The Technologies Treasury Needs Now

These are tough times for corporate treasury departments. The challenges are coming from all directions: Banks are reluctant to provide the liquidity treasurers count on; customers are struggling with their own cash flow, and the threat of bad-debt write-offs and customer bankruptcies is growing; and wild swings in commodity prices are testing investment and hedging strategies.

Budgets for technology investments are slim, but the crisis has pushed liquidity management to center stage, and many organizations are taking another look at tools that can take some of the burden off their overstretched treasury pros. In particular, they're looking for systems that can help them gain oversight of all their cash positions and analyze them on an intraday basis, according to a new report from strategy consultancy Celent, a member of the Oliver Wyman Group.

At the top of treasurers' wish list is data consolidation. The idea is to tap fewer sources of data from more dependable providers and so reduce the cost of obtaining the data and hopefully simplify compliance tasks. Treasury pros are also looking for more uniformity in the data languages that are used to transmit financial information.

One part of a viable solution, according to Celent, is the secure financial messaging network provided by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a nonprofit consortium. The network lets corporations establish a single communication channel with their banking partners, eliminating much of the complexity around third-party communications providers and multiple messaging channels and standards.

SWIFT has been around for more than 30 years, and the system still has its kinks (as Karen Kroll noted in "The Credit Paradox" in our June issue),
And although adoption of SWIFT's latest model, called SCORE, has been climbing steadily since 2004, the bulk of the 350 current corporate users are large international companies. But Celent believes the offering is poised to make rapid headway among mid-market organizations in the next few years. The potential rewards are attractive; for companies that implement SWIFT, the five-year ROI can range between 200 percent and 400 percent, the report notes.

Also high on treasurers' list of tech priorities is integration; in particular, the ability to tie transaction data to their general ledger and ERP systems, where users outside of treasury can easily access it. "The treasurer will be looking for a solution that crosses the boundaries of his or her office," notes Enrico Camerinelli, senior analyst with Celent. "Users from other units -- for example, sales, purchasing, production -- will have to interact with the system."

Compliance is a key driver of the search for integration, notes Jim Daddario, director of marketing, SAP ERP Financials. "You have to have linkages between the treasury systems that are managing things like hedges and investment positions and cash flows, and that has to flow into the general ledger because you want fair and accurate financial reporting," he says. Forging those links can be a challenge, though, despite the rise of open standards such as XML. "The receiving system is expecting data to be in a certain format, even down to the basics like a bank account number. One system might want to see a 7-digit number, and another might want to see a 10-digit number." SAP offers treasury management modules that integrate natively with its ERP offerings and automatically record transactions in the G/L.

Once they have good data and treasury-to-ERP consolidation, treasurers want analytical tools that can help them better understand their liquidity management options and improve their investment decisions. Achieving actionable insight is challenging, though, given that spreadsheets still dominate large tracts of the treasury landscape. "Sometimes the whole treasury department is still running on spreadsheets, and even in the larger companies quite regularly you see a part of the operation still running on spreadsheets," says Andrew Woods, vice president of global treasury solutions with software and IT services provider SunGard. While many midsize organizations would be happy to upgrade from unwieldy Excel-based models, they don't always have the budget for a standalone treasury management system, Woods notes. "This is why we've seen the increasing popularity of richly functional, Web-deployed products that are available on a rental basis and that don't require a six-month project to get them up and running."

Banks, ERP providers and treasury workstation providers are working hard to improve their liquidity management offerings, the Celent report notes. "With so many providers and services in the market focusing on enhancing the treasurer's view of accounts and providing more timely data, liquidity management will make big strides in the coming years." That's good news, but treasurers may not want to wait that long before checking out products that are already available and that can help them steer a path through the current turmoil.