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Press Release

Fintech Services for new PSDII

Treasury & Cash Management Europe 2018 - Press Release Header Image

How global players can take advantage of fintech services for new Payment Services Directive II (PSDII) agreements and automate their payment flows

 

Noel Hillmann: What are the unique challenges you see global companies face that make their challenges distinct from that of single country operators, and how does this effect their payment flows?

John Byrne: The Payment Services Directive II (PSDII) is a European Union (EU) directive, which means that all banks have to make account balances and transactional data available to their clients through the Application Programming Interface (API). They are obliged to facilitate the ability of corporates to make payments directly through the same API.

The challenges are not that great for the global companies as many of them are already doing this through other third party providers such as existing bank portals, Service Bureau, SWIFT, etc. Smaller corporates operating within their own country, i.e. single country operators, have tended not to use these facilities because of the expense of doing so. This directive spectacularly reduces the cost of making payments directly through the same API. The large corporates can reduce the costs they currently have to bear, and the single country operators or smaller corporates are very likely to start using this capability for cash management and automated electronic payments. These are functions that smaller corporates have historically carried out manually because the cost of doing it otherwise was too prohibitive.

The real challenge under this directive is for the banks themselves. Many have the capability already but are charging for it. Now, they must provide these services for free. Other banks, who don’t have this capability, have to offer it. So, they have two challenges, one to update their systems to provide the services and two, to do so free of charge. This directive makes it an obligation on the banks to facilitate third party players, such as Salmon Software, to collect balances and transactions and to deliver payments on behalf of our clients through this API.

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Knowledge is King

Knowledge is King - Press Release Header Image

John Byrne, CEO at Salmon Software, tells FX-MM editor Peter Garnham why Treasury has never been more important and how technology can improve decision making across organisations.

 

Byrne makes no apologies for the fact Salmon Software may be one of the smallest of the competitive Treasury Management System
(TMS) providers in the market. It is, he says, a benefit to the firm’s clients since they get a lot of personal attention.

“We don’t have upset customers; we are very protective of them,” says Byrne. “We are also very protective of our reputation and regard ourselves as having technical excellence both on the financial side and the technology side.”

He founded the company in 1986 when Salmon Treasurer, the firm’s TMS system, was “a tiny bit of software”. Now, he says, it is a huge toolkit with multiple instrument coverage.

“It has evolved through instrument coverage, capability, functionality and a whole variety of different technologies, from DOS to windows to the current version,” says Byrne.

Over the years, he says, he has had many competitors that have been swallowed up into the bigger providers, and they tend to be the firm’s competitors now.

“In theory we should not be competing with these guys with the resources they have compared to Salmon. However, the way we compete is through the quality of what we have. We have superior products, superior knowledge, superior implementation teams and superior speed of delivery,” says Byrne.

“That is crucial. For a company of our size, our customer profile is phenomenal.”

The Future of Treasury Management Systems

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FX-MM brings together leading industry experts to discuss the future of Treasury Management Systems (TMS) and examine how technology is enabling Treasurers to ditch the data gathering and take on a more strategic role within their organisations. Our panel examines how technology is also helping to democratise the use of TMS, with Software-as-aService offerings enabling corporates large and small to enjoy the benefits of the cloud and more user-friendly systems.

How Dechra Centralised Cash and Transformed Global Treasury Reporting with Salmon TMS

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With revenues doubling and rapid expansion leading to an increase from 16 to 36 global business units, Dechra Pharmaceuticals faced a major challenge in managing its cash and treasury operations across the group. In this case study, Dechra’s group treasurer Steve Card explains how they met the challenge.

 

The Challenge

 

In 2014, Dechra did not have any formalised treasury operations, no intercompany netting system, no formal intercompany loans reporting, and no cash pooling arrangements. Essentially, the group operated as 14 autonomous businesses from a cash perspective.

However, with an increasing need for cash within the group’s head office (to fund both acquisitions and an increasing group dividend), a growing number of bank accounts across the globe which required more disciplined control and reporting, a greater volume of intercompany trading that was resulting in increased bank charges and adverse FX charges, and a complex network of intercompany lending, it was necessary that the group implemented some form of central control.

The major obstacles to creating an effective intercompany system, without using a TMS solution, were:

  • The sheer volume of transactions that would need to be captured and
    reported (presumably by using some form of Excel system);
  • Intercompany activity in different systems, i.e. ZBAs from all the
    different banks and all other activity in the netting system;
  • The volume of multi-currency movements and positions, and the desire
    to report only in the functional currency of the business unit;
  • Calculating interest accurately on moving positions;
  • Handling the different taxation regimes in different jurisdictions;
  • Combining and collating these disparate activities.

This process was further complicated by the growth of the group, introducing both new acquisitions and new geographic jurisdictions into the ongoing process.

