Treasurers around the world are enthused by the role they play within their organisation. Corporate strategy is increasingly within their domain but how they deliver benefits will inevitably come under scrutiny in the context of overall organisational decision making.
The way in which treasury management systems (TMS) deliver in cash flow forecasting and help with risk management in facilitating growth will be crucial as opportunities become harder to find in the post-financial crisis world.

Starting point

The value of a TMS has changed over recent years. It may have originally been based upon time-saving and efficiency leading to productivity gains but increasingly companies are checking the suitability of their current systems and measuring the value of supposed gains.

A starting point for an analysis of a TMS is whether it is as centralised as it needs to be, covering cash forecasting, risk and a funding stream. Does the current implementation suit the company?

The constantly changing regulation of banks is also a challenging area which needs to be future-proofed by your TMS. Once installed a TMS needs to provide across-the-board visibility in terms of cash and processing. This means that any company has to get the most value from the technology and be aware that updates and improvements are always available. How they are to be prioritised is a key role for any treasury executive.

Threats to profits can come from the traditional areas of local taxation and the increasing threat of cyber interference. Checking that your treasury structures are secure is as important as whether they are based in the right locations to minimise costs. The simplest and most complex transactions may be sensitive to these considerations, both internal and external.

Any TMS will have to cope with the above issues but also potential market volatility which may include foreign exchange, interest rates and commodities and their fluctuations in terms of rates and costs. Given the chain links affecting all of these aspects, capital services and payments will have to be monitored efficiently through the TMS and it will need to maximise any potential gains which may be made.

Treasury departments

The role of the strategic treasurer involves full clarity on financial flow as there is no alternative way of encouraging growth while minimising risk. Anything less will not be viewed favourably by boards or shareholders.

Any TMS must reflect this, allowing treasurers to receive information on FX and interest rates and compare them with derivatives, thus making sure that their exposure to raw material and commodity trades are aligned. The more information treasurers have access to, the more pressure they will be under to demonstrate their business acumen driving the business forward.

Already it is clear that in the modern business landscape there are myriad processes and data streams which can offer diverging information and predictions. Any analyst will want to impose efficiency on this voluminous input in order to drive efficiency within the organisation, so how can this be achieved?

The system must offer clarity across the organisation, its departments and their disparate needs. Consequently, treasury departments across a wide-range of industries are seeking to avoid fragmentation and are re-vamping their systems in the interests of clarity by up-dating their TMS. This effectively empowers treasury departments in the sense that they can work at both strategic and operational levels, offering value and forward planning to the organisation.

Whether involved in the spot commodity market or dealing with hedging currency market exposure, an efficient TMS will bring short and long-term benefits. In a volatile global marketplace, the ability to lock in forecasts with confidence is key. In the currency market, increased collateral calls can place pressure on cash flow. Treasury will always come under pressure to manage procurement processes and cash reserves and any TMS must be fit for purpose to deal with these issues as they arise.

Such a detailed understanding can only be achieved when all the available data is housed in the TMS, allowing reaction time to be as swift as possible.

Because the market for TMS technology is ever-expanding, it is essential that the system fits the company and likewise. Standard systems will manage cash but many more sophisticated alternatives are now available, bringing with them analytical power tailored to suit any corporate needs.

Effective use of the technology has the capability to transform treasury from a cost centre to a source of profit since a correctly deployed TMS is a powerful tool indeed.

Simon Lynch is the owner of Treasury Talent.
Treasury Talent is a specialist treasury talent provider solely focussed on the treasury market with offices in Sydney covering Australia, Singapore covering Asia, and San Francisco covering California and the USA. To make contact simon@treasurytalent.net