Ed Barrie's first daily task as group manager of treasury at Microsoft is opening up his treasury workstation from SAP and taking the pulse of its financial health. "The dashboard is great for horizontal processes like general ledger, accounts payable and managing our cash positions," Barrie enthuses from the tech giant's Redmond, Wash.-based headquarters.
Across the country in Dublin, Ohio, Linda Harty starts her day a bit differently. "We have an SAP treasury workstation that we use for booking transactions and posting journal entries but we don't use it very often for analytical purposes ," says Harty, executive vice president and treasurer at Cardinal Health Inc., an $87 billion global manufacturer and distributor of medical supplies. "I don't want to put it down, but it's too mechanical. We find that spreadsheets best meet our needs. We'd rather look at the data on the spreadsheet and use our brainpower to make decisions."
Two treasurers, two different approaches. While treasury workstations have evolved into sophisticated amalgams of enterprise-wide data--account balances, transactions, forecasts, cash positions, debts, investments, and pretty much anything else that occupies finance--they remain a tool. And like all tools, especially the more sophisticated ones, sometimes it's easier to do things the old way.
Consultants understand the dilemma, as do vendors of treasury workstations. The latter have even put to rest the term "workstation," given connotations of blue-collar toolboxes. The new term is Treasury Management System or TMS, with customized dashboards suggesting the panels of a sleek racecar. While newer systems are increasingly robust in terms of functionality, more user-friendly and enhanced on a regular basis, Harty's experience is not atypical. "We use the workstation to classify transactions or provide information to accounting, but when I want an overall view of what is going on in treasury for analytical purposes that information is just an input to something we generate ourselves," she explains. "You can't outsource us yet."
TMS was born after the last big recession. The twin oil crises of the 1970s unleashed double-digit interest rates compelling treasuries to rein in their borrowing, elevate their management of cash, and get a fix on their cash deposits at banks. Once the personal computer was created and a platform for the technology erected, early workstations made the scene, interfacing between companies and their banks to manage and maneuver funds. In the decades since, more functions were integrated into the systems, and in the last couple years, dashboards made their debut. "There was a demand by treasurers to see the main information that the database holds all in one place," says Laurie McCulley, a principal at Chicago-based consulting firm Treasury Strategies.
Today's dashboards are packed with cool graphs and charts in a rainbow of colors providing drill-down insight into an array of financial transactions, investments, the weighted average cost of debt, foreign exchange deals and the mark to market on them, among other data. A topnotch TMS dashboard will broadcast the daily status of treasury operations, items pending and what needs to be executed that day. Most provide a total view of cash globally, broken down regionally and summed up. The best TMS vendors offer these features, with more on the way. "Treasurers want the ability to customize the dashboard to their needs," McCulley says. "Vendors that make this easy are ahead of the curve."
The TMS market is shared by two groups of vendors, those that sell financial backbone Enterprise Resource Planning (ERP) solutions with bolt-on treasury modules like SAP and Oracle; and single-focus firms like IT2 Treasury Solutions, Kyriba, Wall Street Systems, SunGard and Thomson Reuters. Basic systems feed information from banks on cash positions to help treasurers make cash forecasts, and present the ability to track, report on and account for financial transactions. "You want a system that will analyze, price and mark to market transactions involving debt, investments, FX, commodities and other derivatives," McCulley explains. "You also want a system that can be used to initiate payments, such as a time deposit with the bank. You should be able to enter this into the TMS, feed it into the cash position, and then be able to create a payment or wire transfer request. Lastly, you want to be able to report on this."
No treasurer of a publicly traded company would dare sit down at his or her desk without access to some electronic form of treasury management. But many are loath to let go of tried-and-true processes. "We use a treasury workstation [from SunGard] on a hosted basis, renting it as a software-as-a-service for our global activities and find it useful, but I would have to concede that we still operate in 'spreadsheet hell,'" says Mark Rogus, senior vice president and treasurer of Corning Inc., with $5.9 billion in 2008 revenues. "We're getting better at using the workstation, but still find that we have to extract data from it and then manipulate the data in Excel."
Rogus blames these outside-the-box processes on the inferior report generating capacity and data analysis capabilities of the TMS. "The analyses are not very robust, and I have to pull data and redo things in Excel," he explains. "On the bright side, this is getting to be less." Although the SunGard system, called Quantum, comes with a state-of-the-art dashboard, Rogus says he rarely uses it. "Some treasurers are seeking the holy grail, where they come into their offices in the morning and the screen lights up with seven or eight dials like a cockpit in a plane telling them how to navigate cash around the world, moving it here and there and then doing the accounting," he adds. "That's not us. We use the system more for basic blocking and tackling--more for trade transactions than for dashboard reporting."