 

The Solution

 

Having established a central group treasury, the group initially reaped the benefits of the ‘low-hanging fruit’ by implementing a group-wide netting system and a notional cash pool in Europe, which covered, at that time, the majority of the group’s cash operations.

The next objectives were to implement a cash pool in the USA, introduce zero balancing in Europe and to formalise the intercompany loan positions, effectively by expanding group treasury into an in-house bank.

This required the implementation of a TMS. The group went through a formal RFP selection process in 2016/17 that resulted in the group choosing Salmon Treasurer.

The group had a number of requirements for the TMS, but the two primary objectives were:

  • Allow better transparency into Dechra’s consolidated cash positions and FX exposure – and in real time;
  • Ability to hold intercompany positions and capture zero balancing and Netting movements, thus allowing the implementation of an in-house bank.

The first of these objectives, prior to the introduction of Zero Balancing, was achieved by the implementation of MT-940 reporting of bank account balances and transactions – though we did not realise the protracted time it would take the banks to deliver the necessary files in the format required.

The second objective was not so easily achieved, requiring a close relationship with Salmon Software to deliver a solution that covers not only the daily balances and transactions of 36 business units, but is also able to account for both the daily interest and any withholding taxes arising on those balances and transactions.

 

The Benefits/Results

 

Dechra and Salmon worked together over a period of some nine months to deliver a comprehensive Intercompany module that allows for:

  • Merging the data, from both Bank ZBA activity and intercompany netting activity, into one intercompany management system;
  • Handling the different currencies across intercompany positions, which manages FX transactions within each business unit and reports in functional currencies;
  • Accurate interest and tax applied to the reported intercompany positions;
  • Real time maintenance of the transactions and balances;
  • Accurate reporting of the individual and summary (treasury) positions.

and allows Dechra to report:

  • Accurate and up to the minute intercompany positions;
  • Accurate and up to the minute group cash positions;
  • Group FX exposures;
  • Tax liabilities, both to the business unit and to global tax authorities.

The Intercompany system on Salmon Treasurer allows all business units to receive balance, transaction and interest reporting, on a daily basis if necessary, in both paper (pdf) format and also in file formats that can be loaded directly in their business unit ERP system

Most importantly, all these benefits are being achieved with a minimum of manual intervention on behalf of the (two) group treasury staff. This allows the group treasury team to concentrate on the management, control and reporting of the group’s cash, FX and intercompany positions rather than being focussed on the collation and preparation of the data.

Furthermore, the Salmon system will allow for the inclusion of any future growth within the group, organically or by acquisition, and to respond to the inevitable changes in reporting requirements and group structures, as the business develops.

The implementation of Salmon Treasurer, particularly the Intercompany module, is a significant and valuable development of the group’s treasury operations, which will enable Dechra to continue to grow globally whilst providing accurate, timely and relevant cash and interest reporting.

 

About Steve Card, Group Treasurer at Dechra Pharmaceuticals

 

After graduating from Loughborough University, Steve spent 10 years in the City with Midland Bank and TSB Bank, before moving into Corporate Treasury with Littlewoods Group in Liverpool. Group Treasurer roles followed with Scapa plc, Signet plc and Ideal Stelrad, together with treasury consultancy positions for Nycomed Amersham plc, Northumbria University and Findus Group, whilst running his own company. Steve has now been in position with Dechra Pharmaceuticals PLC for four years as Group Treasurer, building a new Treasury department from scratch. Married with four children, a staunch Sheffield Wednesday supporter and an eternal optimist.

 

Intercompany Position Keeping – A Nightmare or a Dream?

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THE NIGHTMARE – INTERCOMPANY POSITION KEEPING IS A SIMPLE ACTIVITY. ONE ENTITY LENDS MONEY TO ANOTHER ENTITY AND CHARGES INTEREST ON IT. SIMPLE, RIGHT? …WRONG.

 

If your Treasury department is managing unstructured intercompany debt then you will be familiar with much of the following problems when managing the positions:

  1. If Treasury lends money to an entity, let’s call it Company A, you need to record that loan transaction from the point of view of Treasury.
  2. You need to record that transaction as a borrowing from Company A’s point of view also. These are known as mirror transactions.
  3. On other occasions, Company A pays back some of the loan, so you need to record this as a repayment from Treasury’s and A’s points of view. Another set of mirror transactions.
  4. Many of these transactions occur throughout every accounting period. So at the end of the accounting period you have to reconcile all these mirror transactions to ensure that all have been recorded accurately and correctly. As part of that, you have to handle disputes that arise.
  5. After you have reconciled the positions, you then have to calculate interest and apply it …to both sides and record those interest movements…twice…., as mirror transactions and apply them.
  6. Again, not too bad and manageable if you have 10 intercompany positions. But what if you have 50, or 100 or even 500 positions? You are doubling up on every transaction and every position and increasing the reconciliation time and managing more disputes. The time involved in this activity is huge.

