Published: January 01, 2000
Too often, recognising that their current technology — or lack thereof — is holding them back, corporate treasury managers dive headlong into shopping for a treasury management system. If they fail to do the proper upfront evaluation, however, the results provided by their new system may be disappointing. In this article, we suggest a process for evaluating a company’s treasury technology and needs, so that before shopping begins, companies will have an understanding of their current processes and inefficiencies, and can establish a clear direction for their ideal future state.
Many corporate treasury organisations today are in the market for a treasury management system. Some are seeking to gain efficiency and improve treasury performance by moving from a manual spreadsheet-based process to a more automated environment. Others have a treasury management system in place that may not be meeting expectations — or one they’ve outgrown — and they decide to replace it.
A common mistake many companies make is failing to invest enough time and resources — prior to engaging vendors with requests for information and proposals — in the upfront work that’s needed to select a system which will truly meet the company’s needs.
In some cases, treasury managers select a new system without fully understanding those needs. The managers may then layer new technology on top of existing bad processes and, in effect, automate existing inefficiencies.
Another typical scenario is for a company to go out and buy the most robust technology it can find — paying a hefty price — and then either implement it incorrectly, not leverage all of the capabilities that could be helpful, or later learn that the system offers many unneeded capabilities.
Finding the right treasury management system for your company requires a systematic approach. While there are many options from which to choose, we provide a suggested roadmap for evaluating your treasury technology needs and other suggestions that may be of use in your decision-making process.
Building a foundation for your buying decision requires four primary steps:
1. Document current state processes. Step back and ask: What are we doing today? Walk through and document your day-to-day processes. For instance, how are you currently establishing your daily cash position? How are you accessing bank balances? How are you managing your account signatories? Taking a hard look at your current processes will help you determine which ones are serving you well and what activities you may want to enhance or eliminate.
2. Identify inefficiencies and non-value-added activities. Once you have documented current processes, you can start isolating inefficient practices. If you are looking at how the company accesses bank balances, for instance, you might learn that a member of your staff is going out daily to 20 different bank portals to pull in balance information, print it off and key it into a spreadsheet. Eliminating such inefficient processes should be one of the goals of your technology revamp.
3. Rationalise and optimise bank relationships and bank account structures. An important aspect of achieving treasury efficiency is maintaining an optimal number of banking relationships and bank accounts. Evaluating and adjusting your current bank account structure to achieve that optimal state should be a prerequisite to implementing a new treasury management system. Performing this task will reduce resources required and risk during the transition.
When you implement a new system, you will most likely establish direct data feeds between your banking partners and the new tool. The more accounts you have, and the more feeds you require, the higher your bank charges will be and the more time your company’s information technology staff will spend on managing those interfaces. Thus, before you start shopping for a treasury management system, identify unnecessary or unused accounts and close them down.
4. Define your future state processes. Once you have pinpointed the inefficiencies of your current processes — and optimised your banking relationships and account structure — you will need to develop (or define) the new processes that will bring greater efficiency to your operations with the support of a new treasury management system.
5. Understand the future state finance technology vision for your company. When you are exploring the purchase of treasury technology, understand that you are not operating in a vacuum. Be sure to consider how any particular technology investment will mesh with your company’s overall financial technology plans. For instance, is your company migrating soon to a new enterprise resource planning (ERP) system? Will it be possible to integrate the treasury management system you are considering with the new ERP system? Or will it make more sense to purchase the ERP system’s treasury module?
Also, what is your company’s position on the need to host critical financial applications on company servers? If you are considering cloud-based or software-as-a-service (SaaS) treasury management system options, will they fit with your company’s larger finance technology vision?
Once you have established a foundation for your search, it’s important to develop a treasury vision: How will you move from your current-state strategy, processes, organisation, people and technology to your future state?
When you think about where you want your treasury department to be in three to five years — particularly if your company will be expanding globally — what activities do you see the department engaged in? Will you have new pooling structures? An in-house banking structure, perhaps? And then what do you need from your technology in order to get there?
Realising your treasury vision will require a transformation roadmap, a step-by-step plan.
One step will be to create a business case and document the financial implications for senior management, both costs and savings. You will also need to establish business requirements for your new treasury management system, establish and conduct a vendor selection process, and manage the significant change that implementing new treasury technology can bring to an organisation. This will enable you to transition staff from transactional and non-value added activities to strategic, analytical, value-added activities.[[[PAGE]]]
A critical step in preparing to buy a new treasury management system is defining the system’s functional requirements: What must the technology enable your team to do from a tactical perspective to support reaching your envisioned future state?
Begin by establishing the new system’s ‘must have’ capabilities. For instance, you might decide that the system must be able to automate reconcilement of your bank account activity.
Then list the ‘nice to haves’. For some companies, those might be capabilities such as bank fee monitoring or signatory maintenance.
See the list of questions in Box 1 that you should answer in a functional requirements document.
Treasury management systems are major investments that impact people across your organisation. Be sure you have an internal champion who is committed to your initiative and can:
Establishing a project team is another important step. Give careful consideration to which disciplines in your organisation should be represented. For example, in addition to Treasury, you might want to include representatives from Accounting, Audit and IT. Make certain team members have the requisite skills and experience, and understand the commitment required to succeed.
Selecting the right project manager to lead the effort is paramount; ideally, you want someone with experience of managing similar financial software implementations. The project manager will need to manage vendor resources effectively to make sure the project is a priority and that the vendor provides excellent responsiveness and customer service.
Finally, take the time to consider whether you have all the resources you need to succeed.
Treasury is a critical intermediary between the company’s business lines and its banks as they support the collection and disbursement of funds. In Treasury, if you don’t have the correct technology and processes in place, the business lines will suffer and you won’t be successful.
Simply put, choosing the optimal treasury management system is critical to success — and making the right choice requires a systematic approach that takes both time and resources.
Fail to make the right choice and you could find yourself later wondering why your company spent seven figures on a new treasury management system that really isn’t dramatically improving operations.
You don’t have to tackle the selection of a treasury management system on your own. Talk to your peers in treasury management industry groups who have been through the technology evaluation and system selection process. Also, be sure to leverage the expertise of your banking partners, who can share their years of experience in working with clients on treasury technology projects.
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