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You too can rock your TMS implementation
BELLIN has successfully launched over 400 corporate groups on our tm5 Treasury Management System, leading the industry in project success rates. On the basis of this implementation expertise, we’ve compiled three less thought-about factors that can signiﬁcantly improve your cash positioning, forecasting and risk management.
Don’t automate, do streamline.
Cash positioning is an area where we provide a lot of consulting because there are several choices on the source of cash forecast information: direct subsidiary forecasts, indirect forecast from P&L, cash ﬂow modeling, or bank current day reporting. Most TMSs can automate cash positioning, but there are still many decisions to be made.
The ﬁrst step is to identify the sources of data. For example, treasury may receive a daily outgoing payments report from AP. But how can that be reconciled with a current day report from the bank so that your cash positioning doesn’t contain any duplication? In some cases, the diﬀerent sources are easily identiﬁed, e.g. when you’re dealing with a single large payment on a given day. But if you’re making payments to several diﬀerent customers, how do you reconcile them with items on the current day report?
We build a process for a client, based on their resources and the level of detail they require. This is always trade-oﬀ – the more detail, the more steps their workﬂow has to contain to ensure accuracy. So your process is not automated, but streamlined, which is preferable as you maintain full control. The system operates on your behalf, but you need to monitor the process to ensure that you maximize its capability to deliver error-free results.
Get your subsidiaries involved in cash forecasting early, so you can use their data.
People always ask how to assure the reliability of cash forecast reports submitted by their subsidiaries. And there are so many beneﬁts to an accurate forecasting system (i.e. comparing against your actual values without all the copy/paste eﬀort) that they should want to use your system and produce sound numbers. But accurate forecasting requires accurate historical data – and organizing that data across a group can turn into a real nightmare for certain organizations. One of our clients recently told us how hard it was to get his subsidiaries to do forecasting, as they were lacking solid historical numbers.
Now that he has BELLIN tm5, he enjoys global cash visibility through the BELLIN SWIFT Service, receiving every entity’s account statements on a daily basis. This information enables his subsidiaries to do an accurate forecast – for the ﬁrst time. In our system you provide all entities access to do their own forecasts – at no added cost, as we don’t charge per user. Empowered by a great tool, they will get on board and end up providing reliable data to the central treasury.
When it comes to risk management, start with real data, and use speciﬁc analyses to establish where you have weaknesses.
A lot of customers ask for risk management and many questions on that speciﬁc subject are listed in the various RfPs. However, these questions are always focused on speciﬁc risk factor calculations such as VaR or credit ratings instead of focusing on the underlying risk management approach supported by a TMS. The TMS should facilitate the entire risk management process, not just speciﬁc risk factor calculations.
Let’s say you do a VaR calculation and ﬁnd you have four million dollars at risk. What are you going to do? This kind of data is hard to work with because it’s based on so many assumptions, all of which can be a risk factor that needs management. Hence clients should focus on items based on real data, like liquidity risk – the risk that your company won’t be able to fulﬁl its ﬁnancial obligations one day. Even though people don’t think of this as risk management, it’s probably the most important risk management that you’re going to perform on a daily basis. And when you’re operating a TMS that is able to provide your central treasury with so much more reliable data, you’re suddenly empowered to make a lot of important decisions about your risks.
For example, we restructured one of our client’s ﬁnancial reporting structure to allow real-time reporting of their expected cash needs against their credit facility availability. This is further divided by the time it took for draw-down from diﬀerent sub-facilities to become available as cash. At any point, the treasurer and the CFO could obtain a ﬁnancial status report to gauge the liquidity status of the company, then determine if cash needs to be re-patriated or if additional funding needs to be obtained well before the bills are due. In this way, liquidity risk is clearly exposed and managed. The managers have a complete picture and can really understand what may be at risk.
Implementing the TMS only gets you going. Once you are moving, you face a whole new set of challenges. Don’t settle for a TMS that only gets you started. Leverage the experience of BELLIN to provide you with a truly transformative treasury experience.