Establishing a Need for a Treasury Management System

Building the business case for new treasury technology is a tall order, even if doing so can greatly improve cash and liquidity management, FX risk management, working capital management and more. In times of economic uncertainty and budget tightening, it’s even more challenging. But treasurers can have greater success if they know how to position a treasury solution as a necessity.

Lee-Ann Perkins, assistant treasurer for Specialized Bicycle Components, noted that throughout her career, she has been successful pitching a TMS implementation to a CFO at times when various external factors were in her favor. If the economy was good or the company was performing consistently well, then getting buy-in for treasury technology can be a much easier sell.

Fred Schacknies, treasurer for TechnipFMC, noted that treasurers generally “don’t do a great job” of talking TMS implementations to the CFO. Schacknies speaks from extensive experience, having pitched TMS implementations to four CFOs at four different companies. In his estimation, convincing the CFO generally boils down to showing them what finance and treasury currently cannot do without such a treasury system. “Either it’s helping a critical transformation or it’s not,” he said.

For example, treasury at TechnipFMC manages “a material foreign exchange portfolio,” which is challenging to do with legacy technology, Schacknies explained. While treasury also is well staffed in comparison to the size of the company, it could run more efficiently if certain tasks we automated. So, gaining buy-in from the CFO on a treasury system implementation wasn’t difficult because Schacknies was able to show that it supported key strategic and organizational imperatives.

According to Chris Mitchell, treasury director, technology and operations for Koch Industries, it can also help to provide the CFO with more of a long-term vision rather than just immediate process improvements. When the treasury leadership team presented the case for a TMS implementation to the CFO, they first discussed the benefits of automation. It didn’t move the needle. But when they presented their overall vision and strategy of a treasury department across the world working closer together, the CFO was able to see how a TMS could help. “We needed one single application that could be accessed across the entire globe by a core group of treasury individuals to support our businesses,” he said.

Treasury can also capitalize on timing. Petar Tomicic, treasury manager for Beam Suntory, explained that the 2014 acquisition of Beam Inc. by Suntory created a “perfect storm” for a TMS implementation. The treasury department knew that the legacy system it was using was outdated. After the acquisition, it became immediately clear that the system didn’t have the capacity to handle the growth that the company was expected to experience. So, for Beam Suntory’s treasury, building a business case with the CFO wasn’t difficult because it was absolutely necessary due to the changes the company was experiencing.

Finding Allies Outside of Treasury

It also helps to have allies outside of treasury to support your case. A TMS implementation affects more than just treasury, and it can help immensely if other departments recognize this fact.

Stephen Kincaid, vice president and assistant treasurer for Walker & Dunlop, explained that in 2016, his controller was the one who first suggested investing in a TMS. This occurred right before AFP’s annual conference, which provided the perfect opportunity to meet with various TMS providers.

After speaking with several TMS providers at the conference and ultimately selecting Kyriba, Kincaid and his controller needed approval from the CFO. Fortunately, the CFO agreed because they were able to carefully illustrate why Walker & Dunlop needed to adopt a treasury system. “We had over 1,000 bank accounts with multiple banks, and didn’t have an easy, efficient way to track our cash positioning in real-time,” he said. “Ultimately, my controller was easily able to convince the CFO of the many benefits that a TMS could provide to our organization.”

When Lee-Ann Perkins join Specialized in 2021, she faced a unique challenge. Treasury had already adopted Kyriba, but the project had stalled prior to completing the implementation across the company’s locations around the world. “So, my job was to restart a Kyriba implementation for the rest of the company—in 80 countries,” she said.

Finishing the implementation was critical for Perkins to achieve her overall goals of automating and maturing the treasury department. While Specialized is a large, global company, the treasury team is small. Maintaining continuity—which includes cash visibility and protecting the company’s financial assets—is much easier to do with a treasury solution. But completing the project would require more than just getting the treasury team on board, as well as producing hard numbers.

“The sell to the CFO was to get resources from the financial side and the human capital side to ensure we could keep the implementation going,” she said. “It wasn’t what I would call an easy sell. It required conversations, quantitative metrics and qualitative metrics, to ensure that there was buy-in from the end-users. Because at the end of the day, those people running the system need to also know that they can use it in their particular jobs as well.”