But that’s not the end of the nightmare. Sometimes after interest is calculated, it may be paid or capitalised. Or worse still, it may be part paid and part capitalised.

And it gets worse. while it may be paid, part paid, capitalised or part capitalised, this may or may not happen on the day or date to which interest is calculated. Meanwhile, while the position is being ascertained and the interest is being calculated, more loan activity is happening, loan funds are being received and paid, thereby compounding the difficulty.

Some Treasury departments counter this problem by putting a freeze on loan activity until the position and the interest is calculated, reconciled and applied. Sounds like a reasonable solution to that particular problem. Not necessarily.

Company A, in our example, may need working capital funding during the freeze period and you could be starving them of necessary working capital.

Is that the end of the problem? Not a bit of it. You have to throw into the mix, the following:

Some loan movements may not be cash movements and don’t flow through your bank accounts. How do you deal with those non cash intercompany movements?

Company A may have close trading relations with Company B and Company C and Company D and others, compounded by the fact that many companies in the group trade with each other and transactions between them may be settled through their respective Intercompany Positions with Treasury as non cash transactions.

And just to make that scenario a little more complicated, these transactions between companies are quite often in different currencies and not necessarily in the currency of their Intercompany Position with Treasury.

To counter this, Treasury may buy or sell foreign currency from Company A, settle one side in cash and the other side through its intercompany position.

Company A may have a different interest rate applied to deficit positions than it has applied to surplus positions. That’s right, Treasury may become the borrower if Company A pays back more than it borrowed. Positions reversed.

Company A may be charged different interest rates on positions to Company B and other Companies in the group.

Once you have taken care of those additional complications, you are on your way……no, unfortunately not. You may have to take care of ZBAs. If you haven’t automated the collection of these, your first problem is recording them, again in duplicate as described above. Let’s assume you have automated the collection of these transactions. One of the problems you will have is that usually one account per currency collects all of the transactions for all entities and these all have to be isolated and allocated to their correct intercompany accounts. Then repeat all of the above.

Are you there yet with completing your month end process for intercompanies? Almost, but not quite. You have to produce the general ledger postings for Treasury and possibly for all other entities also. Company A may not have the same General Ledger system as Company B or Company C or Treasury. So multiple variations of the GL postings have to be generated, and reconciled.

When all that is completed, then the nightmare is nearly over for the month once you issue all statements to the subsidiaries. If you are lucky, nobody will mention that they forgot a transaction during the period, or worse still they missed a transaction that occurred during a prior period. Then what? You may have to adjust prior periods balances and interest………in duplicate.

Then it starts all over again for the next month and the nightmare begins once more.

If you have a TMS to manage all of the above, at least you have a solution to the nightmare problem. If you are using EXCEL spreadsheets, then the nightmare never ends.

 

THE DREAM

The dream is to have all of the above issues taken care of. The way to do that is:

  1. Eliminate mirror transactions. This will reduce your transactions’ recording by half.
  2. If you eliminate the mirrors, then you eliminate the reconciliation process.
  3. Automate your ZBA collections.
  4. Allocate the ZBAs immediately to their respective intercompany accounts as soon as they are recorded, i.e. real time.
  5. Update your intercompany positions real time.
  6. Calculate your interest real time.
  7. Automate your journal postings real time or on demand

 

How do you do all of that?

By utilising multi-impact data.

 

How do you do that?

Give Salmon Software a call and we’ll show you how. We won’t give away all our secrets but we will wake you up from the
nightmare.

 

We can reduce your intercompany month end process from days or even weeks …to minutes !!

 

About John Byrne, CEO at Salmon Software

 

John Byrne is founder and CEO of independent TMS global provider, Salmon Software. A Commerce graduate of University College Dublin, he set up Salmon Software in 1985. Over three decades he has been a strong advocate of independence, specialisation and innovation in TMS.

During this time, he has led the development of Salmon Software and the evolution of it’s its flagship system, Salmon Treasurer TMS to continuously incorporate new technology and new ideas to meet the demands of the increasingly complex nature of global financial markets.

A Practical User Guide to Implementing a Successful TMS

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FIVE KEY QUESTIONS TO ANSWER AT THE OUTSET

 

Treasury Management Systems used to be the preserve of big banks and major corporates. Technology advances and lower prices have today made TMS accessible to companies of all sizes. Darius Zemrieta, Treasury Analyst at communications infrastructure and media services company Arqiva, gives a practical guide to those about to embark on their TMS journey on how to avoid the pitfalls in selecting and implementing a system.

These days there is no excuse for any organisation trying to implement critical treasury management functions through outdated and inaccurate spreadsheets. Indeed, those who attempt to do so risk paying a heavy price due to ever increasing pressures on efficiency, accuracy and more importantly, compliance and security concerns highlighted by external auditors.

