Time consuming, manual processes that are highly prone to errors, raise concerns over data integrity and make collaboration a major headache. That’s the traditional approach to liquidity management.
For Eventbrite, this added up to 2-3 hours of work for the treasury team. Every. Single. Day.
Because regardless of size, your business revolves around cash. That could be cash stored at your local bank, or cash spaced out across dozens of accounts and currencies.
Whatever the case may be, to achieve success you’ll need modern, flexible liquidity management. For that, treasurers must leverage a treasury management system (TMS) .
But not just any old piece of software will do – you need to leverage the right treasury management system. The right system is one that fits with your unique business and has features that grant it that extra edge over competitors.
With so many TMS out there, though, how do you know which is best? There are the obvious points like price or level of support, but you also need to look at features and depth of features.
Below, we’ll dive into what to look for when choosing a treasury management system that meets your unique needs. First, though, let’s do a quick review.
The Role of Treasury Management Systems
While they may not get as much recognition as a standout team or an innovative product, at the end of the day treasury management systems are the lynchpin of your business. They help the CFO and finance team streamline financial operations, automate workflows, and achieve real-time cash visibility (this they do through integration with your financial institutions and ERPs like SAP and Microsoft). TMS are critical for financial risk management, regulatory compliance, and are the foundation of a successful cash and liquidity management plan.
Liquidity management – it’s a big topic! There’s more to it than moving money from one account to another or paying vendors on time. It’s really about the big picture. That means your treasury management system shouldn’t be focused just on standard treasury operations, but be able to tackle financial risk through intricate hedging, forecast future cash positions, and provide a comprehensive picture of (short-term) working capital and (long-term) financial health.
With the right system, every dollar (or pound, or yen) can be placed where it needs to be. By establishing a strong foundation early on, you ensure each move counts. You need to build that base for success today, so that you’re in a good position a year or two down the road.
So, let’s get into choosing a treasury management system that’s right for your organization.
Choosing a Treasury Management System to Modernize Operations
To build up that strong foundation quickly, you’ll want a system that can be implemented across your corporate treasury fast. The problem is, on average, it takes over 9 months – an eternity in the world of business – to implement a TMS. Fortunately, that’s only the average.
Customers using modern treasury systems are often able to connect their key bank accounts in less than a day.
That’s good news because, before you can really do anything to further your liquidity management strategy, you’ll need to figure out exactly how much liquidity you have on hand right now.
The first step to successful liquidity management is acquiring a view of your cash position. When you see where your cash is located, what currencies it’s denominated in, and can quickly assess your liquidity needs, you can make strategic moves to expand your company while also protecting against risk. You make the move from cash accounting – just recording numbers – to cash management – building and deploying a game plan.
But how can you see all of this information quickly, without trying to piece together a bunch of disparate spreadsheets?
The answer is with open banking, a new trend in finance that makes banks transparent for clients. Facilitated by APIs, open banking allows all your bank information to be consolidated in a single location. Open banking API is essential for choosing a treasury management system that will future proof your organization because it provides unmatched cash visibility.
You’ll no longer have a fragmented view of your finances – you can instantly see the big picture and make decisions accordingly, across dozens of bank accounts and currencies. You’ll know whether it’s a good idea to make that big purchase now, or to boost working capital first.
A clear view also means real-time cash positioning. Thanks to open banking, you can see how all transactions and past decisions led to your current cash position. This way, you can understand why your cash position is the way it is, and then make the right moves to get it the way you want it to be – all from one, centralized platform.
Just imagine: how much more effective would your decision-making be if you had instant access to the latest financial data, down to the day? What if your cash flow forecasts were consistently updated based on this information? It would be a game changer! Real-time data allows you to pivot and adapt on the fly in a way that’s just not possible with spreadsheets. In today’s fast moving world, that’s crucial.
Real-time visibility also speaks to the problem of data silos. Data silos are a common issue, where different departments have access to different spreadsheets. There’s often no way to tell which is most current. The truth is spreadsheets were never meant to be a collaborative tool. When choosing a treasury management system, you need one that will democratize data. With a centralized platform, you guarantee connectivity and ensure your teams aren’t making decisions with blinders on.
Managing liquidity isn’t just about moving money around, but it is partially about moving money around! When choosing a treasury management system, it’s best to find a TMS that grants you access to traditional payments rails like ACH and wire transfer, as well as new methods like RTP that can be completed instantly and make cash management easier.
Getting access to these payment rails involves working with banks, so you’ll want to look for treasury management systems that leverage open banking APIs. Some third-party providers try to go around the banks, but there’s really no point now that banks are connecting with third-parties.
When you tie in payments with cash flow forecasts, that’s when things really get interesting – you might want to achieve a certain end-of-day cash position, for example. With Trovata, you can do that, as the cash flow forecasts constantly update based on intraday transactions.
Scales With Your Business
The ultimate goal of your company is to grow. When choosing a treasury management system, you want one that will help you do that, for sure, but also one that will remain compatible with your organization when it reaches a certain level
One way to scale quickly is with cloud technology, thanks to its auto-scaling feature. With auto-scaling, you’ll only be charged for the processing power you’re using rather than a flat fee.
