Treasury Management Software

In this blog we dive into the world of Treasury Management Software or TMS. TMS is a critical part of the CFO's Finance Stack. The focus of TMS is primarily on cash and liquidity management, risk management, connectivity to banks and payment processors and much more. The primary users of the TMS are of course the treasury organization who are responsible for managing and maintaining the company's liquidity and interface with its banking environment.

What is a Treasury Management Software?

Treasury management software (TMS) is a specialized application that helps organizations manage their financial operations with a focus on cash flow, assets, liabilities, investments, and banking relationships. A robust TMS will automate and centralize various treasury functions to provide real-time visibility into cash positions, enhance decision-making, and improve operational efficiency.

When do Organizations deploy Treasury Management Software?

In early stages of a company’s evolution, Treasury Management Software is pretty much non-existent. But things change quickly once the organization raises outside capital, starts generating revenue, establishes banking relationships and especially if the company starts doing business internationally. In some cases, the need for a TMS comes in early especially for high volume, high transaction companies that are in financial services verticals like Ecommerce, Payments, Cross Border Payments, Derivatives, FX Management etc.

What are the key elements of a Treasury Management System?

To be considered for use, a treasury management system needs to embody these following elements:

1.     Cash Management Capabilities: Tracking incoming and outgoing payments, managing bank accounts, optimizing daily cash flows, and ensuring liquidity.

2.     Cash Forecasting Features: Predicting future cash needs for short, medium, and long-term planning, helping prevent liquidity shortages or excess reserves.

3.     Risk Management Features: Identifying and mitigating financial risks such as foreign exchange risk, interest rate risk, and credit risk through tools like hedging strategies.

4.     Debt and Investment Management Capabilities: Optimizing investment portfolios, tracking payments and maturity dates for debt, and managing intercompany loans.

5.     Payments and Reconciliation: Automating payment processes, ensuring timely payments, and reconciling transactions with bank statements.

6.     Bank and ERP Integration: Integrating with multiple bank accounts and enterprise resource planning (ERP) systems for comprehensive financial data.

7.     Reporting and Compliance: Generating intuitive dashboards and reports, ensuring adherence to regulatory requirements (e.g., AML, KYC), and supporting audits.

8.     Liquidity Management: Tracking the ability of a business to convert assets into cash to meet financial obligations.

9.     In-house Banking: Centralizing treasury operations for multinational corporations.

What options are available for organizations that are considering deploying a Treasury Management System?

The Treasury Management Software ecosystem continues to grow. Presently it is dotted by a plethora of players that includes large/enterprise players, mid-market focused and small / startup focused companies. Broadly though, the landscape breaks into 2 parts:

1.     Established Incumbents that keep expanding their presence globally and also growing their offerings from a features and functionality standpoint. These include global giants like Oracle, SAP as well as others like FIS, TIS, Ion Treasury etc.

2.     Emerging players especially cloud native players and now AI native players who have found gaps in the market where they could come in and establish a presence. These include G Treasury, Modern Treasury, High Radius among others.

At the highest level, the TMS could be a module offered by the ERP vendor or a standalone application delivered by a specialized TMS vendor that offers robust integration capabilities into the ERP.

ERP vendors like Oracle and SAP offer very robust Treasury Management Systems in the form of modules that integrate natively with their ERP offerings. It is not uncommon to see companies opting to go tap their ERP vendors to explore and deploy a TMS. This offers companies the convenience of dealing with a single vendor for majority of their financial software needs. This is best suited for established large established enterprise companies with globally dispersed teams including regional treasury teams.

On the other hand, the organization, based on its size, need, complexity, future scaling and other factors could choose a stand-alone TMS that meets its needs better. There is a host of players that specialize exclusively in building and distributing cutting edge Treasury Software Solutions.

Click Here to take a look at the various players in the Treasury Management Space.

Key Considerations for CFO's and Treasurers while choosing the right Treasury Management Software:

Here are some questions the CFO's Office with deep inputs from the Treasury team should consider prior to choosing a TMS:

1. Organization Size, Scope & Complexity: This is a key consideration. There are different options available for companies to deploy depending on their size and complexity. For example, certain vendors have established products that serve large multinational companies. Other vendors who specialize in mid-market solutions and others who target emerging startups.

2. Specific Needs: Consider the features that will meet the immediate and future challenges of the treasury organization and the business. Some TM systems will have an edge in terms of their ability to offer deep and quick integration into the existing finance stack, others will have an established specialized reputation for offering best in class cash management and forecasting tools, while others might have an edge in their connectivity to banks and others who might offer very solid multi-entity, multi-Currency support.

