Tresury & Risk Home Menu

Planning a Treasury Management System Implementation

Insufficient attention to planning undermines the project’s chances of success. Here’s how to help ensure that a new treasury management system will meet the company’s needs.

As market volatility, fraud, and cyber risks have become increasingly top-of-mind for corporate executives over the past decade, the visibility and importance of the treasury function have been elevated within the overall organization. Along with this enhanced position come increased expectations. As such, many treasury groups are looking to evolve their capabilities to better meet the needs of their management teams and boards.

One of the obvious places to start an evolution of the treasury function is to implement a new treasury management system, or upgrade existing systems, with the goal of improving cash and risk management decisions. Companies deploy treasury management systems expecting to achieve some of the following: process automation, enhanced cash visibility, process standardization, improved controls, optimized utilization of cash, reduced risk of fraud, and enhanced financial and management reporting.

Failing to include groups outside the core treasury team in an effort to redesign a company’s treasury technology infrastructure limits the degree of transformation the technology implementation can realize. The benefits of including a broader group of business functions can be substantial. For example, a centralized treasury platform that has tight integration with both banks and internal groups outside of treasury can serve as one source of the truth for all financial activity. The accounting team, for one, will benefit if a new treasury management system begins automatically collecting bank data, assigning proper general ledger coding, and then creating balanced entries that post directly to the accounting system.

"The process of defining the desired future state of the treasury function presents an ideal time for benchmarking one's organization vis-a-vis its peers."Involving people from across the company also helps the treasury team create a compelling business case when attempting to obtain funding for the project, as it broadens the perceived benefit to the overall organization. The more stakeholders who are vested in and sold on the benefits of the initiative, the easier gaining final approvals will be, not to mention getting resources allocated to the project.

The key objectives are the outcomes the company wants to achieve through the project. Some examples of typical objectives include:

  • Standardizing processes globally;
  • Centralizing specific functions;
  • Creating a straight-through processing environment, from transaction request to consummation to accounting and financial reporting;
  • Providing a single source of the truth for financial data;
  • Reducing by 30 percent the proportion of employees’ time spent on manual processes; and
  • Optimizing liquidity management, in order to reduce the cash reserve the company must maintain and to enhance investment yields.

The objectives should be set prior to the software selection, and the key stakeholders from each function should work together jointly to define them. Factors to consider when establishing the objectives are organizational goals or key performance metrics, analysis and benchmarking against best-in-class organizations, and opportunities to elevate the analytical capabilities and focus within the company. The objectives should be aspirational and stretch goals, so aim high.

To the extent a company details its future-state processes before it fully understands the capabilities of the treasury management system it will ultimately implement, it may need to revisit its future-state design after making the software-selection decision so that its proposed processes align with the tool’s functionality and recommended workflows.

"The implementation of a treasury management system will likely span an extended period of time. This means it is crucial to create a well-defined roadmap."The process of defining the desired future state of the treasury function also presents an ideal time for benchmarking one’s organization vis-à-vis its peers in the same industry, as well as vis-à-vis companies recognized as having best-in-class treasury functions. Activities to consider for benchmarking include size and organizational structure of treasury group, such as existence of a shared-service model; bank fee analysis; utilization of and overall spend on treasury technology; and the extent to which they leverage more complex structures, such as a payment factory, netting, an in-house bank, and hedging. The data required to perform a proper benchmarking analysis can be obtained from industry sources such as the Association for Financial Professionals (AFP) or from the company's banks. Another alternative is to leverage a consulting firm specializing in this analysis.