Business and financial uncertainty continues to build clouds over the treasury environment in many organizations, leading to tighter budgets and reducing options for development within the treasury operation.  But the importance of tight security and control and the need to monitor cash carefully remain paramount and treasurers may be concerned that the current systems employed may not be up to the mark.

However, a project to review all of the processes and technology applied, followed by a treasury system selection process, followed again by the possibility of a long implementation project can be daunting and, more importantly, potentially costly and draining on the limited resources available to the treasurer.  With this in mind, this article will explore ways to increase the efficiency of existing processes that may obviate the need for new and/or replacement systems and also ways to carefully manage the cost of taking on and implementing a new treasury management system (TMS) if that is the chosen route forward.

Before any route can be chosen it is, of course, necessary to decide where it is you actually want to go and in this respect the organisation’s “treasury mission statement” (Haven’t got one? Then that’s the first job) needs to be held up against the path Treasury is currently following to ensure there are no contradictions in policy.  At that point it is worth taking time out to review thoroughly the practices, processes and procedures followed in the department, ensuring that the practices do indeed match the written procedures.  The review should also cover a detailed examination of the technology and systems employed against the business need.

The review will form the basis of a treasury system requirements definition outlining in some detail what treasury is aiming to achieve and how that need could be best met by the application of technology.

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At this point and in simplistic terms there are probably three routes (and their variations) that the treasurer can take:

1. Fine-tuning – the current systems and processes meet the need of treasury with perhaps only some adjustments;
2. Develop existing systems and processes to meet the defined requirements;
3. Replace existing systems (electronic and manual) with new treasury technology, probably to include a treasury management system (TMS) at the centre of the new configuration.

1)        Fine Tuning

Best treasury practice requires periodic reviews are made of the processes and procedures within treasury to ensure they are still running efficiently and meet the needs of the organisation.  If this has been the case then there are less likely to be any major or urgent proposed changes coming from a review and the changes that do result are likely to be process and/or resource-based.  More sizeable required changes (new or replacement TMS, major system upgrade, department restructuring, etc.) would also be identified well in advance and a plan put in place.

If the organization is satisfied that the review has been carried out thoroughly and that all issues have been covered (including those of security and control) then it may continue in the knowledge that there are no major issues or inefficiencies that have been missed but should have been addressed.  It is often advisable to bring someone in 

2)        Develop Existing Systems

Once the review has been completed it may become apparent that the existing configuration of systems fails to meet the needs of the treasury function in specific areas and for specific reasons.  These would be identified through running a gap analysis between the requirements definition and the functionality of the systems in operation.  When this has been completed the gaps can be discussed, their impact assessed and the available solutions can be identified and evaluated.

Spreadsheets

If treasury relies solely on spreadsheets or uses them to augment the functionality and/or reporting capability of a legacy TMS, then careful consideration needs to be given to the strategy employed if the organization elects to continue to use them or indeed to develop their application.  Points to consider include (by no means a complete list):

• All spreadsheets in use in Treasury should be logged to with their purpose clearly defined
• The author(s) and users should be listed.
• More than one person from within treasury or IT should have the knowledge to maintain, update and support the spreadsheet. 
• Access rights and password maintenance should be managed by a senior department member.
• Ensure data is consistent across spreadsheets.
• Security and control should be enforced and monitored.
• Eliminate re-keying of data across spreadsheets

Existing TMS

If there is a TMS currently in use in Treasury it may be that the additional functionality and/or reporting can be obtained from that source.

• Extract the additional and/or changed TMS requirement from the requirements definition
• Ensure that you are running the latest version of the TMS
• Use in-house TMS system knowledge to develop its application into those areas and seek extra training from the supplier if necessary
• Discuss your requirements with the TMS supplier to see if the existing configuration can meet the need or if additional modules of the system need to be taken
• If the TMS has been in use on-site for some years it could be that the original implementation was designed for a different set of circumstances and requirements.  Discuss this with the supplier with a view to redesigning.

Taking additional modules and training will, of course, have a cost but if the result delivers the correct solution it will undoubtedly be less expensive than acquiring and implementing a new TMS.  The supplier may be willing to look favourably on this cost if the alternative is to look elsewhere for a replacement TMS.

If the issue with the current TMS is linked to the supplier rather than the product, e.g. unacceptable service levels, cost of ownership, lack of local support, etc., then discuss this also with the supplier before going to market.

3)        Replace Existing Systems

If the issues raised by the review and requirements definition cannot be resolved by any of the above then the decision will probably be made to select and implement a new treasury system either as a first time user or to replace a system that no longer meets the current needs of treasury.  In either event a budget will need to be approved and in the current uncertain times lengthy discussion on cost is often needed combined with a sound business case to gain that approval.  So it is important to keep that cost to a minimum while still ensuring treasury’s needs are met.

Ways to manage cost

Despite a series of supplier acquisitions over recent years that has seen the removal of some system options from the market or reduced the choice in supplier, it is interesting to note that other companies have moved in to fill that void with some interesting and well-priced alternatives.  Some suggestions to manage the cost of acquiring the system are:

• Cloud-based solutions: 
  • Paid for on a rental basis unlike an installed solution with a large up-front cost.  
  • No associated hardware costs
  • Reduced involvement of internal IT
• Only pay for the functionality you need now but make sure probable future requirements will be available
• A carefully phased project with functionality gradually brought online over a period of time and as needed will reduce early costs
• The market remains highly competitive, so negotiate on price
• Additional costs arise from putting in place banking interfaces.  
  • Look carefully at how many bank accounts you really need to bring into the TMS. 
  • Look also at the various ways of delivering that interface and the associated pricing.

Implementing the System

The cost of implementing the system will obviously depend upon the complexity and spread of the project.  Elements of the overall cost of implementation for which to budget include:

• System supplier’s implementation costs
• In-house backfill – seconded personnel, temporary staff
• Third-party consultancy
• Incidental expenses of in-house personnel and supplier– travel, etc

In order to keep costs to a minimum, the following should be considered:

• Know the supplier’s daily rate for implementation consultancy and obtain a good estimate of the days they will employ on the project.  The spread of those days over the implementation should be provided on a project plan.  Alternatively, obtain an acceptable fixed-price implementation arrangement.
• Monitor the days used by the supplier on a monthly basis against the estimate on the project plan.
• Actively manage the project on an ongoing basis to ensure it is completed on time and within budget.  Project over-runs can be expensive; cost v budget should be carefully monitored and action taken when this appears likely.
• Carefully consider and understand the ongoing cost of ownership for supporting the system, taking on new modules in the future and any changes that may be required.

In Summary

In summary, it is always worth looking initially to see if the existing systems and processes can be adapted or upgraded to meet the changing need and, if the issue rests with your current TMS, to speak to your current supplier and discuss the options.

If it is decided that a new TMS is required then work within the budget to ensure that you obtain the solution that meets that need most efficiently and very carefully manage the cost of both acquiring and implementing the chosen system.