Companies often employ the following treasury software for cash flow planning:
- Spreadsheet
- TMS
- Cloud-based software / SaaS
What is the scope and limitations of the treasury software?
1. Spreadsheets
Scope of spreadsheets
According to the Cash Forecasting & Visibility Survey by Strategic Treasurer, 91% of companies still use spreadsheets for forecasting.
Spreadsheets historically have been used to gather, track, and reconcile data for years. These are the advantages of using spreadsheets:
- Open source
- Only needs basic training to use it
- Can be modified
- Can be added to a workflow quickly and easily
- Various spreadsheet templates are readily available for users
Limitations of spreadsheets
When using spreadsheets to forecast cash flows, the treasury department encounters the following challenges:
- Manual, error-prone, and time-intensive process
- Tedious collection of the appropriate datasets
- High input requirements and frequent human adjustments
- Little visibility into specific entities to detect differences
- Dead-on-arrival reports due to time-consuming data gathering and collaboration between teams
2. TMS
Scope of a TMS
A locally hosted application is a Treasury Management System (TMS) installed on-site. It aids in automating, documenting, and managing crucial treasury operations.
Many businesses believe a TMS will handle all their operational cash management problems. The following are the advantages of using a TMS:
- Boost in productivity
A treasury management system is good at streamlining and automating laborious data management duties and manual operations, which increases company’s daily productivity.
- Limit redundant banking and FX costs
TMS measurable benefits include the convergence of payment systems and banking connections, which results in lower cross-bank and FX fees.
- Bank and connectivity flexibilityThe bridge to numerous banks and accounts is often where a TMS’s value proposition is seen. It integrates readily with bank portals. Hence, treasurers have complete control over their funds and activity due to the separation from old bank interfaces. However, it may not be able to store an abundance of data or integrate with all systems.
- Regulatory compliance and risk mitigation
It utilizes integrated risk mitigation features and establishes company-wide compliance with industry standards within the systems.
Limitations of a TMS
- It uses MT940 file formats downloaded from the bank and runs these statements, But the STP rates are low, and data gathering gets delayed. It doesn’t support multiple users accessing, updating, and sharing information.
- Difficulty in creating custom reports and forecasting due to manual data exporting and cleansing
- Requires manual intervention and reconciliation due to outdated UI and architecture
- Cumbersome and expensive maintenance and updates
3. SaaS
Scope of SaaS
SaaS users subscribe to an application rather than buying and installing it. The SaaS application is accessible to users from any internet-connected device.
It provides the following benefits:
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- Frees up the bandwidth: It frees up analysts’ bandwidth to focus on liquidity planning instead of manual data gathering and modeling.
- Confident decision-making: Treasurers can make confident investment/debt decisions with accurate and readily available data.
- Better flexibility and scalability: It offers operational flexibility that handles unexpected changes without requiring the setup of physical servers. Moreover, it offers predictability to monitor when and how much scalability is required for growth/investments. The software can be scaled anytime according to the user’s needs and changes in business requirements, wherein more data or processes can be added/replicated.
- Better cost savings: It doesn’t require extra costs for updates and upgrades for the new capabilities. There are also no maintenance costs, and the vendor handles updates and upgrades, leading to more ROI.
Limitations of SaaS
- Connectivity requirement:
Since the SaaS model relies on web distribution, the company cannot access any program or data if the internet service is interrupted.
- Minimum data requested:
SaaS systems require more than six months of historical customer data to get the accuracy of clients’ behavior, and they also need bank statements of more than one month with rules defined for categorizing CFCs for bank data.
- Lower barriers to entry for the competition:
Easy replacement and lower entry barriers for the competition might also result from simple integration into the SaaS model. Since most SaaS transactions are subscription-based, businesses still need to provide clients more value over rivals while ready for the next subscription level once they sign up.
- Higher costs than spreadsheets:
SaaS is typically priced on an annual subscription model. The cost can range from $45,000-$60,000, including a one-time setup fee. It is cheaper than TMS, which costs between $200,000 and $400,000, depending on the solution complexity, with an additional annual maintenance fee. But, it is costlier than spreadsheets, which are free.
