I’ve Been Workin' at the Station, All the Live Long Day

Today I had the privilege to be the guest panelist for the Corporate Executive Board’s Treasury Leadership Roundtable Cash Management Cohort webinar on “Trends in Treasury Technology”.

These kinds of events are always fun for me because I can deliver some of Treasury Café’s insights to a new audience in a different setting. As an added bonus, the folks at the Treasury Leadership Roundtable do most of the “heavy lifting” - I just have to show up!

However, since my short-term memory is notoriously fickle, I decided it best to cover that event now while things are still fresh in my mind.

Choices, Choices

For cash management and related roles, a company’s treasury function will utilize either a) the organization’s accounting system functionality, b) traditional spreadsheets and other generic office tools, c) bank supplied functionality, or d) specialized software systems referred to as Treasury Workstations (hence the title of this blog post).

There are pros and cons to each alternative.

Option A – Jump In With the Accountants

The accounting system functionality (and by accounting system I am referring to SAP, Oracle/Peoplesoft and others) is somewhat limited compared to the specialized alternatives. It is also more cumbersome. It can also be quite costly.

But the primary drawback in my mind to this is that the Finance and Treasury group is beholden to the IT department. And the IT is much more interested in serving the accountants than the Finance and Treasury folks. 

It all makes sense, though. It is difficult to see how it can be different. The accounting system is typically of primary concern to accountants, not finance folks (see Why You Need a Finance Person for some of the differences).

Accountants in an organization outnumber finance folks by large orders of magnitude - 5 to 1, 10 to 1, 20 to 1.

CFO’s of organizations usually emanate from the accounting fold, which makes that group their favorite, and the source of their technical chops.

There are a lot of Sarbanes-Oxley (SOX) requirements for accounting, and since CFO’s are on the line personally when certifying the validity of the accounting results, these issues get a lot of C-level attention.

Let’s recap - the masses like it and the powerful elite like it.

Now imagine being the IT person assigned to the accounting system. You have two requests, one from accounting and one from finance. Whose request do you act on first, and whose do you postpone until the tail-end of the three-year planning horizon?

Or when it is budget time, and you need to give up 5% of the planned spend to hit the stretch targets, do you take it out of the accounting projects or the finance projects?

In other words, if the organization is going with option “a”, Finance and Treasury will get the standard, delivered system functionality and nothing more…ever!

They might not tell us this outright. What usually happens is that any request is met by a lot of arm-waving and concerns that it will take 1,000 man-years to accomplish the request.

Option B – Jump In With Bill Gates

Option “b” involves using standard office software to manage cash. This has the advantage of being versatile and completely under Finance and Treasury’s control, thereby freeing us from IT’s 1,000 man-years constraint.

For simple cash management set-ups it can be the most viable alternative. The basic usage of these tools are some of the more familiar to most employees, so they can all participate without any significant training periods or change management efforts.

Most software vendors earn their living by maligning use of spreadsheets due to the risk of error and the somewhat more manual nature of the processes to use them.

These disadvantages can be eliminated, but generally require programming solutions in Visual Basic for Applications. The software language skills might not be possessed by all of the Finance and Treasury staff.

Option C – Jump In With Your Bank

Option “c” – bank systems - I do not have any personal familiarity with, but am told that these are useful for very basic functions but leave a lot to be desired as the needs of the organization become more complicated.

And if we have more than one bank, we end up using a lot of different systems to do the same thing, which can be inefficient as well.

In addition, there is a great loss of flexibility, as usage of one bank or another becomes an organizational process and procedure issue in addition to bank services.

Option D – Jump In With People Who Want to Do Business With You

Option “d” – Treasury Workstations – is the route that delivers to Finance and Treasury the most functionality in an efficient package, overcoming the drawbacks to options “b” or “c”, and usually priced much more attractively than option “a”, even if we do not include the added benefit that IT is taken out of the picture for the most part.

Workstations these days come in two different flavors – installed software on the organization’s infrastructure, and the Software as a Service (SaaS) variety, where the software is hosted on the vendor’s servers and is accessed via web portals. Each of these approaches has their pros and cons.

The installed model plays better with the organization’s infrastructure and is more “self-sufficient”. The software will still work the day after the vendor goes out of business. Interfaces between programs are internally constructed which also allows greater organizational control, though if we need IT to perform some of this function we run back into the 1,000 man-year problem. It is also more costly.

The SaaS model is less expensive because it is subscription based as opposed to license based, and the vendor can leverage its scale to innovate and include features more effectively. For example, interfacing with Bank A’s system will be less costly for a SaaS provider because they can do it once, and spread the cost of this effort over the x number of subscribers to the software. Under the installed option all the interface programming costs are borne by each individual company.

There is risk here, however. If the company shuts down its business overnight we are in a major lurch. Years and years of data might be lost forever. An emergency situation is created, which is likely to occur at the most inopportune of times.

We Need WikiFinance, WikiTreasury skills!

The technology alternatives that we can use to manage cash and other Treasury functions is one of the primary elements to the Wikifinance, WikiTreasury environment we are moving towards.

For this reason, and others, it helps immensely to have a set of IT skills in the Finance and Treasury group. This was one of the slides in the Treasury Leadership Roundtable presentation, the ideal Treasury person as a mix of both finance knowledge and capabilities combined with technological knowledge of infrastructure, interfaces, and programming.

Let’s be clear - no software is ever going to provide 100% of the needed functionality. There is always going to be a certain amount of customization. This can take place within the Workstation software (if it is installed), the interface process, or through “off-line” activities.

To the extent that our own internal people understand the processes, the architecture, and the interfaces, and have some modicum of programming capabilities, we are able to utilize the product to the best of our ability while simultaneously making it work within our organization’s infrastructure with the minimum amount of added inefficiency.

And we can do it without relying on IT and the subsequent 1,000 man-year problem.

Key Takeaways

There are several choices to be made when determining the technology direction of the Treasury and Finance area. Each choice has advantages and disadvantages.

In order to maximize the Treasury and Finance area’s impact, key technology capabilities, such as programming, architecture, and interface, need to be held within the group. This cannot be outsourced without critical loss of control!

Questions

·         Which of the options are you currently using to manage your cash and treasury functions?

·         What is the status of IT skills housed within the Treasury and Finance area?

·         What steps can you take today to enhance your capabilities?

·         Do you have a roadmap for the future?

Add to the discussion with your thoughts, comments, questions and feedback! Please share Treasury Café with others. Thank you!