Cash Management

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.”

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.

Treasury Managers Avoiding Blockchain Like the Plague

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It will take four to five years for the treasury management sector to embrace blockchain technology in assisting with calculations of reference rates, according to John Byrne, owner of Salmon Software.

“If you ask any corporate treasurer would they use blockchain as an alternative, you would fit their response on the back of a stamp – they’ll avoid it like the plague. It has no resonance at the moment in the treasury sector where they are taking out big loans, they are going to go with something that they are at least going to be able to wrap their minds around,” says Byrne.

“If they can get their heads around the LIBOR, they can get their head around the SONIA, throwing in the complexity of blockchain – I don’t see that being a substitute for at least four or five years,” he says.

Firms are currently preparing for the transition away from the LIBOR reference interest rate that has been used for several decades, and which is currently used in tens of millions of contracts globally, to the recommended alternatives.

For Paul Dobbs, managing consultant at Catalyst, problems around the increasing number of trades that continue to reference LIBOR is of concern.

“You would think with new trades being created to date that people would start to reduce the trades that they do referencing LIBOR and start to reference the new risk-free rates. The reality is that people still trade in LIBOR more now, which means there are going to be outstanding trades which will mature before 2021, which is great but there will be a whole load of trades that are past that which will need to be changed over as a result,” says Dobbs.

The FCA said in February that there were currently £60bn in bond issuance that reference LIBOR, that will mature post-2021.

Regarding the current standard of technology software that is looking to assist with the transition from LIBOR, Byrne says that the treasury management sector has yet to embrace it.

“In our sector it appears that they haven’t embraced it yet, or they haven’t facilitated it. We’ve come a long way on it because we don’t want to find ourselves in 2021 struggling to put something into place that requires a lot of attention and testing of the calculations,” says Byrne.

“We’ve been through a lot of that pain, and we have a number of clients who have SONIA loans in place or are about to put them in place, or about to migrate from LIBOR to SONIA. They have been asking us for the last year, or year and half, ‘when can we have it,’” he says.

Such is the concern about navigating the transition away from LIBOR that since mid-February of this year, the Alternative Rates Committee (ARRC) has held weekly conference calls where market participants can ask questions on key transition issues.

In a report based on a survey of 150 banks, end users, infrastructures and law firms published on June 25, 2018 by several industry bodies including the Association for Financial Markets in Europe (AFME), noted that there was “a gap between high levels of awareness of benchmark reform and concrete steps being taken to transition from the Ibors to alternative RFRs.”

Artificial intelligence may be needed by banks to create the central register needed across the various departments in order to prepare for the transition, according to Davide Barzilai partner at Norton Rose Fulbright.

“Because of the volume of documentation, and because you have to be certain as to what you’ve got, and the way that banks have developed their systems particularly the very large ones, all the different departments they have not have a central register for all of this information. So, they have to start building that register, and building the systems and processes for that. That’s where artificial intelligence can help speed up processes and take up some of the slack of doing the due diligence for all of this. The technology available seems to be ready and available for application. For Byrne, technology solutions which aim to assist with the LIBOR transition must keep in mind the regulation difference between SONIA being significantly more complex than LIBOR.

“We are pretty agile in terms of our development cycles, legacy systems aren’t. I know how difficult the job is, and I suspect that they are not ready, and I suspect that the push is coming from them to say, ‘look there is a lot of work involved here, can we continue to use LIBOR for another little bit until we get ready,’” says Byrne.

In the loan market additional problems may be arising concerning whether banks and law firms are adopting the loan market association’s (LMA) documentation to bring about a standardized move away from LIBOR, according to Davide Barzilai partner at Norton Rose Fulbright.

“Looking to the practical and legal sort of things you’ve got millions of financial contracts out there, they might be bi-lateral loans just between two parties, or they might be much broader in a syndicated loan concept where you would have multiple lenders, and multiple borrowers and multiple parties, everyone has to come together and agree what they are going to do,” says Barzilai.

“While we have loan market association documentation, so there is some level of standardization it is nowhere near the level of Isda and the derivatives market because bi-lateral loans and banks will have their own forms of loans, loan agreements plus even in the loan market whilst it can be adapted, there can be regional variations and so there is no real all-encompassing standard.

“The latest LMA drafting for this situation where there is a replacement rate, is to makes things a little easier to put forward the amendments, and that is so you wouldn’t need to get full consensus with all the lenders. With some complex lending that might be more difficult, so that is the wording that has been provided in the last six months by the LMA, but the question remains are banks and law firms using that wording regularly, and it is not clear whether it is being fully adopted yet.”

