The Importance of the Cloud for Treasury Management Systems

No organization should leap into major changes without thorough analysis and a clear demonstration that what’s being recommended is going to work.  And when we’re talking about the critically important and highly confidential business of treasury management, such skepticism is especially appropriate.

Financial data is highly sensitive, after all. If we keep all of our systems and records within our own four walls, nobody can see it or steal it, right? And if we have to use manual spreadsheets to keep track of everything, well, that’s just a price we have to pay.

Up until the last few years, that price wasn’t too high. But now, the widespread acceptance of cloud computing in other areas of the corporation – areas such as payroll, sales, human resources, and marketing – means that a treasury function that’s not taking advantage of all that the cloud has to offer will be lagging behind the rest of the company.

Being a laggard, a drag on the organization, is anathema to treasury professionals. They’re not clerks and checkout folks. They’re strategic partners to executive management. Nowadays, they can best perform in that role if they have the power of a cloud-based system at their disposal.  By this, we mean a Software-as-a-Service (SaaS) approach; merely web-enabling a legacy system and having an Application Service Provider (ASP) host it is not what we’re talking about here.

True, the treasury team receives, disburses, and reports on the funds that flow through the company every day of the year. A good Treasury Management System will enable them to automate those important but mundane tasks. Moving off the reliance on manual spreadsheets can also lead to better, and higher-quality financial reports. Automating the process can make for more speed and less human error.  That can happen with in-house automation, or with an ASP. But the benefits of going to a shared, cloud-based SaaS model go well beyond these worthy initial steps.

Let’s first consider cost.  SaaS systems have a lower up-front cost than installed ones.  There’s no initial capital outlay. The large capital expenses – for physical facility, infrastructure, and security – get spread over many users.

Implementing the installed system and then updating it regularly means that the company’s IT resources must be available. The treasury department can find itself in internal budgetary or political battles when its team would rather be concentrating on their work.  Also, with SaaS you don’t give a second thought to upgrades. You’re always running with the latest versions of the software because when upgrades become available, they’re done automatically.

Closely related to cost is scalability. As the company and/or the treasury function grow, it’s a simple matter to add more capacity with a SaaS solution. The monthly operating expense will rise, but it’s predictable, and it’s only for what’s needed – pay as you grow.

As we noted above, the “show me” tendency among treasury pros is a cultural thing. Treasurers are conservative by nature. They do like to have full control of their environments, and that’s why they’re latecomers to the cloud. Keeping the system in-house and relying on the company’s own IT staff can allow for more customization than they’d get in the cloud, but the tradeoffs in cost and time are probably no longer worth it.

While we’re on the topic of conservatism, let’s consider security. We cringe at the all-too-familiar stories of data breaches and thefts of information. However, most data breaches take place within private companies rather than in hosted, shared environments.

Multi-tenant data centers that serve SaaS clients have made security a top priority. They have to – or no one will take them seriously. They have to meet industry standards like SSAE, SOC and ISO. They have invested heavily in their physical premises, in their IT infrastructures, and in their backup and disaster-recovery capabilities.  In sum, they’re capable of doing security better than most individual companies.

Finally let’s consider the additional tools – an arsenal of improved weapons, really – that going to cloud will make available to the treasury organization. Nowadays, everything is global and everything is mobile. Cloud-based treasury systems let the organization reap the full benefits of ubiquity and mobility; they ensure that the treasury function keeps pace with the rest of the company and contributes on a strategic level.

Consider, for instance, the demands on the treasurer of any company with a significant presence in one or more foreign countries.  You may be dealing with customers who use different currencies; your foreign offices or subsidiaries have to deal with different government regulations from those in the home country. The interest-rate environments offshore might affect your liquidity differently in each of those foreign lands.  Your foreign banks may have their own unique ways of doing things.

It all adds up to a lot more risk that has to be managed. Effective risk management in treasury means, first, having the visibility into the entire company’s liquidity. When you can protect and optimize your cash, you’ll be able to move that cash in and out of various countries and among different banks as needed.  Only a cloud-based SaaS system in the treasury will allow for this sort of flexibility and agility. It enables the treasurer to play his or her role in ensuring that financial policies, operations, and controls are fully compatible and consistent with the company’s strategic vision and values.