The market for treasury management solutions has changed dramatically over the course of the past few years. From technological advances – such as the proliferation of the cloud – to the way the treasury function has changed in recent times, corporate and bank treasurers find themselves with a wealth of options to choose from.
But not all of the solutions provide adequate coverage for the modern organization, nor are operators able to keep up with the latest changes to the market. Further, when organizations go through structural changes – such as mergers, acquisitions, or carve outs, those entities involved often find their TMS is no longer fit for purpose.
To find out more, we caught up with Timo Hämäläinen, CFO, of Analyste.
How are departmental responsibilities changing, and how is that reflected in demands for technological solution?
What’s changing is the way that treasury departments communicate with subsidiaries, or how subsidiaries are served. Firms change. Before, a firm might have had a decentralized model, but for a variety of reasons – such as cost savings, or to get greater control of things – the firm starts to provide service from centralized treasury, rather than each of the subsidiaries working with local banks. Of course there are tax and regulatory issues which will impact the way treasuries are working.
The main challenge that treasuries are facing is how to use technology to communicate more effectively with subsidiaries, and controlling better what the subsidiaries are doing.
When corporates realign and restrategize, how difficult can it be to readdress treasury solutions?
First of all firms must decide what they want to do, then go to the market to find out what is the best solution for doing it. In many large corporations it’s difficult to buy the best of breed solution because they often have policies to keep the number of vendors they work with to a minimum, which can often lead to them using only large vendors. There are IT departments and procurement managers deciding on behalf of treasury what type of vendors they can use. That can present a challenge in itself.
Some of the top tier treasury management systems typically have good solutions for almost everything firms want to do within treasury. But then again there are many solutions out there that do not incorporate everything. For instance, none of the leading treasury management solutions out there are covering IFRS 16 - the new accounting rule for leasing instruments – yet some of the smaller players are and they’re picking up customers across Europe thanks to that. There’s a lot of potential there for small, agile players.
Some of the larger TMS providers aren’t agile enough to provide some solutions when their customers need them. They can struggle with new issues such as regulations when they come up. In most cases they can’t pick up on everything, so they need to focus on the most important things for treasurers.
What are the tech challenges to a carve out?
I’ve seen in the past where a large company has split into two and the entity that was spun off was large enough to justify major investment in the technology. But then there’s a lot of examples in which a smaller part of a business has been carved out from a bigger company and they do not have the opportunity to take the same solutions that the larger company has relied on. So, they need to find a smaller solution they can rely on. They need to have everything in place as soon as possible because typically they have venture capital money backing the company – and they want everything in place from day one. Cash flow forecasting is a very good example of that. In these cases they need to find a solution they can implement as soon as possible.
In many cases these can be focused on specific solutions – forecasting or netting for example - but they are often temporary scenarios because they’ve already decided that they will implement full blown treasury management systems within two or three years’ time.
How has the buying process changed?
Treasurers aren’t necessarily experts in buying software, and they might not be aware of the market until they need to buy something, at which point they start looking at the market.
Quite often treasurers stay involved but they don’t have the knowledge so they often go to a consultancy which will not necessarily make the decision on behalf of the company, but will in many instances run the RFP process.
It’s important that organizations find a consultant that has a good track record of understanding their needs, knows the solutions available on the market and is able to simply select and implement the best of breed solutions that fit the customer’s need, budget and schedule.
And looking at the other side of the equation, when firms buy or are bought, what are the specific challenges in realigning the treasury mechanisms?
When you’re buying a company you need to prioritise what you’ve got from both companies and of course cash flow and cash flow forecasting is one of the most important things you need to know.
Then, you need to find a solution that is easy and fast to implement. If you are using Excel for collecting information from the business units it’s of course possible to divide the feeds to the new company. That of course works, but it requires a huge amount of effort and it’s not very reliable because controlling the information is not that easy compared to a specialist solution.
Whatever treasury management system you are using I think it is important that it is cloud-based, otherwise you could end up implementing a solution in different locations when you buy a new company. You need to prioritise information and cloud-based solutions can add agility to do so. Also, it needs to be easy to use because there could be a lot of resistance from the company that’s been bought, which may be used to doing things a certain way.
On all of the above, how does Analyste assist?
The whole idea of a system is that it needs to be easy to use and it needs to be easy to implement.
If you would need access over the whole group, during an entire implementation project, we’re talking huge processes, huge projects. Then when something changes you might not have the flexibility or the speed to adjust.
Here’s where we come in. You have your infrastructure in place, but our system is flexible and easy to use, for example in addition to an implementation project, in a fixed period of time, or even to make the most of all of the back office where all the ERP systems are in use.
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