Treasury Today Country Profiles in association with Citi

TMS – icing or band-aid?

Treasury management systems are often considered the icing on the cake for the treasury department: they require investment, but can boost efficiency, visibility and process integration for a team covering a lot of functions. But they also have another use – as a band-aid, holding treasury operations together when merging or acquiring other firms.

Companies plan mergers and acquisitions for strategic reasons and clearly their enterprise resource planning (ERP) systems are hardly a core consideration for the firm as a whole. That means the companies involved often have different ERP systems, resulting in incompatible processes, reporting features and management tools. This may not bother the chairman, but it impedes treasurers in their core tasks of monitoring cash and exposures.

One solution is to adopt the same ERP systems across the merged business. If those already in place are two incompatible versions of an ERP system provided by one supplier, an update is required; if they are from different vendors then an evaluation process is needed to decide which is most suitable for the unified business. In any case, the result is a standardised system with the same reporting formats used across the board, making the whole integration process significantly more straightforward for the hard-pressed treasurer.

For a range of legitimate reasons, however, that is not always possible. Firstly, the process of giving a large acquired business a new ERP system is disruptive and expensive, potentially costing several million dollars. Secondly, it may not be operationally possible – if the acquisition is part of a joint venture, for instance, not all of the finance functions will be controlled by or integrated with the acquirer’s treasury, and the other partners may use different systems again. Similarly, if a more decentralised model is favoured, there may be too little integration taking place to justify a full ERP overhaul. Whatever the reason, the treasurer will be working in a much more challenging environment in terms of visibility.

In such a circumstance, the treasurer will be aided by a system to tie the different formats and reports together – and that is where the TMS comes in.

“Our offering integrates with a wide range of ERP and planning systems giving treasurers standardised reports and data when they’re looking at cash flow forecasts and exposures, for example,” says Pat Coleman, Regional General Manager, Central Europe, Middle East and Africa at IT2, a TMS provider. “We already have long-term relationships with our clients, working with treasurers as they expand the scope of their department’s operations both in terms of processes they undertake and the proportion of the business units they deal with, so in terms of customer support we are ideally placed to help in acquisition and integration scenarios.”

“When treasuries merge but two or more ERPs are used we can re-configure the accounting module – which sits on top of the main TMS functions – to match the new requirements. Implementing a new TMS costs between €150,000 and €1m depending on its scope, and the re-configuration after a merger typically costs another 10% – 20% of that – so that compares very favourably with the expense of implementing a unified ERP system across the whole business group.”

So a TMS can actually save money, by acting as an overlay to a host of incompatible systems. Perhaps the minority of treasurers that have one are right after all.