Treasury Systems

Introduction to Treasury Systems

As your organization increases in size and complexity, corporate treasurers will need quicker access to accurate information from internal and external sources for decision making. Treasurers need access to information from multiple sources including accounting information from its Enterprise Resources Planning (ERP) systems, feeds from Bloomberg or Reuters, marked-to-market information regarding its interest rates, foreign exchange, investments positions, real-time cash positions from multiple bank portals, and so on.

This can be tough for corporate treasuries with limited manpower. As such, large organizations will need to rely on treasury systems to integrate information from various sources and relieve the burden of manual operations through automation and straight-through processing (STP).

If deployed properly, a Treasury Management System (TMS) can be an extremely powerful tool to automate daily treasury operations, reduce costs and improve process controls for treasury operations.


What is a TMS?

A TMS is a complex software that integrates information from multiple sources like ERP, market data and banking systems and can be used to automate, record and control various core treasury functions. Broadly, the TMS can cover the following functions:

  • Cash flow analysis and forecasting
  • Banking
  • Data entry and accounting entries
  • Debt and capital management
  • AR and AP management
  • Collections management and payment processing
  • Bank reconciliation
  • Monitoring risk limits and deal maturities
  • Investment tracking and monitoring
  • Risk analytics and reporting

While the TMS is multi-functional and is widely used for automation of core treasury functions, we should note that the TMS is not just a transaction management application. The real value of a TMS is in its ability to provide reliable real-time information and its data analytics capabilities, enabling corporate treasurers to confidently make critical decisions for cash, funding, investment and risk management. 


Choosing the right TMS for your organization

Choosing the right TMS depends on the needs of your organization. A small organization probably has small deal volumes and will not need advanced risk management functions.

A basic set-up with cash visibility and reporting functions will probably suffice for small organizations. Banks or corporates with high deal volumes on the other hand might want to consider a more sophisticated TMS with other capabilities like advanced risk management.

There is a broad spectrum of TMS software in the market, ranging from simple-to-use brands like Kyriba, Exalog for smaller companies to high-end software like Sungard, Misys and Wallstreet for more sophisticated conglomerates.

In the next section, we will discuss the 4 main considerations for implementation of a TMS. 

Feel free to check with us or the respective system vendors directly, if you need more updated advice on choosing the right TMS for your organization.


Consideration #1: Integration and Automation

  • Which banking systems can the TMS be integrated with? Connecting your TMS with some local banks in developing countries might be a challenge.
  • Is it compatible with my company’s accounting system or ERP system?
  • Can the TMS enable straight-through processing (STP) of payments and automate the input of journal entries into my company’s accounting system?


Consideration #2: Storage of Data

  • Is the software and data stored in vendors’ servers?
  • Does the TMS require servers at users’ sites (additional cost will required)?
  • Is the data stored in cloud (servers in the Internet)? This is often the more popular choice by companies due to lower cost and ease of connectivity.


Consideration #3: Vendor Support

  • Is the vendor able to provide good support in case there is a technical issue with the TMS?
  • Can the vendor provide training support for new users of TMS?
  • Does the vendor have good experience in implementation process?
  • What are some clients which are also engaging the vendor for TMS?
  • Which countries are the vendors in? Do the vendors have a presence in the countries for implementation?


Consideration#4: Costs

  • What are the initial cost of implementation?
  • What is the running and maintenance costs (e.g. per user fees, server costs, hardware costs?)
  • Are there any hidden costs like license fees, etc.?

So now that you have decided on implementing a TMS, what is the typical process of implementation like? Let us you through the 5 steps of a typical TMS implementation process below.


Step #1: Build a Business Case and Obtaining Management Approval

The first stage of TMS implementation involves understanding the treasury needs and priorities of your organization, and preparing a business case to get management approval for implementation of TMS. At this stage, you might want to consider your organization’s current treasury processes, controls, accounting systems, banking partners, manpower resources and identify the needs of your corporate treasury. Before going into the details of implementation, identify what are the areas of improvement for your corporate treasury. For example,

  • What are the processes that you want to automate or increase efficiency in?
  • What are the areas that you would like to improve controls?
  • What are some reports or real-time information that cannot be generated using Excel easily?
  • How would you want to monitor outstanding deals and manage risks for your company?

