During the pandemic corporations rapidly changed old ways of working in what might be described as an ‘emergency automation.’ Now that the pandemic is receding, those same corporations are taking a longer view and re-evaluating their approach to technology.
ERP or TMS?
The all-embracing treasury management system (TMS) of old is being superseded by a new environment in which solutions from multiple vendors can be connected with banks and enterprise resource planning (ERP) systems to give an all-round view of cash in the company.
For users of ERP systems such as SAP’s S4 HANA, the line between ERP and TMS is becoming blurred as the range of treasury plug-ins and integrations develops its capacity in areas such as reconciliation, cash forecasting, and working capital management. It might seem that the roadmap to the future is easy to follow, but there are other factors to consider like treasury often being at the back of the queue regarding IT department priorities.
In those situations, it might be easier to have a dedicated TMS, perhaps boosted by other ‘best-of-breed’ solutions, all hosted off-site in a Software as a Solution (SaaS) environment. These would typically need little input from the IT department other than in managing connections to other internal systems.
For mid-sized and smaller firms, another option is growing in importance. Banks are increasingly developing portals that can offer some functionality that was once the preserve of a treasury management system. For example, Bank of America’s CashPro® is a complete digital platform for payments, receipts, liquidity, investments, FX, and trade. Often, these capabilities are delivered through partnerships with fintechs, helping close the gap between bank portals and the ‘best of breed’ world.
Larger corporations are also calling on their banks to provide greater levels of connectivity and integration than ever before, as the treasury and banking world moves from one based on batch-processing uploaded files to one that is ever closer to a real-time, always-on flow of payments and receipts.
Fresh thinking
Managing this emerging technology calls for fresh thinking from treasurers, who could increasingly be pulled into a world of IT and data analysis that they may not be either happy with or equipped for. As the landscape evolves, two approaches to treasury are emerging.
One is what we can call the ‘strategic treasury,’ where treasury sets policies, handles controls and risk management, but effectively ‘outsources’ the execution of transactions to a shared service centre (SSC) of which it is a client.
The other is a more hands-on approach where the treasury team plays a bigger role in transaction execution.
Deciding which of these approaches to take will influence the decisions a treasurer makes around technology – but whichever path is chosen, they should be building skills and knowledge of some of the new digital tools around connectivity, data visualisation, and workflow.
As we gain ever greater access to data from these interconnected systems, the importance of data analysis skills – and platforms – will only grow. The forward-thinking treasurer needs to ‘lean in’ to the data and become familiar with the data visualisation tools – such as Microsoft’s Power BI – that help make sense of increasingly complex data to support decision-making.
Into the future
The wave of ‘emergency automation’ that began in response to the pandemic isn’t restricted to treasury. Across the enterprise, functions that remained stubbornly manual are being digitised. Yet treasurers, with their insights into cash flow and liquidity patterns, could benefit most from this new world of rich data shared between platforms as they become the ‘liquidity data interpreters’ for the wider business.
Keep an eye out for next month’s Thought for the Month.
