By John Hintze
Buying a TMS can be all-consuming, a headache and more. But there is hope.
As a news organization and a provider of financial data and services to financial institutions as well as nonfinancial corporates, Bloomberg has broad and deep insight into trends impacting corporate treasury. Its head of product management for corporate treasury discussed those trends at a recent NeuGroup meeting, although he first addressed a topic dear to treasury executives’ hearts: How to approach buying a treasury management system (TMS).
Several NeuGroup members acknowledged being in the process of implementing a new TMS, having just done so or considering the prospect—often with dread. Mark Lewis, Bloomberg’s head of product corporate and bank treasury, who led the session on the future of treasury, noted his background both in corporate treasury positions and working for TMS vendors. The latter, he said, mistakenly believe they generate profits most effectively by selling customized products.
High and Low, Big and Small
Mr. Lewis said vendors split the TMS market into the very high-end space, like the General Electrics of the world with upwards of 200 people in treasury, followed by clients looking for more packaged solutions. The high-end customers spend over $1 million a year and as much as $10 million on their highly tailored TMSs, which often involve end-to-end solutions for specific functions such as FX workflow, and find themselves “in perpetual upgrade mode,” he added.
The packaged solutions typically range between $75,000 and $750,000 a year, he said, but can end up costing much more than the sticker price when corporates make a common mistake.
“Many corporates buy packaged solutions and want the system to adapt to the way they manage their treasury, compromising the very nature of a packaged solution,” Mr. Lewis said. “The CFO and treasurer may want to use the TMS exactly the way the vendor designed it, but a problem arises when the end users wants to continue to operate as they did before, the TMS vendor then brings in more consultants to customize it, and the budget is blown.”
Mr. Lewis’s advice to a company in search of a packaged TMS is to find the one that best suits its current treasury structure, methodology and workflow processes, then adapt its processes to the solution as much as possible. For any desired functions or reports that are not easily attainable as part of the TMS, he said, find an external solution leveraging application programming interfaces (APIs) to and from the TMS—increasingly easy to do with APIs now available with most systems.
A NeuGroup member said that his company’s treasury had primarily used Excel, and recently adopting a TMS pushed its executives to adapt their practices to it, rather than the other way around.
“It was an uphill battle, especially with the cash managers who were used to do things their own way—three different people, three banks and three different ERP (enterprise resource planning) processes,” the assistant treasurer said. By using the new TMS’s standard processes, however, now they more easily “can take sick days, go on vacation and rotate to another job.”
In addition, he said, implementation of the TMS has not gone over budget.
New Entrants
Mr. Lewis said that while consolidation of TMS providers has paused in the last few years, new TMS systems are entering the market. That’s bringing down licensing costs, but the vendors’ lower and even negative margins mean less customer service—an ever-louder complaint by treasury executives. In addition, because the vendors are looking for higher and higher licensing fees, they are building products that more flexible, further increasing implementation time and costing more.
“Many corporates buy packaged solutions and want the system to adapt to the way they manage their treasury, compromising the very nature of a packaged solution.”
Mr. Lewis advised meeting attendees to implement the TMS in-house as much as possible. If consultants are needed, they can work alongside the in-house team that has been implementing the system.
“When the project is over, your treasury team are the experts on your treasury operation and your new TMS system,” Mr. Lewis said.
In fact, he said, TMS providers are missing the forest for the trees, given that Apple and other providers of consumer technology have long shown the importance of making the technology user-friendly. Mr. Lewis said vendors offering a better user experience and onboarding process could dramatically reduce implementation time and effort, and improve profitability. In addition, their corporate clients could spend less on training employees how to use the technology and be more satisfied.
“The vendors could make more money because they could charge a bigger licensing fee, and that goes straight to the bottom line,” he said, adding corporate clients are not pushing them enough in that direction.
Looking into the future, Mr. Lewis said, more companies will likely purchase a TMS as software as a service (SaaS) as they become more comfortable with the security aspects, rather than as hosted or in-house solutions. In part that’s because SaaS systems are enhanced more frequently but gradually, enabling users to discover new features that will help them without needing a major upgrade project.
One participant noted the benefit of gradual upgrades.
“You tend to fall behind on upgrades [when the company opts to choose when to pursue them], and when you finally do it becomes a massive upgrade” that can result in complications, he said.
Looking Ahead to a Brave New Treasury
Mr. Lewis said that a company that has pursued an acquisition spree for growth often has multiple ERP systems that its TMS could become the leveler, laying on top of the ERPs, since those ERP systems rarely talk to each other. The future, he said, will likely be TMSs that have strong APIs, enabling that data to flow back and forth. He noted that banks in Europe are already required to offer APIs to third parties, giving them access to data on behalf of the client.
On the robotic process automation (RPA) front, Mr. Lewis noted that purchase orders can already be processed via RPA on both sides of the aisle. Reconciling cash is another area where RPA is being adopted.
“By 2025, before you walk into the office your cash position will be known and the cash reconciliation has been completed,” Mr. Lewis said. “Trades will be recommended or even executed within parameters defined by treasury.”
A meeting participant then asked whether treasury expertise will have to change, so that treasury employees are no longer experts in treasury processes but rather experts in “getting the bots and training them.”
Mr. Lewis responded that treasury executives will be much closer to the business, and there will be more data analysts and programmers given the huge volume of data that will be available to treasury departments to decipher. Processing work will focus on change, such as acquisitions that need to be added to the pools, or divestments removed.
“A lot of that will just be inputting it and telling the system, ‘We just bought a new company, these are the accounts and these are the banks,’ ” Mr. Lewis said. “It will enable redistribution of resources away from processing to data analytics and a deeper understanding of the business.”