List down the specific needs of your corporate treasury, front, middle or back office, and build a business case to explain how a TMS can address some of these pain points that your corporate treasury is currently facing.

While you might not be able to quantify all the costs and benefits of the TMS, you should try to estimate potential savings, increase in efficiency and costs of the TMS on a best efforts basis. Getting in touch with a treasury consultant or different TMS vendors to understand more about the cost and unique specifications of different systems in the market would also help in building a strong case for implementation of TMS.


Step #2: Scoping Exercise

After getting the approval and budget for going ahead with TMS implementation, the next step is to shortlist and contact potential TMS vendors for information to ensure that they are capable of fulfilling your organization’s needs and priorities.

This is typically a two-way learning process for you and the TMS vendor. While you will get to learn in greater detail about the system from your vendors and assess its suitability for your corporate treasury, the vendor will also seek to understand the needs and current set-up of your organization at this stage. Your vendor will probably ask you some of these questions below before he comes back with a detailed proposal for your organization:

  • Who are your banking partners?
  • What is the volume of your transactions per month?
  • What are the needs or pain points for your treasury team?
  • How many entities or countries do you intend to cover?
  • Do you have inter-company netting or cash pooling for your entities?
  • What are some daily and month-end reports that will be useful for your treasury team?
  • How many users of the TMS do you plan to have?
  • What is the accounting system used by your company?


Step #3: Request for Proposal and Selection of Vendors

After the scoping exercise and finalizing the requirements of your organization, the vendors will return with a detailed proposal and quotation. You can shortlist some vendors that meet your requirements, and request for a demo or live-testing of their systems.

You should try to involve your treasury team members in selecting the right vendor. It is important not to look only at cost and budget in choosing the right TMS for your corporate treasury. As best practice, it is recommended to design a set of criteria (e.g. cost, functionality, user-friendliness, maintenance, customization, etc.) and weigh them based on their importance in your choice of vendor. In this way, your selection process will be more robust, and you will have a stronger case to present to your management in choosing that vendor for your TMS.


Step #4: Implementation, Training and Testing

The implementation stage will involve lots of testing and needs to be managed very carefully by the implementation team. You will need to make sure that data from your banking partners, market data providers and internal enterprise resource management systems are all integrated seamlessly into your TMS. This is a multi-functional project, and cannot be done by the Treasury team alone. You will need to involve not just your treasury members, but also the IT team for tech matters (e.g. firewalls, servers), finance teams for AR/AP matters, dealers for market aspects, controllers for risk management matters, etc.

At this stage, you might want to concurrently relook at your existing SOPs for daily operations, and review how processes would change with the use of the TMS. It is important to keep in mind the internal controls for your operations, and limit the type of access for different users of the TMS.

Testing of different scenarios should be done rigorously before the TMS goes live to ensure that all information flows seamlessly and is fully integrated across different systems. Therefore, you should liaise with your vendor to arrange training sessions for different users. Alternatively, you can also ask your vendor for a simple user guide for different users.


Step #5: Review and evaluation

Once the TMS has gone live, it is important to evaluate the success of the TMS. You could consider some of the questions below in deciding the evaluation criteria for your TMS:

  • Are there any errors in the reports produced by the TMS?
  • Are there any issues in reconciliation by the TMS?
  • How have internal controls changed with the implementation of the TMS?
  • How have my risk management processes changed with the TMS?
  • How has the efficiency of my team members improved with the TMS?


Hope this has provided you a good summary of the role of a treasury management system and its implementation in a corporate treasury!

Next, we want to look at another topic - Accounting for financial instruments! While not the most interesting, having a basic understanding of how financial instruments are accounted for is essential for corporate treasurers. We will look at the recent changes and developments in accounting standards - the change from IAS 39 to IFRS 9.