Access to Power

The Democratisation of the TMS

For various reasons, many mid-size firms feel the TMS is not meant for them. It is, they may believe, the preserve of large corporates and their sizeable budgets. However, a recent podcast with Matthias Varenkamp, Account Executive, Cobase, set about deconstructing this myth, and explaining how and why the TMS is now very much within reach of firms with revenues more than €100m. Here’s a recap.

For many mid-size businesses, a TMS is neither necessary nor affordable. And there the discussion often ends. The counterpoint that they will be consigning the vital work of treasury to suboptimal processes and systems, or be at risk of losing vital accumulated treasury knowledge should the incumbent treasurer leave the company, may still be an acceptable roll of the dice to these companies.

But the value of equipping the treasury team to the same high standard as the rest of the business should not be underestimated, said Varenkamp. Doing so, he believes, provides a means of securing future success. And what’s more, this can be both technically and financially more achievable today for a far wider spectrum of businesses.

In essence, Varenkamp believes that TMS ownership has been democratised by the advent of new delivery mechanisms, to the extent that even treasuries in mid-size companies can begin fulfilling their potential as functions of both operational and strategic importance.

Setting treasury free, embracing the future

Of course, this does not stop some treasurers (or more likely the masters of their technology budgets) from feeling they are OK as they are, thank you. But while accounting software applications, ERPs, and even Excel spreadsheets, undeniably have roles to play, they are generalist systems that offer little or no advantage to the treasurer. In an increasingly competitive commercial environment, holding on to legacy technologies also seems like a roll of the dice.

“Across many accounting systems, ERPs, and especially Excel, manual inputs are required. These are time-consuming and, naturally, can force costly mistakes,” noted Varenkamp. “But from a treasurer’s perspective, that intensive operational focus also detracts from the department’s capacity to engage with strategic decision-making.”

He continued: “By incorporating a wide range of data into a centralised system – a TMS - and being able to apply a range of modern analytical tools to meet the treasurer’s shifting demands, treasury is set free from its operational boundaries and is able to take up a more strategic role within the company.”

With many companies having deployed a host of different legacy accounting and ERP systems, often with multiple iterations of each, Varenkamp argued that the notion of a ‘single source of truth’ can rarely be attained. “This is where the TMS steps up as a central hub, where all treasury’s data sources may be connected.”

For many treasurers, at least a couple of hours, but maybe even the whole morning, will be absorbed in building insight into the previous day’s activities. “Having a central hub, where they have all information at their disposal from the moment their working day starts, enables them to start looking ahead straight away.”

As an example of the power of the TMS, Varenkamp recalled how one Cobase client – a global operation, active in more than 65 countries and with at least 45 banking partners – had found that building a daily overview often took one employee all day. “With Cobase, it was handed the ability to monitor and operate all of its banks and accounts within one platform,” he explained. “And within our platform the company could manage its forecasting, trade FX and apply its hedging strategy.”

Varenkamp further revealed that this client had opted to deploy the vendor’s balance optimisation module, enabling it to automate cash sweeps across multiple accounts within its newly developed target balance structure. “This not only ensures peak cash efficiency but also, as part of the optional in-house banking module, ensures all interest rates are calculated and settled on the intercompany positions this movement creates.”

Removing IT complexity

Having highlighted the efficiency gains afforded by a TMS, and some of the tools now available that can, and indeed do, make a real-world difference for treasurers, the topic turned to the democratisation of the TMS.

Varenkamp’s proposition is that the TMS is no longer just for big corporates and their big budgets, but also for mid-size firms, perhaps with restricted resources. While obviously keen to present a clear case in favour of deploying a TMS, he commented that a typical prospect client is held back by the belief that a TMS is “very costly” and that it sets up “an IT-heavy implementation”.

The issue for some, he accepted, “is that in their career they may have been exposed to a major ERP implementation that seemed to be never-ending, draining IT resources and budget”. Such an experience, especially for treasurers now working with mid-size firms, understandably sets an unwelcome precedent for core system implementations.

But while a TMS can be a weighty proposition, it does not have to be. “With SaaS-based solutions such as Cobase, treasurers can access turnkey platforms for businesses of any size,” stated Varenkamp.

From the outset, a vendor such as Cobase is able to take away all IT complexity for the client, he said. “On average the IT involvement for a project with Cobase is two to three hours. We undertake the whole secure messaging and data set-up with their banks, including data formatting, irrespective of channel, even API. Clients then have full flexibility, for example, to apply payment workflows and authorisations, and to receive and process statements in their own back-end in any format required.”

