Treasury Systems

Globa l treasury management

Whafs in a
Systems "Solution"?
By Susa n Griffiths
G loba l Cas h Management Ltd.

Focusing on the basics of what you

want your systems to do leads to better (and often) cheaper solutions.

Systems do offe1 so luti ons fo r treasuw

H oweve r, syste m s diffi c ulti es-bo th
internal and external -ca n also exa cerb ate probl ems: forc ing treasurers to
w ear the hat of IT manage r in addition
to treasu ry. In ot h er words , trends
toward auto mation w ith improved systems development ca pab ili ties, and the
ava il ability of numero us free-sta nding
syste ms packages are good news fo r
MNC treasurers, but only after a significa nt amount of work, eva lu ation , and
in sta ll ation effort.
Th e groundwork is esse nti al, because
despite th e adva nces in tec hn o logy,
there is still no "black box" or si ngle
syste m which ca n effective ly handl e
al l MNC international treasury tasks.
W hat is needed to do th e j ob?

The right stuff at the right time

Few treasurers wo uld argue that obta inin g forecasted cas h flow in formation,
'oy curr ency, i s essenti al in o rd er to
manage FX expos ures and global liquidity-the two mo st co mm on e l ements of intern ation al treas ury man agement. However, this is a compl ex task
co nsid erin g the t im e zo ne and geographi c distances, the va ri o us tax and
lega l stru ctures inherent in a MNC, and
t he my ri ad of banking sys tem s and
commerc ial practices globa ll y. And th is
says noth in g abo ut the po li tica l issues
lurkin g beneath the surface.
Timely information-both forecasted
and actual- is the primary req ui site
for effectively managin g in te rn atio nal
treasury. Thu s, some of th e most basic
and effect ive syste m s so lu tions are
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those that bring abo ut more t im e l y

delivery of actio nab le in formation .
Fo rtun ate ly, these so lu tions are also
the most read ily achieved. Th e impl ementation of globa l E-m ail and compatibl e off ice software pa c ka ges o n a
wo rl d-w id e basis-such as M ic rosoft
Office, faci litatin g the cross-sharin g of
data betwee n sp reads heet, wo rd-processi ng, and prese ntation applications
- goes a long way to creatin g a treasury in fo rm ation syste m. It eve n may
se rve as a treasury systems " platform "
for a majori ty of co mpani es. Most treasuly ap pli cat io ns ca n ind eed be performed on a sp rea d sheet. Th e on l y
potential glitch is data inpu t- the ri ght
stuff must be put in w ith accuracy.
If eve ryo ne has the same for m at
spreadsheet, reportin g timely i nform ation to treasury i s ju st a matter of
dow nl oading the releva nt fi les through
E-mail (o r a WAN) so th at they ca n be
retr ieved and linked by treas ury. Th e
probl em, th en, is not so mu ch the system , but dete1m in i ng th e fo rm at and
inform ation requirements.
What information to capture?
Tr easu r y has to m ake the effo rt to
develop and " se ll" its ideas, to all compan y location s, about what data should
be co ll ected and transm itted to treasury. Thi s is particu lar ly true for forecasted info rm atio n, which is th e key to
va lu e-add ed treasu ry management.
For exa mpl e, expected inflow s/o utflows by week, by month, by cu rrency,
and by ba nk, are very simp le for local
controll ers to estimate, the trick is to te ll
them that this " forecast" is not used for
perform ance measurement purposes.
A far eas ier item to includ e is bank
bal ances-thu s sav ing the onerous task
and expe nse of bank balance reporting
(especia ll y if a " netwmk bank" is not
used). Of co m se, ba lance inform atio n
may also be provided by a bank system
(espec iall y if a network bank is used).

From communication to integration?