3. Integration into Company's existing or planned Finance Stack: This was mentioned in point 2 above, but it cannot be understated how important it is to analyze thoroughly the integration prowess of the TMS often via powerful API's, with the company’s finance stack which is primarily with the ERP system, accounting software, banking partners and market data providers.

   
   

   The aim here is to minimize/eliminate manual data entry or intervention, offer highest level of data consistency and above all consistently present a single source of truth that leverages existing IT investments.

4. Future Proofing: Can the software grow with the business and accommodate future expansion in terms of size, scope and features and complexity.

5. Security & Compliance:  This is in some ways table stakes but every responsible high functioning CFO's office is advised to hone in on this aspect and ask if the solution meets the organizations security requirements and regulatory obligations.

   
   

   The importance of protecting sensitive financial data from unauthorized access, cyber threats, and internal fraud cannot be understated. This is critical for maintaining trust and operational integrity. Data security and compliance stays imperative for every company and especially for those operating in highly regulated environments like Financial Services, Fintech, Payments, Utilities etc.

   
   

   The TMS should offer the ability to implement robust security measures including data encryption, multi-factor authentication (MFA), granular role-based access control (RBAC), and fraud detection mechanisms.

   Why it's a must-have: 

6. User Experience & Training:  Consider if platform intuitive, and what kind of support and training are offered. The more intuitive the platform the less time required in terms of org adoption and change management.

7. Total Cost of Ownership: Consider not just the software cost but also implementation, maintenance, and potential customization expenses. In this vein, companies should also dive deep into the contract renewal mechanisms given the TMS will be a multi-year investment for the company.

8. Customer Support:  What is the vendors reputation in term of providing ad-hoc troubleshooting customer support and on-going customer support

   
   

Innovation in Treasury Management Software Space:

Innovation is taking different forms in the TMS space. Most of the innovation is being driven by leveraging modern technology and focusing on specific client need to make treasury management more accessible, efficient, and data-driven for a wider range of businesses.

The innovation is aimed to push the boundaries of what a TMS can do, moving beyond basic record-keeping to become strategic tools for financial optimization.

Here are some specific areas where innovation is more visible and will continue to expand in coming years.

1.     Cloud-Native & SaaS Focus: Nearly all new players are building their solutions on cloud-native architectures and offering them as Software-as-a-Service (SaaS). This provides scalability, accessibility, faster deployment, automatic updates, and reduced IT overhead for businesses.

2.     AI and Machine Learning for Forecasting and Automation - This is perhaps the most visible and significant feature that is undergoing rapid innovation by utilization of AI / ML

·       Improvements in cash flow forecasting accuracy: By analyzing historical data, market trends, and even external factors, AI can generate more precise forecasts.

·       Automate routine tasks: From reconciliation to payment processing, AI and RPA reduce manual effort and errors.

·       Enhance risk detection: AI can identify anomalies, potential fraud patterns, and emerging financial risks more effectively.

3.     Real-time Visibility and Data-Driven Insights: The demand for real-time data on cash positions across all bank accounts and entities is paramount. Innovation in TMS solutions prioritizes instant access to information and intuitive dashboards that provide actionable insights.

4.     Open Banking and API Connectivity: Innovative players in the space are embracing Open Banking principles and robust API integrations to connect seamlessly with multiple banks, ERP systems, accounting software, and other financial tools. This fosters a more interconnected and efficient financial ecosystem.

5.     Focus on User Experience (UX): Recognizing that treasury teams often deal with complex processes, emerging players and innovators have focused on building out user-friendly interfaces, intuitive workflows, and customizable dashboards to enhance adoption and efficiency.

6.     Specialization and Niche Solutions: Instead of being a "one-size-fits-all," a lot of innovation is focused on solving specific pain points (e.g., AR optimization, yield on idle cash, fraud prevention) or catering to particular market segments (e.g., startups, mid-market, specific industries like alternative investments).

7.     Embedded Finance: The concept of embedding banking and financial services directly into existing business workflows (like ERPs) is gaining traction. A particular call out here is Koxa's Treasury Gateway is a prime example, reducing the need for treasury teams to switch between multiple systems.

8.     Liquidity Optimization: With economic uncertainties, companies are more focused than ever on optimizing their liquidity. Emerging players offer sophisticated tools to manage cash concentration, pooling, sweeping, and short-term investments to maximize returns while maintaining sufficient liquidity.