Barrie from Microsoft loves his dashboard, but even he concedes some misgivings. "We find it a bit more challenging to use for vertical or more technical businesses processes like FX management or derivatives processing," he says. "In our SAP module we have to work with consultants to get that implemented. There is no 'help desk' we can call like we might get from a dedicated workstation vendor, someone who knows how to do the appropriate configurations within the system. I guess that's the tradeoff between an ERP-based system and a best-of-breed solution--better horizontal support versus technical business process support."
Barrie, too, relies on spreadsheets to analyze data and make forecasts, not surprising since his employer invented the Excel spreadsheet program. "No TMS system has it all in one shot," he says. "We often take the data from the workstation and put it into Excel for ad hoc modeling or different analyses."
Despite ongoing improvements in TMS, there remain several shortcomings with the systems--treasurer demands for functionalities that are not being met. "Treasurers want counterparty exposures reporting out of the system to know when they close an FX trade whom they owe money to or who owes money to them," says McCulley, who works closely with treasury organizations. "Right now they are not getting this assessment of overall counterparty risk, and have to collate and pull together a bunch of things from
Other wishes include:
oDatabase improvements to keep better track of bank accounts, such as the work flow related to opening and closing accounts and maintaining signatories;
oReporting improvements within the system to reduce the need to export data to Excel to manipulate the data;
oThe display of process flows and procedure documentation, e.g., steps needing to be done to generate and finalize the cash position;
oDocument storage within the system, rather than provided by a hyperlink, which can break down and cause potential loss of the document;
oAbility to integrate with SWIFT , which provides standardized global interactivity for financial transactions.
Ask vendors about these features and they will say they already provide them. The truth is somewhere in the middle. Certainly, it's in the vendors' interests to heed treasury needs. And interviews with a few vendors indicate ongoing enhancements aimed at making systems even more functional, integrated and user-friendly.
Some of this work, in fact, is quite exciting. IT2, for example, is introducing a feature assisting companies to manage their carbon emissions and trading to help companies move toward zero impact, by offsetting a carbon emission with an investment in a green technology. "This is not just a whim to track something under a report heading; this is a useful tool to manage these costs and the impact on the business," explains Steve Bullock, senior vice president, North America, for the New York-based TMS vendor.
SAP has listened to its treasurer base and is enhancing their ability to invest in "commodity paper deals--not just the physical contract for the delivery of oil or soybeans, but to actually invest in the securities in the paper contracts," says Jim D'Addario, director of marketing at SAP ERP Financials. "Treasurers tell us they want to be able to handle a wider variety of instruments in the treasury portfolio, as part of their hedging or investment operations."
Kyriba touts a recent enhancement providing general ledger reconciliation. "Most systems offer general ledger mapping; what we do is take this a step further, sitting between the bank and the ledger," says Scott Montigellio, vice president of business development at San Diego-based Kyriba Corp. "Our system takes a feed back from the ledger that ties into the bank actuals on a daily basis. This way the month-end closing is just another day."
While such bells and whistles are loud and clear, many treasurers apparently don't hear them, according to former EDS Corp. Assistant Treasurer David O'Brien, who previously was the director of treasurer operations at Fidelity Investments. These days, O'Brien is a consultant (he heads boutique firm Enlightening Enterprises in Dallas) specializing in treasury management. "There are plenty of very good TMS vendors out there, several of which have made substantial strides in the last few years to improve the quality of their products and their delivery methodology," O'Brien asserts. "The problem is not the vendors or the systems needing more functionality. The problem is users. Many treasury operations just don't understand what the technology is or how to use it to its fullest. Consequently, TMS is underutilized."
He blames the situation, in part, on hidebound treasury processes--the tried-and-true procedures that people are comfortable with. "Many treasurers will continue to keep all their fixed debt on a spreadsheet off to a side, and others will do the same with their cash forecasting," O'Brien says. "Even though they can do this in the TMS, they don't."
His advice is for treasurers to take a very formal look internally at all their processes. "They need to ask, 'Is this the best way to do my job?'" he says. "In many cases they will learn the answer is 'no.' Many processes can be automated and already are. The TMS is there to be used."
Down the line, the old ways of doing things gradually will give into the new. "The tools exist, the platforms are getting better and the deficiencies are being worked out," says Rogus from Corning. "There will never be one tool to fit everybody, but it's getting closer."