By Joseph Neu and Anne Friberg
Treasury can access financial information from around the world with greater ease than ever, but lack of standardization in formats and processes can still hamper true effectiveness.
Global access to financial information is easier than ever for treasury departments, especially with the aide of global banks’ platforms or reporting services. Still, this is not a turnkey situation: the greater challenge is to get the right information in standard formats and have smart processes and applications to process the information effectively.
With this in mind, there are three things that make treasury’s job easier when expanding internationally:
- Getting access to all information about the timing (value date) and currency of funds being received and dispersed. This requires that the international accounting systems are set up appropriately and do not override the enterprise management systems’ ability for treasury to get a cash view. The general ledger (GL) system—and properly addressing its set-up from a currency standpoint—is integral to cash forecasting and FX exposure management. It is important that it is clear whether transactions of foreign subs are booked in local currency or not.
- Having access to the bank accounts where cash is being received and dispersed via SWIFT or another multibank platform.
- Possessing effectively integrated systems to allow straight through processing (STP) of all this information with as little manual intervention as practical.
Define and document your desired end-state
Treasuries that implement new TMSs consistently say that the statement of work document, defining desired functionality and the processes the system will support is the most important part of a successful implementation. Taking this idea to the next level means that any treasury seeking to create a platform to support enterprise growth should have a document that attempts to define the desired end-state with the best practice processes and system functionalities that treasury wants to put in place over time.
Assess your IT support model
After the statement of work, what defines a successful TMS implementation is the IT support model available to treasury. For example, the further the IT department is from treasury in terms of familiarity and working relationship with treasury staff, the more treasury will tend to need to adapt to the functionality and support model available through the system provider or another third party.
Designate a treasury project manager
Whatever support model treasury has at its disposal, it will greatly maximize it by designating someone with tech and treasury expertise to serve as a project manager or liaison with the vendor to ensure the systems’ functionality suits and supports treasury’s processes and objectives.
Access
Treasury management systems should be flexible enough so that they can be securely accessed from mobile devices and globally. For many, this means a cloud-hosted arrangement of some sort, but note that the lines between cloud, private cloud and hybrids are blurred by various data-hosting options. Global and mobile access aligns with the increasingly common smartphone-centric IT experience, the tech leap-frogging common in developing growth markets and the centralization across geographies with centers of excellence and mobile workforce needs to take on global markets.
Aim to be on multi-institution platforms
Multi-bank platforms – although traditional banking services may increasingly be provided by non-banks too – allow a move away from proprietary e-banking platforms to standardized interfaces such as those offered by SWIFT, for example SWIFT Alliance Lite2. If single-entity interfaces are useful, ensure that they are based on standardized file/message formats that integrate with your own systems.
Don’t implement legacy technology
If you don’t have legacy systems, take the forward view to implement systems that use the current set of global standards, e.g., make ISO20022-based XML your core transaction format in your internal systems. Find out about the code base of the systems you are looking to implement and see to what extent they will be able to adapt to emerging global standards and the access imperatives described above.
Look to retail/consumer banking and related non-bank services
Many of the innovations found here will find their way to corporate banking.
Don’t be afraid to build your own apps
If your IT support or the IT capabilities of your treasury team allow it, don’t be afraid to build your own apps. Several emerging MNCs scaled their international treasury on the back of in-house developed applications, some of which were spun out into systems companies (see Clearwater from Cisco and Atlas FX from HP). Currently, Microsoft is the poster child for a cash visibility application based on new data analytics and reporting tools embedded in Excel with mobile hooks for its Azure cloud platform.
Partner with vendors
If you cannot build your own apps, chances are you might find vendors willing to help develop the application that you need. FiREapps honed many of its capabilities in early partnerships with companies expanding internationally looking to fix item 1 above. Chatham Financial is working with companies on a long-term project hedge accounting application, and there is a growing list of financial technology vendors from Clear2Pay to SAP looking to partner with corporates to build applications that tie into new service platforms Just like in the consumer tech space, the future may be in separate apps that sit on a common platform that pull data from where it resides, which might render the current concept of a comprehensive TMS out of date.
Look for TMS that is flexible
If you feel like you need an off-the-shelf TMS, look to a vendor that can offer you a flexible system or flexible licensing to meet your needs today and, in line with your end state vision, tomorrow. While the flexibility of various systems modules developed and acquired by the major TMS vendors (i.e., SunGard and WallStreet) are a work-in-progress in terms of being able to be seamlessly swapped in and out, the licensing models of these systems will adapt to offer you the ability to move up or down within a systems family to right-size the TMS to current needs, e.g., from City Financial to Wallstreet Suite or Integrity to Quantum.
What’s ahead
Getting the systems architecture right is the foundation for effective and scalable treasury management that can support a growing business. Companies that are in a rapid international growth phase often have treasury departments just trying to keep up, let alone lead. But they also have an opportunity to look for the latest in flexible treasury support systems without having to shed legacy systems or transform antiquated processes. Available options in the current market place make this an opportune time to look at solutions on the treasury tech side.