Accounting systems. A not her trend
witnessed in tod ay' s sys tems impl ementation dec isions is to move beyo nd
co mmon o ffi ce app li cat io ns to th e

in sta ll ation of the sta ndard accountin g

system globally-SAP, Orac le, and JD
Ed war d s a r e the most r ecog ni zed
names.
Whil e mor e expe nsiv e, inst allin g
co mm on accou ntin g systems does prov id e a num ber of benefits, th e most
basic be in g ease of sta nd ardi zat io n
- i. e., com mon input formats, acco un t
labe ling, and fina nc ial reporting. At a
minimum , this sta nd ardizat io n w ill
ass i st in st rea mlinin g the ard u o u s
monthl y closing process, importan t for
the accountin g function .
Shmter process in g cycles also ben ef it
treasury in th at inform ation about
boo ked transactions can be passed on
more qu i ck l y, w hich in turn all ows
treasurers to get a faste r handl e on
how w ell forecasted f lows/exposures
compare w ith actuals.
For some companies, the ex istence of
a common format and single data entry
all ows th em to co nsolid ate accountin g
functions on a 1egional basis.
Often, thi s co nsolidation takes the
form of a Shared Servi ce Center (SSC),
w hi ch ca n either mirror or be incorpoBeing SWIFT
nother related development which
wi ll streamline international treasury
activities, in this case cross-border transactions, is a new SWIFT message format
that allows "batch" messages to be transmitted. Although a coupl e of large banks
have software whi ch allows batch multi currency transfers to be initiated from a PC
(e.g. Citibank's World/ink), the new
SW\H message format will enanle any
SWIFT member bank to offer a somewhat
simi lar capability, wh ich may be included
in its balance reporting/transaction initiation service.
The new format allows transactions to
be received at the loca l, even correspondent bank level and processed in that
country's payment system. Thus, the costs
may be lower than ex isting intern ational
wire transfers. Although treasury may not
"shop" the FX in these transactions, it is
assumed that anything transferred in a
batch mode is lower value and subject to
1etail1ates anyway. Thi s is not exactly an
intern ational ACH mechani sm, but simulates the efficien cy and cost effectiveness.

Internatio nal Treasurer/October 16, 1995

Treasury Systems
ra ted w ith a treasury center.
The SSC is only possible with the
streamlined accounting package in
place and its effectiveness for treasury
is enhanced when treasury is in volved
in this streamlining process.

Th is brings up the two most important

thin gs to keep in mind for co mpa ni es
seeking to set up an
(or otherwise
in tegrate their accounting systems):
(1) It's not a rush job. Th e im p lementation process always ta kes mu ch
\ or~%e~ tn ar~ ar~)lo n e ant i c ipates and
this is even more true w hen a crossborder inst all ation is involved .

sse

(2) Treasury better have a hand in.

Treasury should be involved in th e ve ry
early stages of the im plementatio n to
insure that account designations pa rti cularl y for cash fl ow, FX, and ba nkin g
tra nsac ti ons w i II m eet i ts n eeds.
Generall y, th e co nce pt is to des ign a
chart of accounts th at fac i Iita te forwa rdlooking, proacti ve management, rath er
th an merely stati c reco rd keepin g fo 1
the preparation of fin ancial statements.
To help achi eve thi s, it makes sense for
treasury to play an active role even in
the selecti on of the appropriate vend or.
Treasury workstations. Often bridging
treas ury/acco unting needs Is the trea sury workstation . Before investing in a
treasury wor kstation , however, treas urers need to as k th emselves what they
actua ll y can do for managing t hei r
international activities. Basica ll y, a treasur y wo rkstat io n sho u ld " hook" the
cntJ;iPc; created by treasury-e .g., internatio nal rece i pt s/pay men t, i nte rn al/
external loans/ repayments, FX co ntracts
-to the accounting system.
Th ere are often ot her va lue-add ed
mod ul es, depend in g o n the ve nd o r,
w hich ca n all ow Reuters feeds, market
linkages, and mo delin g capab iliti es.
Treasury wo rkstati ons are prov ided by
ba n k and no n -b ank p rov id e rs.
Howeve r, ve ry few ba nks (e.g., BofA
and Chase) have gotten into full -b lown
treasu r y wo rksta ti o n ap pli cat i o n s
because of th e amount of customi zin g
that is requ ired for each custo mer. It
fo llows th en that th e degree to w hich a
International Treasu rer/October 16, 1995

