether to invest in a TMS is personal, and will be different factors to consider for each organisation, but there are a few considerations that might help.

As we found earlier, the top two reasons for not investing in a TMS are cost, and difficulty of implementation. Certainly, the process of implementing new treasury management software does take time – from three to 18 months depending on the system, the business, and where it started – and it does carry a large cost, which may not be entirely clear at first. But the investment now may save a lot of difficulty in three to five years’ time, when most systems will be automated and the need for instant reporting intensifies.

According to Dimitriadis, the cost of a missed payment, such as an interest payment on a loan, which might have been avoided with a more efficient system, could be enough to cover the cost of the TMS.

It’s a big step to take, but working with an IT specialist or external consultant may allay any fears. Later in the bob’s guide to… treasury management systems series, we’ll walk you through the process of implementing a TMS, and what to expect.