But there’s an important thing we need to point out here: many TMS describe themselves as being “cloud-based,” but all they’ve done is take their 20, 30 year old technology and slapped it onto a cloud hosting service like Azure. This is a bit of a marketing trick to take advantage of financial departments’ interest in cloud technology – it’s still exactly the same software it’s always been.
Since they haven’t been designed with cloud technology in mind, they can’t take advantage of some of the unique features of a true cloud-based solution like autoscaling or microservices infrastructures.
So, when choosing a treasury management system, look for cloud-native software – it must have been designed after 2015, when cloud services companies allowed vendors to develop their software “in the cloud.” Only cloud-native software can leverage microservices infrastructure, which allows updates to be deployed as needed.
Embraces Automation & Real-Time Analytics
It’s impossible to do things the “modern way” without automation. Spreadsheets were a big step up for the time, but now many treasuries are stuck using software that came out in the 1980s (could that 80s nostalgia trend be going a bit too far?).
If you’ve worked as a treasurer before, you’ll know how it is: the old way involved running from bank portal to bank portal, recording transactions (hopefully, without making mistakes), and then putting everything together. Only after hours each month could you establish your cash position
It’s impossible to do flawless liquidity management this way.
Automation is what permits that real-time view across all bank accounts. It would be impossible to gather all that information across spreadsheets in a way that allows you to have a current view – by the time you collect it, it’s outdated!
Next, transcription errors result in flawed cash flow forecasts. Flawed cash flow forecasts lead to flawed decision making, which defeats the whole purpose of liquidity management.
Automation is an essential feature to consider when choosing a treasury management system. It saves your team hours each month (for CrowdStrike, it was 40 hours a month). It’s this technology that really enables the finance department to make the shift from “just” accounting to becoming a strategic partner, uncovering insights and directing company policy.
It’s also what allows you to optimize workflows and adhere to lean principles, keeping your finance team small and efficient.
With automation, your cash flow forecasts are continuously updated based on the actions you take now, so you know if you’re headed in the right direction
Automation isn’t just about recording payments – when choosing a treasury management system, look for software that automates reporting, too (that can be quite a big time saver!).
Leverages Machine Learning and AI
Related to automation is machine learning and AI, another essential feature to look for when choosing a treasury management system. Trovata’s machine learning algorithms can discover trends in your cash flow, helping to optimize your forecasts so they become more and more accurate over time.
Generative AI can explain strategies, fill in reports, and understand the context of what you’re asking.
Leverage analytics instead of a “wait-and-see” mentality. Analytics allow you to stay ahead of competitors by reacting to circumstances before they occur, rather than scrambling after the fact.
That’s the true power of embracing automation and real-time analytics.
Makes Scenario Planning Easier
Scenario planning is a critical piece of your risk management and overall liquidity management strategy. This has especially been highlighted over the past few years. Normally a difficult process, some companies overlook it. That’s probably because they don’t have treasury management systems that make it easy to do.
The first piece is consolidating all of your information, which means leveraging APIs that connect with your financial institutions. Next, you want tags, and the ability to create user-defined variables and growth rates. You can then quickly sort through your masses of data and build scenario planning models.
In today’s fast-paced digital era, connectivity and seamless integration are a must-have when choosing a treasury management system. In the consumer field they’re things we just expect – why not in treasury management, too? You shouldn’t have to go from platform to platform to manage your business’s finances – you should have everything in one, centralized command center that allows you to manage liquidity across your entire organization.
To give you a complete view, your TMS needs to integrate with your ERP systems. This way, you can automatically pull open invoices, unpaid CC transactions, unapplied payments, and payables and receivables from your ERP into your TMS.
Finally, with cloud-native software, you’ll know all this financial data is backed up securely in the cloud.
The Pivotal Role of Treasury Management Solutions in Business Growth
It’s worth noting that treasury management isn’t merely about cash management and risk management. It’s about harnessing the capital to steer the ship of your organization towards its strategic goals. With efficient cash flow forecasts you can see which goals are realistic, and most desirable at the time.
With a better understanding of what to expect from a full-featured, modern treasury management solution, you are on your way to finding a system that helps you manage everything from payment processing to cash flow management and profitability projections.
Your treasury management software is going to be the foundation of your financial management. Choosing a treasury management system means changing your thinking on the core features that are essential for liquidity management. Find one that includes all the latest technology, has a proven track record, and can explain how its features not only make your life easier, but boost your liquidity position, too.
Evolve Your Approach to Treasury Management with Trovata
Trovata’s analytics tools are engineered to offer you an unmatched vantage point over your financial data, making business decisions not just informed but inspired. We aim to provide you with a “trove” of financial data and make it easy to analyze and visualize. This way, you quickly build and execute targeted plans.
Learn how Krispy Kreme scaled their treasury management capabilities with Trovata.
With Trovata you can gain unmatched visibility of cash daily across all accounts, empowering you to better understand liquidity to make the most out of excess cash. Aggregate, search, tag, analyze, forecast, and report; gain everything you need to make smarter, faster decisions. These are all essential solutions to look for when choosing a treasury management system. Elevate your business’s financial operations with Trovata’s superior tools today.
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