Treasury Management Systems Guide

Bob's Guide to TMS 2017

How to ensure your TMS is a perfect fit.

SO YOU’VE DECIDED THAT IT’S TIME TO INVEST IN A NEW TREASURY MANAGEMENT SYSTEM. WHAT NOW?

Investing a great deal of money into new technology, and implementing the system in a process that could take up to 18 months is a daunting prospect, made worse by the fact that it’s likely no one within the business would have undertaken such a project before.

Choosing a system that aligns with the needs of the business while streamlining everyday processes is just the first step of this journey. But how do you ensure you choose the right one? Over the last few months, we’ve been speaking to experts in treasury technology about how to get the TMS selection and implementation process right, and making the process as manageable and efficient as possible. We’ve boiled down what we learnt about the process into the following four steps:

  1. Assemble your team
  2. Settle on the system requirements
  3. Meet with the vendors, and test the systems
  4. Make your selection, and put it into place

ASSEMBLE YOUR TEAM

Each step in the TMS procurement process should prepare the treasury function for implementation, the most important stage. Although it’s a step that comes much later in this process, in order to get it right, treasury teams must ensure they have the right people on board from the outset.

Treasury is becoming an integral and critical point in any organisation, therefore the effort to design the future scenarios must be a team effort

Enrico Camerinelli

Who should be involved?

“Treasury is becoming an integral and critical point in any organisation, therefore the effort to design the future scenarios must be a team effort,” says Enrico Camerinelli, a senior analyst from Aite Group.

According to Richard Warren, a senior manager from Brickendon, many different areas of the business need to be consulted at the beginning of the TMS process. These include: Treasury department, and its related investment teams, such as foreign exchange and money markets, both front office and back office. “Consulting with the risk managers will provide an understanding into the day-to-day activities, workflow management, current limitations and any particularly problematic areas that need to be addressed,” he adds, such as complex spreadsheet processes that currently fall outside the ability of the existing system. CFO, CEO and company strategy team, so that you can understand the future direction of the company and possible new areas of research, says Warren. “This will enable the firm to plan for scalability in the event of growth and/ or acquisitions, whilst ensuring transparent and comprehensive reporting.” IT development and implementation teams, to understand the required level of integration, the feasibility of timelines, and to determine the current skill level of employees that will need to support the implementation, Warren adds. IT security and audit/compliance teams, Warren continues, should also be involved to analyse the authentication and the fraud prevention capabilities, and put a value on the level of risk and possible reputational damage.

This final point is a serious consideration for emerging fintechs, he adds. Each of these teams should also be involved during the implementation process, but in varying amounts, Warren says. “A delegate from each team should be involved in all the stakeholder meetings to provide transparency to their wider teams for each element of research,” he adds. “It is essential that all parts of the business, including the IT and change departments, are involved to ensure the company’s infrastructure and employees can support the new system,” Warren adds. Ken Lillie of consulting firm Lillie Associates recommends including key personnel from treasury, accounts, and IT, but warns against making the team too big to manage. Nominating a project manager for the treasury and project management experience, as well as getting backing from stakeholders, is also recommended, he says.

One of the common pitfalls when selecting a new system is to think either too big or too small

Richard Warren

SETTLE ON THE SYSTEM REQUIREMENTS

After assembling the project team, it’s possible to create a list of functions that are required from the treasury management software. This list should reflect the needs of each of these teams, and will help the team determine what is most important, so the business doesn’t invest in functions it does not need. In 2014, research by software provider Bottomline Technologies and treasury consulting firm Strategic Treasurer found that just 28% of businesses investing in treasury management software use 80 to 100% of the modules they purchased, and nearly half use less than 60% of the modules they acquired. This was due to a variety of factors, including not just buying modules that weren’t needed, but also misunderstanding the functionality, lacking the resources to implement the services in a timely manner, or failure to train staff on how to use the module. If staff don’t know how to use the system, they’ll fall back on old ways of working, rendering the new system useless.

How do I work out what features I need from the software?

“One of the common pitfalls when selecting a new system is to think either too big or too small,” Warren continues. “This results in either the adoption of expensive systems, which as well as being confusing a difficult for users, leaves much of functionality redundant, or an inadequate system that isn’t scalable.” He says that it crucial to have full knowledge of the current day-to-day functions employed by the treasury team in order to understand the business requirements of a TMS. Camerinelli recommends mapping the organisation’s ‘as-is’ processes, and defining the desired or expected configuration of the system. “The organisation should operate by scenarios, selecting a technology solution that can accommodate multiple possible outcomes,” he says. The arrow goes the other way, too. As well as understanding the treasury function’s processes back to front, it’s important to understand what the TMS can offer, Warren says.