One small step…

For the treasurer who sees the logic of deploying a TMS, but feels overwhelmed by the prospect of even setting out on this path, Varenkamp suggested taking a measured approach. “Many companies send out RFPs with hundreds of cut-and-paste questions to vendors, often without considering their relevance or the scope of their project, and frequently without thought for how they might properly analyse the responses,” he reported.

“But I believe the best way is to start small, with your direct needs, and evolve from there as your business evolves”. Doing so, he said, “makes it easier to achieve buy-in from senior management, and easier to prove to them, and yourself, that the system really is helping on a day-to day basis, and is delivering many benefits to the wider business”.

Start by obtaining bank balances, and enabling essential payment streams, suggested Varenkamp. “Where a company has a couple of primary relationship banks handling perhaps 70% of all needs, centralising those providers onto a single platform will generate considerable time- and cost-savings, while delivering stronger security through centrally administered user-management.”

The nature of the modern SaaS-based system is such that moderately IT-literate treasurers will be perfectly capable of engaging with their own implementation project, noted Varenkamp. “But the treasurer needs only to understand how the system can support them in their day-to-day business,” he added.

“From a Cobase perspective, we try to take away all the technical complexity of a TMS implementation. But although the initial setup and configuration will be done by us, we work with the client from an early stage to teach them how to use and configure their system so that from the outset they will have a platform that is operational in the way that they need it to be.”

Each Cobase client has weekly meetings with a dedicated implementation manager, which will be their single point of contact throughout the whole project, explained Varenkamp. “Often the conversations that we have with customers are delivered like a consultancy service,” he noted. “Our industry experience means, for example, that we can advise clients on aspects that they may need to change internally to achieve better results. We can also act as a sounding board for their ideas. We see it as guidance on optimising treasury, based on our deep experience of best practice across many sectors.”

Raising the strategic voice

“The ambitious treasurer will be thinking about moving from an operational to a more strategic outlook within their company,” noted Varenkamp. “The way to achieve that is not by hiring new people and expanding the team, but by making sure that the repetitive and simple tasks that take up so much of their time can be easily automated.” A suitable TMS project, he argued, will provide just such an escape from these tasks.

Those troubled by system complexity and cost should seriously consider how help may be found in the earlier advice of starting small, going for quick wins, and ensuring there is sufficient proof that the solution is enabling treasury to be more strategically engaged. By following this approach, Varenkamp said it becomes “relatively easy” to persuade the CFO or board to invest more in a TMS. “If you’re pitching from the outset for a major project that encompasses everything, it will be a much harder sell, and you will find it tougher to prove its value,” he explained.

“To be a strategic player, ultimately, treasury needs a future-proof solution,” continued Varenkamp. He explained how this requires a deep understanding of how the company is changing, and the extent to which these changes align with a platform’s planned capabilities. But there should also be early consideration for how the contractual agreement with the vendor suits the company’s ongoing needs.

“What we sometimes see is companies entering into contracts for several years; they start paying straight away, and upfront. From there, it can be hard to change a platform if the vendor cannot deliver, because there is a long-term commitment with them.” Cobase, he explained, invoices only once a component is fully live, and it provides customers with a 24-hour cancellation notice. “From our business perspective it may seem a risk, but it’s a statement of our confidence that we will always deliver.”

The truth about ‘complications’ and cost

While many treasurers hold on to a belief that a TMS is too complicated to consider, Varenkamp urges a re-evaluation of current offerings. “The big game-changer was SaaS delivery,” he stated. “It took away all the IT complexity for businesses so that today, we have intuitive platforms which can be set up with a click of a button, require almost no maintenance by the end user, and clients may now take only what they need, when they need it.”

The issue for mid-size-company treasuries may still be the cost of a TMS, admitted Varenkamp. He cited as unhelpful the practice by some vendors of applying often hidden additional fees for reprocessing a statement, or even configuring modules in certain ways. He believes it is therefore in every potential TMS user’s best interests to ask prospective vendors when and how costs will be incurred, if there are any upfront payments, and if costs can be spread or deferred.

“We try to keep our pricing as transparent as possible. If a client chooses to work with Cobase, they will receive a price list for every aspect needed. They will see straight away what the costs are, what the one-off charges are, and what the monthly recurring fees will be, so there are no surprises.”

In making his assertions about cost and complexity, Varenkamp presents a strong case for many more treasurers to begin exploring how they might leverage the advantages of a TMS. Indeed, he is confident that “a TMS is now more affordable than ever, even for the mid-size business”.