workstation ca n be customized to the

needs of treas ury is a cru cial se lection
criteri on-one th at grows more impo rta nt to treasurers, t he more so phi sti cated th eir treasury acti vit ies beco me.
Pitfalls. Interestingly, wo rkstati on ve ndors may emph as ize fro nt-end "cash
manageme nt" o r " FX" capab ili ties,
wh il e in some cases the ir workstat ions
are rare l y used o u tsi de " t he back
off i ce ." So i n se l ec tin g a vendor,
bewa re of w ho t hey c ite as "c u sto mers," as those co mpan ies may use
th e wo rk st ation fo r operat ions oth er
t han w hat yo u have in min d. A nd, due
to th e costs in vo lved-from $25,000 to
$100,000-think before you sigri up.
If yo ur FX vo lum e or inte rn at iona l
tra nsaction activity (e.g.,wire transfers)
is low (25-50 a week) , all yo u may
nee d is an interface routi ne w hi c h
d ow nl oads yo ur t ransact io ns in an
app rop ri ate ent ry fo rm at in to yo ur
accounting system.
Be extremely wa ry of large accountin g sys tem ve nd ors wh o also offe r a
"treas ury modul e"-to da te, no o ne
has in sta ll ed one.

Outsourcing or in-house?
Other automated appl ica ti o ns aidin g
intern at io nal t reas ury manage men t
in c lu d e interco m pa n y n ett in g and
stand -a lone FX softwa re. Th ese appl ica ti o ns are fa r less cum bersome and
costl y th an full -b low n t reas ury wo rksta tion s. Lower cos t and increas in g
soph i sticat i o n mea ns mo re va lu eadded treas ury activ iti es ca n be perform ed in-h ouse.
Nett i ng syste ms are an exce ll e n t
exa mp le. Traditi onall y, a handful of
ba n ks
h ave
offe t ed
n ettin g
se rv ices-nota bl y Citi ba nk and Bank
M end es Ga ns. Th ese se rv i ces have
excell ent reputat ions, but nettin g is a
form of outso urcing w hi ch ca n have a
hefty cost. Th e mo nthl y fees do not
inclu de th e "sprea d" w hi ch th e bank
w ill ta ke on each FX transaction.
Purchas in g spec iali zed softwa re to
do th e nettin g in-h ouse-un ava il abl e a
few yea rs ago-may be th e id ea l so lution for th e MN C th at wa nts to furth er

A Band-aid
o matter how many integrated app li cations you may have, a prob lem
you w ill li kely always face is how to
extract informa ti on fro m financial fil es
generated by an accounting system .
These often do not provide treasury with
an approp riate view of the data.
For example, let's say you want to
rev iew all OEM sa les last quarter.
However, sales are only reported by lega l
entity. An interesti ng software product
ca ll ed "Monarch" (Personics) [te l 800445-33 11 ] allows you to take an existing
computer fil e - from th e mainframe or
another PC-a nd extract the data you
require by creating a " soft" copy in a treasury PC. In th is way, data ca n be entered
in to your own Lotus or Excel files.
Despite all the integration of accounting and treasury systems thi s is a simpler
approach than going to the M IS department and asking them to "sort" fo r
you-you still might not get w hat you
want.

ce n trali ze and co nt rol intern ati onal

treas ury from a single location. Th ese
off-the-shelf so luti ons elimin ate th e
need to des ign an in-h ouse application
from scra tch.
Pac kages such as " FX W orkbe nch"
an d " N ett in g W o r k b e n c h " by
Hypermedi a, Inc. [708-615-2552] are
rece nt entrants t o th e m ark etpl ace.
A nd, as all ud ed to above, all the transac ti o n s co ul d be entere d in to th e
accounting system via a routine set up
durin g installation.
Sys tems imp rove m ents in term s of
upgrades in accounti ng systems, more
soph isticated workstations, intern al PC
applicati ons, linkages, and user friendly
tr eas ur y software offer a variety of
choices. In assessing them, it is essential
t hat treasurers tnoroughl y in vestigate
and revi ew ba nk and third-party; customi zed and generi c; and outsou rcing
and in-h o use alte rn atives . Final ly, as
t reas ury becomes more t un ed to its
in for mat ion needs it sho ul d cons ider
getting active ly invo lved in the se lection
and im plementati on of every major system throughout the co mpa ny.

Ms. Griffiths is reached at (708) 295-64 14.

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