“The understanding of what a TMS can offer is a great starting point for analysing the synergies between the business’s current processes and system architecture.” He advises running a series of team workshops to determine the TMS requirements, ensuring that all key members of the business are consulted and listened to. “It is also important to involve the CEO and CFO to ensure any decision is in line with the direction the company is moving,” he adds. Lillie continues: “Take a step back and review all of your current treasury processes and how technology is currently employed.” If budget allows, hire an experienced treasury consultant who can take an objective view of the existing environment, he adds. Lillie also recommends building a Requirements Definition document, detailing everything the business will want from a new TMS, distinguishing essentials from nice-to-haves.

These systems can be very expensive, so suppliers are keen to conduct demonstrations based on the use-cases of their anonymised existing clients

Richard Warren

MEET WITH THE VENDORS, AND TEST THE SYSTEMS

By now, the treasury team should have a shortlist of possible systems that are right for the company. The next step is to meet with the vendors, and run the prospective systems through their paces with a test run. Meeting with the vendor is a chance to ask questions about the system and determine whether it can handle business(-critical?) operations in a more efficient way, serving the needs of the company now and in the future, which can take the form of a presentation. Enrico Camerinelli, says that the vendor must show knowledge of treasury operations and have done similar implementations in the past. He recommends that before meeting, the buyer prepares a set of business scenarios, so that the vendor can present how their solution will address those issues, and resolve them differently from how the company currently does.

What questions should I ask the vendor?

“The vendor presentation agenda should be set by the buyer and agreed with the vendor,” says Ken Lillie of treasury technology consultancy firm Lillie Associates. “Ask questions about functionality as listed in the requirements definition, [and] ask about implementation resource requires, [such as] time scales.” Richard Warren, a senior manager at consultancy firm Brickendon, recommends that during the meeting with the vendor, buyers ask the following questions: Is the solution customisable to the workflows of the business, or will the business have to re-engineer existing flows and retrain staff to fit the TMS software? “An extensible solution for all workflows is a must and ensures the system is easily upgradable for future requirements,” he says. Are the support staff available 24 hours? Check the support line staff, Warren says. Do they answer when the business calls with a problem or query, and can they help? Also, and even more importantly if the business operates around the world: Is the support available in your language? Where else has the TMS been deployed and are there any similar use cases or workflows and operating models? “If the vendor can articulate an understanding of your business it is likely that they have similar clients already successfully using their software,” Warren says. If this is the case, it may be possible to learn from these companies, and how they work with the system.

Can I learn from how others have used the system?

There is no need to go into this process blind. With some research, treasury teams can see how other similar businesses use their treasury software and acquire an understanding of leading industry practices. Lillie says that although such information, beyond vendor-sponsored case studies, is not publicly available, it may be possible to obtain by speaking to colleagues and associates in other companies to understand their experiences. Buyers might also consider working with a specialist consultant, who should have experience with a number of implementations – on a no-names basis, he adds. Buyers can also get this information from the Request for Proposal and Request for Information processes used when evaluating potential suppliers, Warren says. “These systems can be very expensive, so suppliers are keen to conduct demonstrations based on the use-cases of their anonymised existing clients.” He adds: “Setting one-day workshops with the company’s key stakeholders is a great way to see and challenge the processes and functionality. To maximise the value of the vendor-selection process, scoring should be applied by an internal team with experience and knowledge of the business and functional requirements.”

Can I test drive any transactions?

After an initial meeting with the vendor, and during a second more detailed workshop, when the shortlist of vendors is down to two or three, buyers can ‘test drive’ some transactions in their prospective systems, Lillie says. Camerinelli says that test driving some transactions in the vendors’ systems will give buyers an idea of how flexible and adaptable the system is. “The company cannot expect to have all the problems solved during the demo sessions, but the level of appreciation of the flexibility of the system must be ensured within the user community,” he says.

MAKE YOUR SELECTION, AND PUT IT INTO PLACE

By now, buyers should be in a position to make an informed decision about which treasury management solution to invest in. Meetings or workshops with the vendor will give an idea of how long the implementation will take, and internal discussion within the company will determine who should be involved in the process. But how much will it cost? Our research found cost to be treasurers’ second greatest concern when it comes to implementing a TMS. 58% of survey respondents selected ‘cost’ as one of their greatest concerns, putting it not far behind the top concern, ‘difficulty integrating new solution seamlessly with existing systems’, selected by 62%.

So how can buyers get an idea of how much a new treasury management solution will cost before implementation starts?

The cost of the system can depend on a number of issues depending on the individual supplier, Lillie says, but initial conversations with vendors will give buyers a guide to costs. He continues: “The system may be modular so you pay for the modules you need, complexity of instruments used, accounting requirements (e.g. hedge accounting), connectivity to TMS (banks, market, rates, dealing systems, etc.), number of users, etc.” The system may be “bought” for a one-off licence upfront, with ongoing maintenance and support fees as a percentage of the original cost, or rented for a monthly fee (typically the case for SaaS solutions) after an initial set up cost, Lillie says. “The vendor will also charge consulting fees for implementation at a daily rate or for a fixed price so discuss these at the outset.” It’s worth remembering that no single system can do everything the business needs. This is why getting the selection process right is so important – the key is picking the best possible one.