Despite these pressures and lower costs of implementation, a recent survey by the Association of Financial Professionals in association with Bloomberg found that nearly half (49%) of organisations still do not use a TMS.

Another recent report from Deloitte found increased pressure on treasurers to play a strategic role in the overall management of the business. More than 70% of respondents said their responsibilities included:

Liquidity risk management; efficient capital markets access; steward for risk management company; strategic business advisor; value-add partner to the CFO in areas such as mergers and acquisitions (M&A); leading, governing and driving working capital improvement initiatives; enhanced governance and control over domestic and overseas operations; creation of a scalable treasury organisation to support company growth.

It is most unlikely that this level of activity can be achieved without the aid of an effective TMS. So once the decision to invest is taken, how do you select and implement a TMS solution successfully?  Organisations need to ask themselves five key questions before they even start:

 

What are your business needs now and in five years’ time?

 

A key question is whether the TMS you select is scalable and flexible enough to meet your business needs in the future. There is little point in selecting a system which will not have a capacity to grow with you.

At Arqiva, for example, we didn’t feel an off the shelf was fit for our needs.  We looked at nine international providers but eventually selected Salmon Software’s TMS, because it is designed on a modular basis. That means we can add to it as business needs change but still ensure seamless future compatibility with legacy systems.

 

Have you secured the best value for money?

 

While you need a scalable solution, you should avoid paying for functionality you don’t need today. The 80/20 rule, whereby you only use 20% of the available functionality, applies as much to TMS as other areas of technology. But you should not be paying for the other 80%.

The advantage of going for a modular solution such as Salmon is that you only pay for what you need at the time. This can dramatically reduce the cost of TMS, which is likely to please your CFO.

 

Do you require an on premise or cloud solution?

 

Ideally, you should select a provider which has a track record in supplying both. At Arqiva, we went with an on premise solution. There are positives in both. It really depends on the individual company and your IT strategy.

The good news is that a cloud solution means that even the smallest treasury operation today can afford to automate.

 

Do you have the internal resources to ensure successful implementation?

 

The truth is that you cannot fully outsource the implementation of a TMS. It will need the involvement of those within the organisation who work on a day to day basis at the treasury coalface.

The problem is that these are the people who are already up to their eyes in daily treasury management functions and who may not have the time to work as part of the implementation team as well. It is vital not to underestimate the internal resources required.

It is estimated that an implementation will require a 50/50 split between the vendor and internal client team. As a result, you must get management buy in to provide additional resources so that these key internal people can be released to work on the installation.

This is critical to a successful installation and saves time and money in the long run for a number of reasons, including:

  1. It ensures that the system meets the requirements of the actual users.
  2. As they will have been involved closely in the implementation it saves time and money on training.

 

Is your reporting flexible enough to meet future demands?

 

Different audiences within the organisation require different information and reports from treasury operations. What’s more, these can change over time. At the tender and installation stage you must ensure that the vendor’s reporting systems are flexible enough to cope with these changing demands.

Salmon Software, for example, uses Crystal Reports as the report writing toolkit. This provides us with the flexibility to deliver real time reports geared to different internal and external stakeholders.

In conclusion, asking the right questions early enough, combined with proper planning and project management, will smooth the successful implementation of your TMS. In this regard, it’s important to talk to the vendors’ delivery team at an early stage as well as sales people. It’s also vital consult with other users to check out their installation and support experience.

 

About Darius Zemrieta, Treasury Analyst at Arqiva

 

Darius Zemrieta is Treasury Analyst at Arqiva, the UK communications infrastructure and media services provider. He began his career over four years ago at UK’s leading independent contract catering services provider as an Assistant Treasurer, managing the Group’s liquidity, Cash-in-Transit operations of over 1,000 business units and satisfying business requirement of various EPOS and other payment card solutions.

In 2014 Darius joined Arqiva as Treasury Analyst embracing a new set of responsibilities of operational Treasury. In Arqiva Darius is responsible for administration of large volume and complex financial derivatives and over £3bn of various debt instruments. This entails ensuring business liquidity, meeting business financial obligations and providing financial reporting.

How To Manage Cash Properly

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Cash Management is a term used in everyday parlance by Corporate Treasurers, CFOs and other senior financial people in most medium to larger organisations. Generally speaking, they all use the term in the same context and many accompany it with the term Cash Forecasting.

So, Cash Management and Cash Forecasting are activities that are now very much top of the list of requirements when selecting and implementing a Treasury Management System. So what’s involved in Cash Management or to put it another way, “Managing Cash”?

Managing Cash is a daily activity in many organisations. It boils down to collecting the data, reviewing and analysing it and then distributing it to where it is most needed.

If you don’t carry out the first two elements, i.e. collecting the data and reviewing and analysing it, then anything you do in relation to distributing it, will be laced with risk. So, a healthy regard for collecting and analysing is the key to “managing” your cash.

