No Way Back

In our recent Treasury Café post we discussed, at a very high level, four different options to handle the cash management needs of the organization – accounting system functionality, spreadsheets, bank provided systems, and Treasury workstations.

The decision to move from a variety of in-house processes to the more complete ERP or Treasury Workstation solutions involves a very critical strategic (to Finance and Treasury) component we best not ignore.

A Business Case is Key

Most organizations, when considering a technology investment, will require the development of a business case.

A business case can be thought of as a mini-business plan. It will contain an overview of the proposed project, explain why that project is needed, detail how the project will be initiated and managed, discuss the organizational impacts that will occur, and demonstrate a financially compelling story, among other things.

The Initial Transition is Valuable…

Why is this business case process so critical?

In a nutshell – economics.

Look at any Treasury Workstation vendor, or any consulting firm who includes in its scope of practice (such as Treasury Strategies and their Treasury 3.0, a subject of prior Treasury Café posts), and the major economic selling point for adopting the technology is the benefit derived by moving from spreadsheets and “off-line” processes to the more seamless, integrated, and accommodating functionality of the proposed technology product.

It is indisputable that there are labor savings.

To give an example, if our cash management staff was originally 10, with the workstation we might be able to use 6, so the 4 FTE savings, because they are perpetual, can go a long way towards paying for the system.

…but the Die is now Cast

So let’s assume that we embark on a project and that we realize all the benefits we had anticipated. This is great! It might go down as the best project in all of mankind!

What is wrong with this picture?

After a period of time, whether it be three years, or five, or ten, suppose we determine that a different system or technology infrastructure is more advantageous?

We might decide this for a number of reasons. Perhaps the vendor’s support for the current system has transitioned from “continuous-improvement updates” to “maintenance-only”. Perhaps we want to move from installed base to SaaS due to our web utilization patterns. Perhaps we want to just stay “ahead of the curve” due to an organizational philosophy.

Our problem is going to be that, unlike the initial transition, moving from one system to another does not yield many tangible, identifiable benefits.

We went from 10 to 6 with our last project. This project might not yield any additional FTE savings, or perhaps at most 1.

In other words, we will incur expense for the project, without any offsetting benefits to pay for it. When the CEO or CFO then asks “what are we going to gain on next year’s P&L by doing this?” the answer will be “none” or “not much”. Not a very persuasive argument, is it?

Given this, the system by which we take out the legacy inefficiencies will be the system we are likely going to continue to use (i.e. be stuck with) for many years to come.

Key Takeaways

Make sure your initial system selection is something you will be able to live with for a good period of time. Moving from one system to another does not yield many dramatic economic benefits like the initial transition.

In other words, there’s no going back and there’s no do-over’s…and “building the bridge to the future” does not always make the most compelling tangible economic argument.

Questions

·         Are you managing cash on spreadsheets or a technology product?

·         How long have you been on your current technology product?

·         Is there any momentum for a “next generation” product in your organization? If so, how was this accomplished? If not, why was this plan not deemed appropriate?

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