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Treasury System Selection: In Need of an Overhaul?

  • By Craig Davis and Stephen Cheesewright
  • Published: 7/31/2015

TMSThe traditional process of selecting a treasury management system (TMS) has not changed in the last 30 years. The traditional process is a perfectly sound approach, but it usually requires about six months and can cost a significant amount in terms of staff time and/or advisory fees:

  • Prepare a statement of key requirements which can be incorporated into a request for proposal (RFP).
  • Identify a list of relevant suppliers and issue the RFP to interested ones.
  • Evaluate responses of both written RFP responses and vendor demonstrations, and form a shortlist should a systems project proceed.
  • Determine the indicative explicit costs, effort and timeline for an implemented system.
  • Build a business case and request approval for capex.

Some organizations may not have the time or the budget to follow this approach. Is there a quicker and less costly alternative?

Speeding up TMS selection

Often, the selection process can been fast tracked, reducing costs and the time involved.

One example is KPMG’s own treasury outsourcing business, which had to transition from an existing treasury platform to a new treasury platform in a short space of time due to external circumstances.  

This process was complicated by KPMG having multiple clients, each with their sometimes complex financial instruments and arrangements, and (looming year-end) reporting arrangements.

Using its existing knowledge of potential suppliers, KPMG rapidly reduced its shortlist to two. It then developed a shortlist of key system criteria and scored each supplier’s system. We also focused on qualitative as much as quantitative criteria—i.e. best fit from an organizational and functional perspective. This indicated a preferred supplier whom KPMG worked with to test key transactions processes and map out the implementation process and costs.

It took less than six months from identification of requirements to having a fully live system able to deal with multiple clients, several thousand complex transactions and undertake complex hedge accounting for client year requirements.

A variation of this approach involved a client developing a relatively detailed design for an in-house bank.

The client identified four potential suppliers and shared the design document with them. Each of these suppliers was invited to a structured two-day workshop to discuss how they would enable the design. At the end of the second week (and four workshops), the client had already formed a view as to the preferred supplier, taking into account also the cost of the implemented system.

This process cut the RFP process by months and required significantly less effort by both the client and the vendors involved.

Expanding functionality and flexibility

One of the key considerations that has arisen in the last few years in terms of selecting a TMS is the advent of cloud computing or software as a service (SaaS). Many organizations are moving away from the traditional operating model of having their treasury software operating on their own servers.

Having the software hosted by a service provider makes the implementation and maintenance of software much easier and less costly compared to the traditional model. There are commercial benefits as well: the traditional model typically requires the payment of a large upfront payment and ongoing maintenance fees, whereas cloud-based systems usually require the payment of an annual rental fee, which may make the business case for the TMS that much easier to be approved.

If a system is not able to be offered as a hosted solution or as a cloud-based solution, it is unlikely to make it onto most treasurer’s systems tender list.

Another key consideration for more sophisticated treasury functions, particularly as straight-through processing becomes more of a reality, is the ability of a TMS to interface with matching software, bank reporting software and payment systems and deal execution systems such as internet banking portals.

Can ERP systems finally capture some of the treasury markets?

Typically, enterprise resource planning (ERP) systems in the Asia-Pacific (APAC) region have struggled to make inroads into the specialist TMS market share.

A survey by Bank of America Merrill Lynch and SunGard in 2015 found that the bigger the organization, the less likely it is to use an ERP treasury system. This might be explained by the fact that larger organizations could afford more specialist software that provides comparatively richer functionality.

In the past, experience has also shown these systems have lacked specialist TMS functionality. While low-cost in terms of acquisition, ERP systems have proven to incur higher implementation costs and are unwieldy to operate. These issues have been exacerbated in APAC by the lack of vendor presence and on-ground support.

However in Europe, in recent years, more than 50 percent of TMS selections have been awarded to a particular ERP vendor. ERP treasury modules have also progressed significantly in terms of functionality in the past couple of years and have caught up with the top-tier TMS specialist.

Moreover, companies in Europe are trying to harmonize their ERP landscape as much as possible, which provides a very good basis to use ERP treasury modules.

As the functionality of ERP systems continues to improve and organizations move to treasury models such as in-house banks that knit together treasury, payment and accounting processes, the popularity of ERP treasury modules—which plays to the strength of integrated systems—may rise in the APAC region.

Craig Davis is head of financial risk management, KPMG in ASEAN. Stephen Cheesewright is director of financial risk management, KPMG in Australia.

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