An overall description means knowing how much cash a company has at its disposal and what to do with it. However, an extended interpretation and one that we, in Salmon Software, are expected to provide includes knowing:

  1. How much cash is available to the company?
  2. What currencies is it in?
  3. What jurisdiction is it in?
  4. What entities within the overall group does it belong to?
  5. What counterparties are holding it?
  6. What form is it in?
  7. How much at risk is it?
  8. Where and how to distribute it.

If you want answers to these questions, then you must put in place an automated system to gather this cash information, usually on a daily basis, report on it and then take action to move it, invest it, use it to pay back debt or meet some other corporate need that is driven by cash.

It is fair to say that most corporates when referring to managing the cash, they mean the cash at bank and the near cash instruments such as money market deposits or holdings in money market funds. The latter two are usually easier to track because they are managed and monitored in a Treasury Management System (TMS), if you have one. The more difficult task revolves around the cash at bank, which is what we are focussing on here.

In a large corporate, especially an international corporate, there may be 100s of bank accounts around the globe held in a variety of banks, in many different currencies and owned by all of the different entities within a group. If you are going to manage this in any meaningful way, as a corporate treasurer, you need to have, as a minimum, the balance in each of these accounts delivered to you every day. How do you do that?

There are a variety of ways including:

Getting each of your banks to send you a file of account balances each day. This is manageable if the number of accounts is low, say 50 or less and the number of banks is low also, probably three or less. If the volume of accounts is low, then you can manage your cash manually, as a lot of companies do, using manual collection and EXCEL.

If that is not the case, i.e. you have a lot of accounts and a lot of banks to deal with, then you need a more sophisticated solution.

Stepping up a level, you need to select a single collection agent for all banks and all accounts. There are a number of banks who will act as your agent and do the collecting for you. This works by each bank sending your collecting bank, a file of their account balances each day and then your collecting bank sending you these files each day containing the balances for all of your accounts across your network of banks.

There are various banks who offer this service. This would be the case if you have 100+ accounts. However, this is largely a perfunctory service and requires you to do your own processing when you have received the file because while your bank provider can offer you the balance data, they cannot offer you much in the way of parsing or analysis of the data.

SWIFT themselves, also offer Corporate Services and if you have your own BIC then you can contract with SWIFT to be the collection agent.

However, a problem that often manifests itself with this solution is that the feeder banks to your collection agent, don’t have common standards when it comes to sending the information. The most common forms of account balance data are SWIFT MT940s and BAI files. SWIFT MT940s and BAI file formats are considered “standard formats” but in the real world of cash collections, you will find different banks populating different fields with the same data or the same fields with different data. So while you are getting the files, working with them and processing them can be problematic because of the variations against standard and your collection agent, more often than not, will not parse the different files collected and pass on “pure” data to you. Rather, they will pass it on as they find it and it is your problem to “purify” it in order to make it useful for your cash management process.

Stepping up then to the next level, if you want more sophistication around the collection process to resolve the data purification problem, and offer other information and analysis about the data, then you may need a bureau service. Bureau services can parse the data better and offer other information and analysis about the data itself.

Once you have decided on your collection agent, i.e. your data provider, then you have gone some way towards Managing your Cash. However, that’s really only jumping the first hurdle which is collections.

There are other considerations and problems to cash management that won’t be resolved by your provider. For these, you will need a TMS which integrates with your provider to offer you a complete cash management service. Examples of where your TMS offers you more sophisticated analysis are:

  1. Are there large swings in the balances on any accounts from the previous day?
  2. Are there any excessively high balances that are unexpected?
  3. Are there worryingly low balances that are unexpected?
  4. Have any new bank accounts been opened by entities since the last file delivery? If so, can they be isolated from the 100s of accounts that are in the file and which entity opened them?
  5. Conversely, have any bank accounts been closed and don’t appear in the file, and who closed them?
  6. Many banks will not include a balance record in the file if the balance has not changed from the previous day. So if there is no record for some accounts, your data is incomplete. Your TMS should be able to, and needs to, cater for this situation.
  7. If it is a bank holiday, many banks will not deliver a file at all. Your TMS should also be able to deal with this situation.
  8. Where problems arise, your TMS should facilitate issuing automated emails to the relevant personnel with detailed diagnostics of the issues encountered.
  9. If some banks in your network cannot deliver a file to your provider, can you augment those that are coming through in the file with manual entries or EXCEL upload to ensure that you have the complete cash picture?
  10. To establish your overall cash position, you need first to establish the cash position in each currency and then convert each balance into your reporting currency for an overall position. What FX rates are used for this?
  11. Do you want the cash position for each entity in the group expressed in their reporting currency which may be different to the Group reporting currency?
  12. Do you want to integrate this process with your Cash Pooling process?
  13. If so, are you using physical pooling such as ZBAs or notional pooling?
  14. Are there intercompany positions created by operating ZBAs? If so these should be updated simultaneously as part of the analysis process.
  15. If you are operating notional pooling, can you reallocate the interest across the contributing accounts?
  16. Do you want to send automated reports on your positions to different personnel? This should include different reports to different people.
  17. The distribution decisions you make need to be converted into trades and these trades and / or funds transfers, and these need to be process driven under appropriate approval and authorisation

The above is not an exhaustive list of considerations. But if you take note of all of these, you will have come a long way towards automating the Cash Management process and making informed decisions about how best to use your cash.

