The treasury function is called upon to advise and support an increasing number of strategic decisions. Automating the treasury function through a treasury management system (TMS) offers a streamlined reporting function, which – when integrated with other systems in the organisation – provides quicker and more accurate reporting. This is what those at the cutting edge of implementation say...
Having a TMS is not about being technologically advanced but about being able to keep pace with the rest of the world. When I joined Al Dahra in 2020, all treasury activities were based on Excel – with more than 30 subsidiaries in 13 countries across four time zones, collating group cash positions from more than 200 bank accounts was itself a task, let alone the visibility on utilisation and available headroom under various facilities, exposure reporting and other treasury KPIs.
Hence TMS implementation was a no-brainer. The idea was not just to bring in efficiencies in current processes but also to avoid any human error in collating the information. Having information available in a TMS also reduced the dependencies to get the required information as a user can directly access the information. Auto circulation of reports was also possible.
We aim to use the TMS as a core system encompassing all treasury activity, be it cash, debt (both external and inter-company) or risk management, electronic payment, accounting, integration with ERP internally and with banks externally, generating certain reports including cashflow forecasts, exposures vs hedges and weighted average cost of debt. We use Power BI along with the TMS to give us more flexibility in reporting.
One good example is how we complete our group cash position. Although we were able to achieve 96% cash visibility, 4% was still outside the TMS, but with the use of Power BI we were able to combine the 4% information from outside with the other 96% to achieve a 100% group cash position. Considering the geographical diversity of our organisation, we have divided the project in four phases and aim to achieve full implementation by end of 2023. The next phase is to develop cashflow forecasting (other than treasury flows), in-house banking, payment factory, exposure reporting, and derivative portfolio, hedge accounting, and so on. We are also getting our own BIC to perform electronic payments, which would take away the hassle of managing multiple online banking portal tokens and create one window to approve payment.
Lessons learnt
I did not necessarily follow the well-established pathways into the treasury profession but found my home in the field after a variety of finance roles, first at Esso Serve Europe and now at major UK retailer Marks & Spencer. My broad responsibilities range from overseeing group cash and liquidity, funding, risk management and reporting, treasury accounting and, last but not least, systems and technology.
Following a departmental health-check review in 2019, M&S decided to replace its legacy in-house hosted treasury system and upgrade to a cloud-based platform from a TMS specialist. The goal was to enable the department to deliver on protecting value for the business through effectively controlled and standardised processes, creating value through effective partnering and enhancing value through data-driven decision-making.
Our ambition was to implement a system fully connected to our enterprise resource planning (ERP) for accounting and forecasting purposes, our banking portals for payment instructions and statement reconciliations, and our trading platform for derivative execution and confirmations, while also managing market data and (risk) reporting. Deciding which platform to choose was not just down to how well the teams’ functional requirements could be met but also to system security, ongoing support by TMS experts and cost.
The choice of a SaaS (software-as-a-service) solution was driven by a desire to embed a continuous improvement culture
The key to successful implementation was working in partnership with our provider on a detailed understanding of our business processes and agreeing well-defined requirements and scope, while considering all stakeholder needs – marrying treasury, technology and business requirements. Key to meeting the project’s objectives were the availability of the right resources and expertise, and setting clear expectations around delivery time frames.
Of course, the control design had to be appropriate, particularly as the level of automation increases, but I would also say to be careful with customisation. This can bake in rigidity and cost to the solution. Allow plenty of time for training and involve the team, backfilling their roles if necessary. There is no point in the system experts walking out of the door on day one of operations.
The choice of a SaaS (software-as-a-service) solution was driven by a desire to embed a continuous improvement culture, tapping into periodic upgrades to keep the department developing and adopting solutions to future challenges and industry changes such as ISO 20022 file formats for our banking connectivity. The onset of the pandemic soon validated our decision, and the platform enabled us to adapt to remote working from day one, allowing the team to support the business through this challenging period for UK retail.
