Treasury Today Country Profiles in association with Citi

Making ERP work harder for the treasury

Enterprise resource planning (ERP) has been a prevalent part of business technology for a number of years, however only recently has it been able to offer functionality at a level required for treasury operations. This month we look at how ERP has developed, whether it has caught up with stand-alone products in terms of treasury functionality and how you can make better use of what it has to offer.

Simplicity, efficiency, visibility

Treasurers often strive for visibility, simplicity and efficiency, and ERP is a way of achieving those goals. ERP intrinsically links every department in an organisation and converts information from each team into a standardised format, which enables it to be accessed by those that need to across the organisation. ERP not only allows integration throughout an organisation’s departments, but now, through the SWIFT network, ERP systems can have straight through processing to a company’s banks as well.

Global Treasurer Jörg Wiemer, SAP AG, one of the world’s biggest ERP providers, explains, “The SAP Treasury department runs SAP. The connectivity via SWIFT network to our banks is completely integrated, and allows bank account statements to come directly into the ERP system as well as seamless payment execution. In our treasury we perform automatic posting of the bank account positions worldwide. From a treasury perspective this creates transparency, reduces risk and enables us to have an integrated liquidity forecast, which can also include foreign exchange deals. These liquidity forecasts work together with other benefits to make the life of the treasury easier.”

While it is hardly surprising that treasury at SAP has mastered the full functionality embedded within an ERP system, what about treasurers within other organisations, who don’t have the benefit of a development team on stand-by?

The primary aim of ERP is to make day-to-day processes within the treasury easier, and the ability to get entity-wide integration with straight through processing to the company’s banks is clearly an advantage. By creating a single source of information, all employees can work off a single system, which enables the management to monitor employees and ensure the correct authorisation and log in is in use. This lowers the risk from fraud as an ERP can log and track transactions whilst also creating an audit trail for all tasks.

It’s never a perfect world for treasurers

But the use of treasury within ERP has its limitations. Critics point out that ERP reports aren’t visually as easy to follow as those generated by the more specialised treasury management systems and there is an absence of some risk management analytics that, for more sophisticated treasury, are an important component. In addition ERP functionality is not designed to cope with complex product coverage, although this is becoming less and less important as treasurers go back to basics. Another criticism levelled at ERP is that it has grown from an accounting mentality, so for pure treasury, the system can be counterintuitive in some areas. On a much more basic level, treasury modules within an ERP system can be small compared to the total offering. From a business case perspective therefore, other developments can quite naturally take priority over treasury needs.

Ken Lillie, director of consultancy firm Lillie Associates, says that, “ERP, as a system, is promoted as being holistic and with the aim of giving senior financial management visibility over the entire company and its financial supply chain. Those who favour bespoke treasury management systems may consider that ERP systems have inadequate treasury capabilities, a view that SAP and Oracle are actively trying to change, or that the functionality does not meet their specific requirements.”

Wiemer says that whilst this issue may have been true in the past, he believes that technology vendors like SAP and Oracle have at least matched their niche counterparts. “SAP invested a lot during recent years, and I believe that SAP’s integrated treasury solution offers all the important functionalities that you would have with a stand-alone treasury tool.”

Whether or not ERP can meet treasury objectives is often a moot point in organisations. The reality is that treasury departments are frequently forced into an ERP treasury module. This is because, from the IT department’s point of view, it makes perfect sense to implement and support one system. Also, having the whole company run on one platform gives that company more influence with its vendor and avoids having to work piecemeal with standalone solutions for various departments. Finally, companies may be reluctant to invest in a TMS because vendors’ size can be worrying and CIOs fret about what would happen if the vendor were to go under or to be bought out.

So how do treasurers, often forced into the ERP route, make the best of what they might consider a less than ideal situation? Or if you are new to ERP treasury, how can you get the most for your money? Those experienced in integrating and installing treasury software within corporations say that the process starts with understanding the functionality you need right from the start. “Treasuries need to make sure they consider not just how they operate today but how they plan to evolve. A common mistake is to install a system which fits today’s needs without taking account of the longer term evolution of the business, such as moving into new markets and new sources of risk, or the strategy for broader finance eg shared services, centralised payments and in-house banking,” says Carl Mantel, Director, PricewaterhouseCoopers Treasury Solutions.

Still, companies make mistakes because they are in a hurry, often working to the IT department’s agenda. Treasurers need to take time out to think about how the system can support them and where third-party interfaces are required.

For example, ERP treasury modules are not sophisticated enough for specialised tasks such as trading. Corporates need third-party software to improve functionality in these areas. Indeed the large ERP providers have acknowledged this issue, and have worked hard to make integration of these third-party products as easy as possible. One third-party software in use is ‘business intelligence’ which allows management reporting on a daily basis without additional work. Oracle recently acquired Hyperion, a business intelligence vendor and SAP has built up its business intelligence offering with the purchase of Business Objects.


The problem of treasury needs versus corporate entity needs must also be addressed so that companies can make the most out of ERP. “There is a suggestion that as ERP is run from the IT department, necessary upgrades and internal support for the treasury module will not receive the necessary priority as treasurers do not have power over the relevant budgets and the IT department,” says Lillie.

The simple way this can be overcome is with good working relationships between the treasury and IT departments. Jörg Wiemer is the ultimate test case for his IT department and product development team. He explains, “The treasury team has very good relationship with our development colleagues as well as an excellent relationship with our treasury/ERP customers. This is important so we can get our own idea of what the treasury solution should deliver using customer feedback which we can then bring directly to the development team. We sometimes run a new SAP product as prototype in our own treasury team and test its ability to handle everyday tasks. We then know that this fulfils the need of the treasurer before we ship it out.”

ERP can be a great solution to a treasurer’s technology problems; its power really comes into its own when the company runs on one underlying ERP platform providing a wealth of information. However, treasury needs to make sure it is heavily involved in decisions from the start because some company structures would be better placed to look at different systems depending on their level of centralisation and structure.