You could argue that treasury management is the most important aspect of a company’s financial health. Regardless of any other part of a business, if cash isn’t being managed effectively, it’s likely the company will be on borrowed time.
At the same time, when the treasury is excelling at their role, the rest of the company likely won’t even notice.
Payments occur smoothly, cash balances are maintained where they need to be, cashflow is allocated to the right accounts, surplus cash yields are being maximized, and reports and forecasts are being produced on a regular basis.
It’s like the proverbial swimming duck. Underneath the surface there’s a frantic splashing of the feet needed to stay afloat, while from a distance everything appears smooth and serene.
It’s here that having the right treasury management tools can help. By automating data collection and analysis, and streamlining functions such as payments, treasurers can build a system where the work going on below the surface looks just as serene as the view from above.
Often, treasurers are simply looking for a tool that can help them see all of their cash, at any time, in one place. That seems pretty straightforward, but the reality often isn’t. The answer can be found in choosing the right technology.
The Value of Digital Transformation in Treasury
Investing in tech for treasury offers the potential to realize efficiency and real monetary gains far and above the sticker price of the software.
Here’s some examples of how tech can move the needle:
Better Cash Oversight
Treasurers need to be able to see their cash position to be able to do their jobs. But something so seemingly simple just isn’t easy in practice. In fact, according to a recent treasury survey from Deloitte, a staggering 64% of treasurers identify achieving visibility into global cash flow and risk exposure as their biggest challenge. Multiple banking portals with multi-entity companies, coupled with a wide range of currencies, tax jurisdictions and even joint ventures, make this a challenging prospect.
Technology can help take away the complexity and give treasurers better oversight of their cash.
Efficiency Gains
Employee time costs companies money. The higher the number of manual processes in a business, the more employee time needs to be spent on completing the core components of the department. By integrating automation and data analysis tools, staff can undertake more work with less time, allowing a company to scale their business without the need to scale their treasury and finance teams proportionately.
Reduced Risk
Automation reduces risk. By leveraging automation, treasurers can reduce the amount of manual work required, reducing the opportunities for errors.
At the same time, connecting banking portals to a third party platform means fewer employees requiring access to the banking portals directly, enhancing overall enterprise security.
Improved Yields
With technology enabling a more complete overview of cash holdings, plus the ability to move that cash quickly, it’s possible for treasurers to become far more proactive. Moving cash between higher yield instruments while maintaining sufficient liquidity becomes far more practical with the right technology to facilitate it.
Recommended: Check out our recent episode of Fintech Corner as we chat with John Bolden, the Treasury Director at City Storage Systems, to discuss how APIs are revolutionizing treasury operations and how this cutting-edge technology is creating a wave of new possibilities in finance.
The Pros and Cons of Common Treasury Management Tools
Most treasurers already know that tech can help them do their jobs better. They know the pain points they’re feeling and the end result they want. But for many, the talk of APIs, SWIFT networks, SFTP transfer or H2H connections may as well be a foreign language.
Let’s break down the different options, with a summary of their benefits and drawbacks.
Spreadsheets
Traditional treasury cash management has been built on spreadsheets, populated manually by human data entry. In this method, a real person is the data connector, logging into each banking portal individually, exporting the available data and then consolidating that into a master document. There are many companies (even large ones) who still rely on spreadsheets on a day to day basis to manage their cash position.
Pros
- Low up-front cost: There’s no denying that spreadsheets are cheap. Every company in the world already has access to Microsoft Excel or Google Sheets, meaning treasurers can default to a spreadsheet approach with no additional funding required.
- No specialist technical implementation or management resources: This simple approach also means that there is no specialist implementation required. Treasurers can start adding cash figures to a blank spreadsheet immediately, and the document can be amended and updated as time passes.
- Flexible: Because a spreadsheet is a blank slate, treasurers are able to build whatever metrics they want. It’s possible to categorize accounts in any way they wish, only add accounts that you want to see, and create tables and charts based on any of the data in the document.
Cons
- Time-consuming: Manual data consolidation takes time. The bigger the company and the faster transactions occur, the more time pressure is placed on treasury teams to keep the spreadsheet updated. This low value data entry work takes time away from higher value strategic analysis.
- Prone to errors: Copying and pasting from one spreadsheet to another is going to result in errors eventually. And if treasurers want to start building more advanced financial forecasts or metrics dashboards, it’s easy to end up with formula errors that misrepresent the data.
- Security and compliance risks: Sharing documents via email attachments and shared links creates a security risk for the business. It’s easy to mistakenly send the wrong document to somebody, or for employees to secure data in an unsecure way (such as saving excel files on their desktop).
- Version control: With these files being emailed and Slacked around the office (and potentially around the world), maintaining control over the different versions of the documents becomes challenging. Are you working on Master Cash List 4.8.2 or Cash Overview 9.1?