The team now uses the FIS Integrity TMS as the main tool in daily operations from cash forecasting to the recording of all foreign exchange trades, external bank debt, bonds and uncommitted facilities and other derivatives like interest rate swaps, through to daily and periodic accounting and reporting.
We are constantly looking to enhance our usage to meet the business’ needs, most recently in adopting a new multi-entity banking pooling and in-house banking structure as well as expanding the range of accounting provided by the system.
We are now thinking about the way in which AI will change treasury and its jobs. What skills do we need to exploit the technology and to what extent is it sensible to adopt it in areas such as enhanced cash forecasting or hedging strategies?
My role in Spektra Inc is Head of Treasury Kenya. I’ve been in the role for more than a year now, having joined from DPO Group. Both are online payment service providers. It’s a role that encompasses cash and liquidity management, FX management and reporting.
One of the exciting initiatives that Spektra Inc is currently pioneering is an application that will enable cross-border payments throughout Africa – if I’m in Kenya, I can send money to friends in Nigeria so that they can draw the equivalent money in local currency. It is a unified platform for people throughout Africa to send payments. It really is at the cutting edge of payments on the continent, and I am really enthused to be part of this evolution.
The role is also an advisory one, as I help the company on the structuring of its products, providing profitability analyses. It is multifaceted, since in treasury you can see the whole company dynamic and help the company achieve its goals.
We are at the early stages of our TMS journey and are currently going through a process of determining which TMS system is best for us. We have primarily focused on ones that are available in Africa and will fully integrate into our ERP, as this helps to keep the data unified.
We are also looking for a system that will provide daily cash visibility and help our ability to forecast and optimise treasury transactions. An integrated system offers lean and efficient treasury features, and having a holistic view helps us in our decisions.
Looking to the future and thinking about ‘Stage 2’ implementations, we plan to connect bank APIs to give us a holistic view of our bank balances across the group. So, a key factor in our decision will be to choose a TMS that’s scalable and that can handle increased data volumes. A cloud-based TMS will also offer better security and cost effectiveness.
Dos and don’ts
I work for IHG Hotels & Resorts, which is one of the world’s leading hotel companies. We have 18 brands including Holiday Inn, InterContinental, Crowne Plaza and Kimpton. My role was created around 18 months ago following the decision to move away from using a treasury module within our ERP system to a full TMS. I am based in the UK, along with the global treasury and the financial reporting teams.
My primary role is the administration and management of our TMS. The work is varied and ranges from the system admin of core data and security to the set-up of new banks and jurisdictions with all the associated connectivity and testing, audits, payment projects and working with our providers technical support team on solving issues and implementing system improvements.
I have worked at IHG for over nine years – I joined the team just after the point of ‘go live’ so there was (and still is) work to do on optimising the way we use the system. It has been a great way to learn the system – resolving issues has required me to investigate different areas and work with the technical support team. We use our system as a payment hub (with integration to our ERP, Peoplesoft) and a TMS including treasury accounting, deals, in-house banking and reporting.
We do not plan to implement any further systems – the focus is more on current TMS optimisation and ensuring it’s fit for purpose and that we are making best use of the modules. It’s also becoming easier to get different systems working together and it’s not always the right solution to have one system doing everything. We concentrate on finding out what works for us as a business and our own specific requirements. We have looked at APIs and I continue to be interested in the development but it’s not a focus for us right now.
Keys to a successful implementation
AI will play a larger role in all aspects of life but this will certainly apply to finance and treasury, too. In the Business Service Centre, they have been using some robotic process automation (RPA) for basic functions like payment allocations and there is work ongoing to expand this.
Like many businesses, we’re looking at opportunities to create efficiencies and there are lots of solutions in the market. It’s about determining what is the best solution for us and how we can create efficiencies in our processes and be more confident of an accurate forecast.
This article was taken from Issue 3, 2023 of The Treasurer magazine. For more great insights, members can log in to view the full issue. If you're not an ACT member, you can sign up for eAffiliate membership.