There is more to Cash Management including two other very significant elements:

  1. Having established your cash position, how to trade your way from that cash position to your desired end of day cash position and integrate that with your trading platform.
  2. Cash Forecasting. This includes integrating your cash position with your expected future cash flows and how they impact on your desired position tomorrow, next week, next month and into future periods.

 

About Tassos Dimopoulos, Director at Salmon Software

 

Tassos Dimopoulos runs Client Services for Salmon Software in the UK. He is a graduate of the Harvard University.

Secrets of Selecting the Right TMS

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With Most articles on the topic of TMS selection are written by consultants offering their take on the Do’s and Don’ts of process. Then you have articles offering the experience of Corporate Treasurers. These insights can be very useful if you are a Corporate Treasurer looking to select a successful TMS.

However, as a vendor, we see all ends of the spectrum when it comes to Requests for Information (RFIs) or Requests for Proposals (RFPs). We see RFIs and RFPs and other variations that are concise, relevant and very utilitarian and we see documents that are rambling, ambiguous, contradictory and ineffective in terms of assessing the vendor and the system.

The most common approach in an RFP is to break the process down into segments and to score these. Typical criteria of TMS selection include:

  • Has appropriate instrument coverage
  • Has relevant functionality
  • Offers seamless integration with other systems
  • Provides proper security and controls
  • Encompasses dynamic, variable and rich reporting capabilities
  • Is cost effective
  • Is future proofed

The above criteria are used to evaluate the system. The consensus is that this is the best way to make a selection. But is it? Does this lead to the best solution? If you adopt this methodology will you have a TMS that meets your operational needs? We believe this methodology has its merits, but it also has its flaws and these are often overlooked. The merits are relatively easy to identify and therefore this selection method has general consensus. However, the flaws are not so obvious and if you overlook them then you do so at the risk of making a bad decision. So, what are the negative aspects of this method?

  • The biggest and most fundamental flaw is that no matter what, if the system you select does not have the capability to meet your requirements, then you can score any submission any way you want, but you will not have a successful outcome to your implementation.
  • RFPs should ideally only contain questions that are relevant to the operation. RFPs regularly have a series of questions relating to financial instruments that clients don’t trade and functionality that clients don’t need. There are two problems with this one, it requires unnecessary evaluation and two, the scoring associated with it invalidates the results.
  • The scoring mechanism itself. Have you ever questioned the scoring mechanism and why certain scores are allocated to certain criteria? After a TMS selection process, both successful and unsuccessful, we are regularly advised that …”you scored well in this section, but less so in another section…” We are never told what the scores are or why we scored as we did. More fundamentally, we never know what the scoring mechanism was. So, scores are allocated, accumulated and totted up and the highest get shortlisted. But beware – this is no guarantee that the shortlist includes the best solutions for your organisation.
  • The primary users of the system, i.e. those In the Treasury department should have the biggest influence on selection. Why? Because it is primarily their needs that should be met. However, in many cases, we see disproportionate influence into the decision, from IT, purchasing, legal and other departments based on the assumption that all the systems are pretty much the same and the differentiating factors are the non-treasury ones.
  • Vendors are regularly asked to demonstrate the merits of their systems with data provided by the client that is not real data. Often there are mistakes, inconsistencies, omissions and other problems associated with dummy data. A vendor cannot show the qualities of the system when the numbers simply don’t add up and the corollary to that is that the client, therefore, cannot evaluate it properly. If you want real answers, then pose real questions. Use real data to establish the merits of a system.
  • Many workshops are focused on data input. Data input and its sources are important. Data can be manually inputted or it can be imported through integration with other systems such as trading platforms, ERP systems, rates vendors, banking systems etc. But don’t forget the output. Getting data out of a system is a much more difficult task. The reason for this is that it will be required in an almost infinite variety of layouts, formats, files etc. and rarely are two clients going to want to look at data in the same way. Consider the challenge of putting FX trades, debt, derivatives, exposures, limits etc. all on a single output dashboard. Great flexibility in the reporting capability is required to achieve this and is often taken for granted in presentations and workshops.
  • Another aspect of the output, especially reports, is the ability to automate them. Automation isn’t always triggered by time. Automation can be triggered by an event or a sequence of events each dependent on the previous one. Compound that with the distribution of the output to different personnel based on their role and data requirements. If you want the CFO to have the information he or she wants on a daily basis, in the format required, then make sure the ability to achieve this is evaluated.