- Out of date reporting and forecasting: Slow, manual processes result in data that is always slightly out of date. If it takes 4 days to update every cash account in the master spreadsheet, the data is up to 4 days out of date by the time senior decision makers are looking at it. That can be a big deal in large companies with a higher volume of transactions.
ERP Systems
Enterprise resource planning (ERP) software is the jack-of-all-trades of business software. Tech behemoths like SAP and Oracle’s Netsuite provide large platforms, which include treasury modules for basic functionality such as cash management and payments.
Pros
- Pre-integrated: In many cases, treasurers will be on-board with an ERP that’s already been integrated into the business. This avoids a lot of the headaches and time spent in getting a new system up and running.
- Central internal system: Because a single ERP can be used across the entire business (albeit with various individual modules), there’s continuity with the product language, reporting and data sharing across the whole organization.
Cons
- Bank connectivity: While ERPs can integrate with your banking platforms, the process is often done manually, with a specific connection required for each bank. This process can be time consuming and expensive, and needs to be done any time you want to add a new bank to your cash management strategy. It’s worth mentioning that some ERPs can often integrate via a modern API connection as well.
- Limited functionality: ERPs are designed to provide the basics to treasurers. For many, the software lacks comprehensive forecasting tools, advanced payments functions and analysis and reporting flexibility.
Dedicated TMS
A Treasury management system (TMS) is the first treasury-specific solution on our list. Because they’re designed with the needs of treasury in mind, they offer a comprehensive suite of tools specifically designed for treasury operations.
The technology has been around for decades now, and has become the default option for enterprise level treasury departments.
Pros
- Bank connectivity: Generally superior to that of ERPs as bank connectivity is prioritized by treasurers. Multiple file formats and connections types available.
- Highly configurable: Like ERPs, TMSs are highly customizable, built for the specific needs of each company.
- Improved automation: Offers the ability to integrate some automations, such as data collection and payments.
Cons
- High cost: Legacy TMSs require substantial implementation investment and ongoing maintenance costs. Because of the customized nature and the direct connections underpinning the platform, the process also takes a significant amount of time, often 6 to 12 months.
- Lacking modern connectivity: Designed to connect with traditional banks via old-fashioned direct connections. Generally limited API connectivity which allows fast connection to banks, but also digital payments platforms like Stripe.
Modern Treasury Platforms
There are now platforms available which use modern API connectivity to transfer data. Imagine you’re working on a presentation with a colleague. The legacy file sharing equivalent would be that your colleague spends half a day working on the presentation, before emailing it over to you. You complete your part, then email it back to them, and so on and so forth.
The sharing of information relies on each of you saving the correct version and emailing it over. That’s legacy bank connectivity.
APIs work on a similar basis to ‘shared’ docs. A shared Google Doc allows you to see your colleague working in the presentation document in real time. When they type a sentence, you see if it appears as it’s written. You can jump into the same document at any time and make your own amendments.
That’s APIs. There’s no need to send or receive files at predetermined intervals. All the banking information is available, in real time, whenever you want it.
Pros
- Modern connectivity/integrations. API-first connectivity means modern platforms can aggregate data from a wide variety of sources, not just banks. Examples include Stripe or WePay, which are often not able to connect to legacy TMSs or ERPs.
- Real-time data/visibility. Because there’s no delay in the data transfer, it’s available in real time. Treasurers can access a total overview of their cash position, as well as analyze and categorize this in countless ways, instantly, whenever they want.
- Advanced forecasting. The depth of the data provided through an API is far greater than a traditional file transfer. That, plus the flexibility of the software itself, gives treasurers access to superior forecasting and scenario planning tools.
- Automation for efficiency. The use of APIs also creates the ability to implement automations at scale. Everything from payments to automatically categorizing transactions to reporting to forecasting can be completely or partially automated.
- Easy to implement. API connections are not created individually between each bank and client, meaning they can be ‘plug and play.’ This means the implementation period can be as low as 1-2 weeks for an API-first treasury solution.
Cons
- Smaller banks don’t offer API connectivity. Because these solutions require API connectivity, it’s not possible to connect to some smaller regional banks who don’t offer an API.
Transform Your Treasury Capabilities with Trovata
Trovata’s API-first solution provides modern treasurers with everything they need to do their best work. In addition to providing treasurers with 100% accurate banking data in real-time, users can see cash balances and transactions across all of their entities, with the ability to automatically categorize and report this data in any way imaginable.
Enhanced cash visibility, sophisticated tagging and categorization features, is combined with AI integrations, a natural language search function, detailed forecasting and scenario planning tools, and even the ability to send payments and invest cash directly on the platform.
Not only that, but Trovata can be implemented in a matter of weeks, not months.
If you’d like to learn more about how Trovata could transform your treasury operations, book a demo today!