However, the primary concern remains whether differences between the LIBOR rate and the new alternatives will result in value differential, and ultimately someone losing out, according to Barzilai.

“For existing loans, and there are millions of these existing financial contracts out there where institutions relied on LIBOR plus a margin and made their value regiments based on LIBOR reflecting their cost of funds, versus the new rate which may be lower than that figure and then there is that value loss in the differential.”

Cash is King & Automation Rules

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As companies adjust to remote working and unprecedented drops in revenue, cash management becomes the chief concern for business continuity, says John Byrne, owner and CEO, Salmon Software.

Effective cash management is reliant on strong treasury management systems (TMS) with a focus on data integration and automation of services.

“Remote working and remote processes are here to stay and I think they’re going to be a part of our selling process from now on. Clients or potential clients will say to us – ‘Have you got the ability to do this remotely in the event of another coronavirus type scenario?’”

According to Byrne, Salmon Software has seen a drastic uptick in clients requesting full automation of their treasury services in the past few weeks. As the pandemic forces treasurers out of their offices and into their homes, remote treasury management is a reality and automated processes are a necessity.

“From a treasury perspective, the main benefit that has been highlighted is that manual processes really need to go. You have to automate as much as you can in relation to treasury so that anything that needs to be approved or authorised or executed has the capability of being executed remotely and approved remotely by whoever needs to do all those steps,” says Byrne.

Current market conditions have quickened the move towards automation and remote processes. Salmon Software’s hosted client base has grown from zero to 40 percent in the past three to four years, says Byrne.

“There’s no doubt that the acceptance of hosted solutions and treasury in the cloud, has increased significantly in recent years, but the pandemic has positioned remote working and automated processes as the saviour”.

A 2019 survey by Deloitte found that improving data visibility was the number one challenge for treasurers. Data has typically been produced and managed manually by corporate treasury teams, processes which are being drawn out due to the shortcomings of remote working. According to Byrne, the more strenuous a process data management becomes, the less teams are able to make smart decisions regarding hedging, trading, cash management and more.

“Clients are saying: ‘We have a lot of information in different systems. Can we get an integration into the treasury system so that the treasury system has the complete set of data to give us information quicker?” says Byrne.

“From our perspective, we see that as a selling point. Within our Salmon Treasurer TMS we have pretty much have automated any process that can be automated in the treasury environment.”

According to a 2019 study by PWC, 64 percent of corporate treasurers noted an increased focus on working capital management. TMS and hosted services can provide a smooth integration of cash data in order to have a clearer view on working capital, liquidity, servicing loans, rescheduling debts and other priorities for firms.

“If historically [firms] were putting stuff on the backburner or delaying projects that would give them access to data quicker, that’s now accelerated,” says Byrne.

Deloitte also reported that the use of spreadsheets has been decreasing over the past two years, with greater investment in TMS and hosted services solutions becoming the norm. As business continuity becomes a priority for businesses in surviving the pandemic, these trends are likely to accelerate.

Cash management is a major concern for corporates as they suffer from a lack of sales and in many cases, a significant drop in revenue. Companies are now looking for ways to manage cash more efficiently and want to learn more about liquidity across multiple banks, multiple jurisdictions , multiple currencies, multiple subsidiaries and other such parameters. According to Byrne, projects not involving cash management or rescheduling debts will have a lower priority. For example, while the transition to  SONIA, SOFR, SARON and other risk free rates,  away from Libor was the “talk of the town” up to the arrival of the coronavirus, now it’s an issue for later in the year.

“I think [firms] have bigger problems at the moment in terms of cash consolidation, cash management, working capital, servicing loans, rescheduling debt – that’s drawing more focus than the transition to Libor is and I think everybody is of the view, rightly or wrongly, that while this is an awful situation, it has a limited lifespan,” he says.

Byrne believes Libor will become a more acute focus for firms in the final quarter of 2020 or first quarter of 2021.

As far as implementation goes, Byrne says the Salmon Treasurer TMS is perfectly positioned for remote onboarding. Moving away from in-person data processing workshops with existing clients and with new clients, Salmon Software now implements remotely and hosts workshops remotely.

“Ultimately it is still clients looking at a screen as they would be in a normal project implementation… … so from our perspective, not much has changed. Hindsight is great, but Foresight is better,” says Byrne.