Making the Case for a TMS

There are a multitude of factors that can contribute to treasury either getting the approval for treasury software implementation or getting shot down. With a possible recession looming and many companies tightening their purse strings, 2023 may be an exceptionally challenging year for treasury departments to get buy-in for a TMS. Treasury must establish the need for a system—not only for itself but across other departments.

Often tasked with doing more with less, treasury has consistently risen to the challenge. But there comes a point where investments need to be made for treasury and the overall business to continue to perform at a high level. If treasury can make that case, then getting buy-in might not be a tall order after all.

The treasurer and CFO are today more closely linked to strategic financial objectives for the CEO, ensuring finance teams provide informed guidance on navigating risks and opportunities. This year, a revolutionary practice area and innovative technology is transforming the value of short and long-term cash flow forecasting with more certainty and analytics, empowering finance with a strategic liquidity planning toolset.

Modern technology solutions are driving value across cash flow forecasting and strategic planning through inclusion of more information from different sources, using artificial intelligence (AI), machine learning and flexible scenario analysis. These user interfaces, reporting and analytics provide finance with better identification of free cash flow targets, improve EBITDA, and deliver views and analysis of total working capital levels.

Creating Engagement and Clarity in Liquidity Decisions

New technology solutions for liquidity management planning create forecasts and analyses on actuals and planned cash flows to include liquidity instruments from debt to working capital programs. When the combination of cash, planned or committed financial flows (AP, AR, treasury) are used as an integrative planning tool with analytics, decision-making for the CFO is more accurate and based on today’s and tomorrow’s reality. Forecasted transactions originating from purchase requisitions, orders and finally invoices are a much better source of forecasted flows than spreadsheet estimates.

Liquidity planning tools and features created as part of an advanced solution gives finance the ability to see exact components of working capital and cash flow forecasts further out to deliver clarity on whether debt or other sources of liquidity will be too expensive. Identification of the mix of liquidity needed and the availability of planned sources or uses further helps the treasurer plan the intersection of borrowing levels, cash flows and confidence parameters for various scenarios and comparisons. The ability to quickly adjust parameters within a planned liquidity model with established, accurate cash management baselines, makes the job easier and faster for not only treasury and FP&A, but gives the CFO quick strike decisioning on the planned mix of cash and debt to fund operations or strategic decisions.

Achieving Optimal Levels of Liquidity

Global economic volatility continues to impact multinationals across a variety of indices and continued strategies by central banks to slow inflation with interest rate increases translates into significantly increased costs of borrowing. For finance organizations that provide liquidity as a net short-term borrower, it is extremely important treasurers can assess the mix of debt and the most advantageous debt instruments, or working capital programs, available. Treasury teams can directly impact greater overall financial performance by optimizing the cost of liquidity and keeping the right levels of available debt and free cash for investments. Modern liquidity planning solutions create better long-range views of available debt vehicles in cadence with cash and other programs to help prescribe the correct mix of long and short-term borrowing. Identifying where short-term debt has carrying costs over other sources of liquidity while also reducing the number of overall debt instruments (facilities or other lines) reduces costs that affect net earnings. Liquidity tools that incorporate the complete set of debt vehicles coupled with cash and forecasted flows create more ability to lessen reliance on borrowing, reducing and optimizing debt levels – all significant contributors to a stronger EBITDA.

Expanding C-Suite Confidence with Future Analytics

In a recent cash forecasting webinar, 90% of attendees stated that they “lose confidence in their forecasts within three months.” Regardless of a static or rolling forecast scenario, lack of confidence in your firm’s future cash and liquidity levels hinders the ability to fund longer-term, accurate strategic decisions without having more of a backup in the form of higher credit limits available to shore up potential liquidity shortfalls.

The new cash forecasting features and capabilities available in new liquidity planning tools are creating better capabilities to manage longer-term liquidity questions:

As the economy continues to spiral, uncertainty will bring down the values of organizations who are incapable of managing the rate at which volatility impacts EBITDA – a consequence of legacy thinking and systems. CFOs and treasurers who are taking a new tact in leveraging liquidity across the enterprise, are finding success in minimizing impacts to their income statement and have an unobstructed vision for how they can unlock near and long-term growth.