There are many aspects to the selection of a successful TMS. The above considerations are by no means exhaustive, but hopefully, you found something in them that will help you decide the right system for your requirements. The final arbiter of success is: “Does the system operate as I expected it to?” and “Does it provide me with the information I need in the manner I need it?” If the answer to those questions is yes, then you have made a wise decision.

 

About John Byrne, CEO at Salmon Software

 

John Byrne is founder and CEO of independent TMS global provider, Salmon Software. A Commerce graduate of University College Dublin, he set up Salmon Software in 1985. Over three decades he has been a strong advocate of independence, specialisation and innovation in TMS. During this time, he has led the development of Salmon Software and the evolution of its flagship system, Salmon Treasurer TMS to continuously incorporate new technology and new ideas to meet the demands of the increasingly complex nature of global financial markets.

Secrets of Implementing a Successful Treasury Management System

Successful TMS Implementation - Press Release Header Image

SUCCESSFUL TMS IMPLEMENTATION

 

As a corporate treasurer, do you have a TMS?

When did you implement it?

Was it a success?

Were you happy with the outcome?

Are you still happy with your choice?

Will it serve you into the future?

Did it cost you more than you expected and above the original quotation?

After implementation, are you still using spreadsheets for some aspects of your treasury management function?

 

So many questions and the above are but a few that need to be asked after implementing a TMS. Any provider of a TMS must be judged by these questions and only consider implementation a success when there is a positive response from clients to the above.

In the course of implementing TMS’s in multinational billion dollar corporations over three decades, Salmon Software has developed a number of principles, sometimes radical, to ensure successful deployment.

These include three key elements:

  1. The system must have the instrument coverage and functionality to meet your requirements.
  2. The personnel implementing it must be capable of doing so. That means that on the provider’s side, the client services
    team must understand treasury in general and your requirements in particular.
  3. On your side, the implementation team must know what you want from the TMS.

The above sounds like obvious common sense statements and they are. But common sense is often not so common and is frequently sacrificed at the altar of accepted practice, procedure and conflicting interests.

More often than not you have internal contributors, other department personnel, advisors, consultants and others all offering their own particular take on the process. Some good, some not so good (and some just to justify a fee). While you have to engage all stakeholders, they must be managed properly. This means engaging them through one person internally and limiting their influence in proportion to their interest in the project. Without that, it will only lead to meeting after meeting, review documents, Gantt charts and timelines, process flows, milestones etc. Lots of talk, heat and documents generated, but not much in the way of implementation. Everybody is “talking “and “documenting” and nobody is “doing”.

How do you avoid this common dilemma? Actually, it’s not too difficult and the key is to cut out the middlemen. What I mean by that is that you work to the principle of “knowledge is power”. Knowledge falls into two fundamental areas:

  1. Knowledge of the system and
  2. Knowledge of the data

The system provider has the knowledge about the system. The people who are responsible for the data and need the information required from inputting and processing that data, have knowledge of it. The key to a successful implementation is for those two groups, best led by one person, to talk extensively to each other and to bring convergence to those two disciplines.

In all implementations that we engage in, the tendency for everybody is to start at the beginning and work their way to the end and all documentation prepared as part of the implementation, reflects this. We are often presented with already prepared implementation plans, sequencing, expected timelines and deadlines – all the things you want or seem to want, but often without due regard to who is responsible for what and how the dependencies influence the outcome.

For example, a large part of a TMS implementation involves importing data from 3rd party systems such as, banking systems, ERPs, rates providers, trading platforms etc. So control and responsibility for delivery of these items lies outside your Treasury team. Putting timelines on these is useful for the purposes of focusing the minds of those responsible, but more often than not, in our experience, they take much longer than expected. So a bit like bus timetables, they are quite useful for telling you how late the bus is running, but not much good for telling you when it will arrive. However, if you build dependencies around these for other parts of the implementation, then they have an additional knock on effect of delaying those also.

While this article is not a panacea for making these things happen quicker, if you adopt a more radical approach to implementing your TMS, then you can mitigate the impact. Our more radical approach is not to start at the beginning, rather, start at the end.

We ask new clients the following question: “If you had a TMS installed right now, what information would it provide to make your life easier?” Most Treasurers know the answer to this question and are not only very willing to answer, they display extraordinary clarity. They know the reports they need. They know the controls they want in place. They know the data and the information they want to pass up the line and across to other departments. They will wax lyrical on the manual processes they want to eliminate. And so on.

As a provider, armed with that information, you can analyse that into a few key elements:

  1. What data is required to be recorded to achieve that?
  2. How is that data going to get into the system – manually or automated input?
  3. Where is that data coming from and who controls it?
  4. The answers to (iii) above will tell you the interfaces required.
  5. Where do you start recording data from? Opening positions on open trades. Do you need to include historical data for verification purposes and for record keeping?
  6. What validation is required to ensure data purity?
  7. How does it need to be recorded to produce the output the way the users want it? That includes factors like:

Ensuring that static data elements are using correct naming conventions.

