A significant portion of companies now use a cloud-basedtreasury system, although the majority still rely on softwareinstalled on-premises, according to a recent survey. Going forward,analysts and consultants expect increasing numbers of treasurydepartments to adopt cloud-based systems, particularly at small andmidsize companies.

The survey of more than 400 businesses around the world,conducted by the Association for Financial Professionals (AFP) andits gtnews unit, shows that 58% use some kind of treasurymanagement system; the portion is 66% in Europe and 53% in NorthAmerica.

Among those companies, 54% use an installed, dedicated system,while 13% rely on the treasury module of the company's ERP systemand 33% use software delivered via a software-as-a-service (SaaS)or application service provider (ASP) model.

When it comes to cloud-based systems, North America is in thelead; here 48% of companies that have a treasury management systemuse a SaaS or ASP product, versus 28% in Europe and 25% in AsiaPacific. In contrast, 63% of companies that have treasury softwarein Europe and 58% in Asia Pacific have an installed treasurymanagement system, versus just 38% of companies in NorthAmerica.

“That was the big finding from this report: how much moreprevalent SaaS has become in North America than other parts of theworld,” said Tom Hunt, AFP's director of treasury services.

Installed systems involve a higher up-front cost than SaaSsystems, and implementing and updating them requires the use ofcompany IT resources, something that treasury departments may havea hard time accessing. On the other hand, installed systems allowmore customization, and that can be important, particularly tolarge businesses.

“More and more companies will go with a SaaS solution, partlybecause more and more suppliers are dropping support of installedsolutions,” said Mark Webster, a partner at consulting firmTreasury Alliance Group.

“If I've got an installed system, I've got to pay the licensingfee, I've got to have staff, I've got to have equipment,” Websteradded. “If I go with SaaS, I don't have to worry about any ofit.”

The cost factors help explain why SaaS systems are most popularamong companies with revenues between $250 million and $999million, 50% of which use cloud-based systems, according to thesurvey.

“Right under that $1 billion mark, that's where you tend to seemore companies using this,” Hunt said.

James O'Neill, a senior analyst in the banking practice atCelent, a technology consulting company, said that before SaaS andASP treasury systems were available, “for midsize companies, thecost of acquiring a treasury solution was just prohibitive.”Instead, treasury operations relied on Excel spreadsheets. But thatpractice is less tenable now that boards of directors and auditorsare ramping up their oversight of companies' risk management andconsidering such topics as the reliability of Excel spreadsheets,he said.

“That's where the software-as-a-service systems come in—theygive you the capabilities of installed solutions but the pricepoint is much more favorable to a midsize company,” O'Neill said.“I think SaaS will really be competitive in getting the companiesthat are running Excel spreadsheets to finally commit to a treasurysolution.”

He argued, though, that large companies will continue to runinstalled solutions because of their “interest in having a greaterlevel of control of the solution.”

But Webster said even large companies may have reasons toconsider a cloud-based treasury product. He cited a Fortune 100client that is considering switching from its installed treasurymanagement system. The treasury function has had a hard timegetting the IT support it needs ever since the company decided tooutsource IT support. Treasury is interested in a SaaS solutionbecause it knows it could just pick up the phone and get someone tohelp, Webster said.

“The other big thing with SaaS, you know that as upgrades comedown, they're automatically going to be made,” he said. “I amautomatically running on the latest version.”

ERP systems' treasury modules, traditionally perceived as lessrobust than other treasury systems, have improved. “The ERP modulesare much better than they were 10 or 15 years ago,” Webstersaid.

ERP modules may not be as flexible as SaaS products, but theyhave the advantage of being integrated into the company's ERPsystem, he said. “That's a big deal. If I don't have to worry abouttying into my [general ledger] system, that's a real benefit.”

And Hunt noted that treasury departments may have an easier timemaking the business case for a treasury module to be added onto thecompany's ERP system than for a separate solution.

Data Security Concerns

The data breaches and other cybersecurity problems that have hitmany companies in recent years don't seem to be deterring companiesfrom adopting cloud technology.

O'Neill pointed out that, to date, breaches have occurred inprivate data centers, not in SaaS environments.

“It's always a concern, but I don't think it would be a showstopper for a company that's considering using a SaaS solution fortreasury,” he said. “The client obviously needs to do their own duediligence on their provider, but if you take the right precautionsand have the right processes for managing things like accesscontrol and encryption, it should be an issue you can manage.”

Hunt also noted the necessity for doing a thorough assessment ofthe provider and how it stores and protects its clients' data. “Ithink a lot of that has been stepped up probably in the lastmonths,” he added.

Looking for Cash Forecasting

Asked about the benefits of their treasury management software,56% of survey respondents said their system is providing increasedcash visibility, 54% said it's reducing errors, and 52% cited theintegration of cash and risk practices.

When asked about additional functionality that would improve thetreasury software, the most popular feature was electronicbank account management, cited by 53% of the respondents.

Interestingly, the second most popular feature that respondentssaid would improve their treasury management system was cash flow forecasting, cited by 51%.

Cash forecasting seems like it should be an integral part of anytreasury management system. But O'Neill said that while systemsinclude cash forecasting, not all companies with a system use thatmodule.

“When it comes to the forecasting, traditionally some of thesesolutions have been very cumbersome to work with,” he said. “Somecorporates have opted to use their treasury management system fortransaction management but not for forecasting. They would continueto do their forecasts manually through Excel spreadsheets.

“Occasionally they would upload the data,” O'Neill added. “Fromthe perspective of managing variances, the system would know whatthe forecast was, but the system was not involved in creating theforecast itself.”

Hunt linked companies' continued use of spreadsheets for cashforecasting with the limited amount of customization possible withmany treasury systems and the differences from company to company,whether it's a different year-end, different operating plan, ordifferent seasonal factors.

“With those unique needs of each business, you have unique needsaround cash flow forecasting,” he said. “Excel has always been thedominant solution for cash forecasting just because of thecustomization capabilities.”

Going forward, O'Neill said, there's an expectation thattreasury software will become “more user-friendly,” and that shiftwill encourage more companies to use the treasury management systemto generate their cash forecasts.