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Resources Use the Socratic Method when planning your move to a new Treasury Management System

Use the Socratic Method when planning your move to a new Treasury Management System

If you’re considering a move to an automated treasury management system, or if you might like to upgrade the one you already have, first think of that ancient advice: “Know Thyself.”

Socrates – who had a habit for ticking off his fellow citizens of ancient Athens – said that people make themselves appear ridiculous when they are trying to know obscure things before they know themselves.  Many centuries later, Ben Franklin wrote, “There are three things extremely hard: steel, a diamond, and to know one’s self.”

Both gentlemen knew what they were talking about.  So listen to Socrates before you make the move to a sophisticated and powerful treasury management system.  First you must know who you are, as both a company and as a treasury professional.  Listen to Ben as well. It takes a lot more work to come to that self-knowledge than you might think.

So, how do you attain this self-knowledge? Why, use the Socratic Method, of course.  Ask questions.

Thoughtful answers to the following questions – about your company and yourself – will lead you to a well-considered decision.

Why are we in the market for a Treasury Management System (TMS)? What is not working as well as it should right now? What problems would we solve by automating or upgrading?

If your company still relies on manually-generated spreadsheets throughout its treasury operations, chances are you’re spending several hours each day to just compile your cash position and forecast.  If you automate, you’ll find more time for higher-level, strategically-focused work. But if that’s all you’re trying to accomplish, you might just be putting a Band-Aid on today’s problem and limiting your potential for bigger and better things.

In short, don’t limit your thinking and questioning to one item or pain point. When you review the treasury department’s current systems, work habits, and technology, you should bring in colleagues who are stakeholders on the periphery of your department.  Get their ideas on how an upgrade to your systems might help them too.

For instance, do you also use Excel spreadsheets to manually process paper invoices and to track incoming and outgoing payments? If so, there will be inefficiencies in the relationships between and among your treasury, your bank or banks, and your company’s ERP system.  To resolve those inefficiencies and to enable you to work more closely with those other stakeholders’ departments, you’ll want to find a TMS that will seamlessly integrate your ERP system and your banks.

What markets does my company serve? What types of customers?  For that matter, what types of vendors do we deal with?  And do those customers and vendors have specific needs that a treasury management system will address?

Businesses that belong to different vertical markets behave in different ways.  The problems and issues that they encounter will vary from market segment to market segment. As you start to narrow down the list of potential vendors for your TMS, ask them about their experience in your sector. Be sure to talk with the TMS vendor’s customers that would have similar needs to your own.

Look inward and dissect the ways in which your company’s supply chain functions. How do you deal with your vendors? What types of transactions take place? Do you need to deal with automatic purchase orders and just-in-time deliveries of materials? Then determine whether the TMS that you’re evaluating can accommodate these needs.

Where is this company headed? Are we going to be entering any new market verticals? Is cross-border expansion in our future?

If your company is a multi-national firm, or if it aspires to be one, your treasury management system will need to have capabilities that extend beyond the basics in your home country. There will be many more types of risks that you’ll have to understand and manage – commodities risk, foreign-exchange rate risk, and interest-rate risk, to name a few. Visibility into such risks, and analytic capabilities to complement that visibility, should be available from your TMS.  So ask if your prospective vendor’s system can access foreign banks, SWIFT, etc.

Maybe you won’t need that extra reporting and analytic horsepower right away, but it’s got to be there in your TMS vendor if your growth plans will eventually require it.  Make sure that you’ll be able to add treasury management system modules from your vendor in the future.

How much automation do you really want? Does your company’s culture favor manual tasks? Do you prefer to keep some of the work “hands-on” because you feel it gives your people a more intimate knowledge of the company’s work processes and customers? 

Most of the TMS products available today can automate virtually everything: account management, cash visibility, payment transfers, financial instrument tracking and of course the reporting of all this.  But if you don’t want to go all-in on automation, or if you prefer to do it gradually, then your new TMS should allow you to specify which tasks to automate, and which ones you’d rather leave alone for now.

Is an installed TMS best for you, or would a SaaS (cloud-based) approach be preferable?

The answer to the above question will give you a clue to this one. More and more companies seem to be opting for SaaS these days because they have no upfront investment. With SaaS, they receive automatic upgrades to the latest versions of the software, and they don’t have to worry about maintenance.

But there are quite a few companies that prefer to do the heavy lifting in-house when it comes to information technology.  They have a staff that’s more than capable of installing and maintaining systems purchased from third-party vendors. By doing the work in-house, they gain institutional knowledge over the fine details of the system. They also can introduce their own customized, proprietary tweaks.

If your company has this approach and philosophy, an installed system might be your best bet.  Most importantly, however, you must always be ready to allocate IT talent and resources on short notice. If it’s going to take an intramural political battle to get the help you need when you need it, then that’s all the more reason you may want to move to the cloud.

Finally, where is your own career as a treasury professional headed? Where do you want to go?

We ask this question because a new, powerful, automated treasury management system will bring you to a new level of knowledge and sophistication within the company. The treasurer has always been responsible for finding the funds to operate every day and making other funding solutions available when necessary.

As we noted above, simply automating the routing tasks of treasury will give you several more hours per day to do higher-level work.  What are you going to do with that available time? How are you going to make use of all the information and analytics that a solid TMS will deliver? Information is power. Your role, if you so desire, can move from tactical to strategic.  You can have a seat at the table for such vital functions as risk management, investment management, and M&A planning.

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