Qualified naming conventions and proper authorisation ensures that static data duplication is avoided.

What data characteristics are required? Most data have natural characteristics such as dates, currency, counterparties, business entity, bank account etc. But if you want more sophisticated reporting you may need additional data characteristics included such as:

  • Business Unit
  • Geographical Region
  • Product Code
  • Cost Centre
  • Country
  • Fund
  • Portfolio
  • GL Code

Specific industry codes such as MSN Number (if you are in the airline business) etc.

The list is long if you examine all business sectors, but if you want data analysed properly and information presented to you in a meaningful way, then you really need to consider these aspects.

This list is not exhaustive. But when you see, know and analyse it, you can view more clearly what the final picture is supposed to be. It’s akin to having all the pieces of a jigsaw on the table and the picture on the box telling you what it should look like when completed.

By starting at the end, you will establish these requirements and then when you are looking at the 3rd party data deliverables, you will be able to determine the following:

  1. Are they able to give you the data with the appropriate codes and
  2. If not, then how do you enrich the data at input time with the appropriate codes?

If you don’t do this, then you will wind up with data provided to you that’s incomplete for your purposes and no means to “complete” it in order to meet your output requirements. If the data is not in the system enriched with the appropriate characteristics, then no amount of processing will deliver the output the way you want it.

Remember, Treasury is somewhat unique in data terms because typically, not always, but typically, the data is high in value and low in volume and lends itself particularly well to this type of analysis.

At the end of the day, a more radical approach to TMS implementation will avoid pitfalls down the line.

 

About Peter Shea, Director at Salmon Software

Peter Shea is Client Services Director of Salmon Software, the independent Treasury Management Systems (TMS) provider. For over two decades, Peter and his team have implemented the company’s flagship Salmon Treasurer TMS for multinational corporations across many business sectors including financial services, construction, agribusiness, pharma, electronics, shipping and port management, aerospace and others.

 

Automated Treasury System

Automated Treasury System - Press Release Header Image

TO HELP MANAGE DEBT AND OTHER TREASURY FACILITIES SERCO IMPLEMENTED AUTOMATED TREASURY MANAGEMENT SYSTEM

 

Serco Group plc (FTSE – SRP), the international service and outsourcing company, which had revenues of £3.5 billion in 2015, has installed a Treasury Management System (TMS) from Salmon Software.. Salmon Treasurer TMS was implemented in order to provide increased efficiency, control and transparency in managing Serco’s extensive treasury operations.

This includes managing its portfolio of US private debt and revolving credit facilities, a large volume of bank guarantees, as well as significant levels of intercompany lending across over 70 subsidiaries and joint venture companies. Serco also utilises a number of other Salmon Treasurer modules including FX, cash management, account reconciliation, intercompany position keeping, automated electronic payments and direct interfaces to SAP and FXAll.

“We had been using spreadsheets combined with a treasury module linked to our ERP system. We wanted to move on from manual processes and data rekeying across multiple systems in order to boost efficiency, accuracy, reporting, control and to provide real time transparency,” commented Doug Wagstaff, Assistant Treasurer, Serco Group plc.

Serco went out to international tender and conducted a detailed evaluation of a shortlist of three TMS providers before selecting Salmon Software. “We chose Salmon because of its track record, robustness, the level of comfort we had around efficiency and control as well as the value for money that it offered us. Salmon also scored highly on its flexibility,” added Doug Wagstaff.

“If we need to add new deal types or transactions, or develop new reporting, Salmon Treasurer has the flexibility to manage this and to deliver the required results in a very timely manner.”

He also referred to Salmon’s level of support. “I’ve implemented and used a number of rival treasury management systems in other companies. Salmon stands out in terms of its responsiveness, flexibility and immediate access to very knowledgeable experts.”

John Byrne, CEO, Salmon Software, which is headquartered in Dublin, Ireland, added, “As one of the few remaining independent specialist TMS providers, we are winning increased business globally. Salmon Treasurer is rich in functionality, highly robust, very reliable. It is easy to implement and is very competitively priced. Its flexibility is particularly valued by customers such as Serco and we work hard to maximise service after the initial sale. Our implementation offers 100% fit to need.”

The software is part of the Salmon Treasurer TMS aimed at corporate treasurers to manage debt, foreign exchange, money market, treasury, banking transactions and many other related corporate treasury activities.

 

About Serco Group PLC.

 

Serco specialises in the delivery of essential public services, with over 50,000 people working in defence, transport, justice, immigration, healthcare and other citizen services across four regions:

  • UK & Europe
  • North America
  • Asia Pacific
  • Middle East