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Treasury Services for SMEs

Treasury Services for SMEs

Why Get a Tailored Solution if a Standardized Versions also Fits the Bill?

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Michael Gerhards

Partner, Audit, Finance and Treasury Management, Finance Advisory

KPMG AG Wirtschaftsprüfungsgesellschaft

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Treasury Services for SMEs

Large corporations and DAX-listed enterprises all have professional treasury management systems (TMS). However, if you look beyond the 1st league, the situation already looks different: many SMEs still do not have pure cash management systems (CMS) or a TMS. It is probably no surprise that the bigger the company, the more prevalent a CMS and TMS become.

Many SMEs are loathe to use a TMS and prefer to use Excel sheets that they have built themselves, thus pushing the decision to implement a TMS to a future date. Usually, the reason for this is a lack of experience with this type of project, the fear of having to allocate additional resources to such a project and last but not least, the high costs (or the lack of a budget).

Good reasons why SMEs should concern themselves with the choice of a TMS nonetheless:

  • The former TMS no longer fulfills the department’s requirements or does not allow any expansions
  • The company has grown and now is active internationally or even globally, thus has to deal with different currencies 
  • Treasury-relevant postings have to be entered into the ERP system manually in a time-consuming procedure
  • Risk management requires that compliance structures and processes are presented in such a way that they will pass an audit
  • The IT specialist has left the company and now no one knows how to adjust the Excel macros anymore 

This list is just a small excerpt of what we hear and could be extended (nearly) at whim. 

However, even if one or several of the reasons listed above hold true, companies often still don’t go out of their way to implement a new system as quickly as possible. Very often companies do not realize that a new TMS or a new implementation of a system could also mean benefits. 

For instance, many repetitive and tedious tasks can be automated. Existing workflows within the department and technical connections to third-party systems can be rethought. Decentralized systems can finally be centralized. A new system also allows the company to define new management KPIs which flow into new reports that tick all of the boxes. While adjusting workflows, redefining responsibilities and converting basic IT systems are activities that usually happen in-house, external advisory companies and even software vendors often support this entire process. 

Once the decision is taken that a company will indeed embark on project “New TMS”, the next question arises: how do I know which system best matches my requirements?  This question has to be spelled out clearly because there is no “best system” that exactly fits the purpose on hand. There are many different systems that can do many things equally well but these nevertheless have strengths and weaknesses in different areas. This is why it is important to define a list of specifications, which will then help narrow down the type of system that could be used from the many systems offered by vendors. Such a selection process is generally assisted by experts from the Big4 or a similar type of advisory firm. These not only have numerous standardized tools but their experience also helps to cut through complexities. 

When selecting a system, it is not only the required functionalities that play a role but also the duration of its implementation and the costs arising from the implementation. In order to keep the implementation time as short as necessary (note: not as short as possible!), there are two key aspects that should be kept in mind:

  1. the choice of standard software
  2. the choice of pre-configured software

So what does this mean? As is easy to guess, standardized software offers a standardized approach but which can still be configured individually. With their long-standing experience and feedback from existing clients, the software producers make sure that their software standard contains “best-practice” solutions for methods, processes and reports. The system could of course also be configured to match the client’s requirements. For instance, if the standardized system allows it, clients can define by themselves whether certain processes need a 2-eye, 4-eye or 6-eye check. However, a standardized system will not allow for new processes, new entry masks or a renaming of fields, including another valuation method or adding functionalities. 

However, this is not necessarily a bad thing because like this, the support function does not require client-specific knowledge when answering questions and updates coming from the vendor will never conflict with the software. This part is important as most systems used by SMEs run on SaaS platforms.  The result is that the system runs well on the latest release and remains stable.

A trend that is also becoming more and more frequent is the pre-configuration of a database. The database the client receives after concluding the contract will allow the setting up of currencies, interest rate curves, countries, deal types, cash-flow categories or even the implementation of a bank holiday calendar, thus shortening the implementation time considerably.  Many vendors also offer a large range of standardized reports, starting with simple and static data reports, cash position reports up to interest statements for intercompany accounts or mark-to-market valuations.  

By using the above-mentioned tool kit, the implementation of a standard TMS becomes a bit easier and more palatable for SMEs. Approaching it with a standard software all the way to the go-live is becoming ever more popular. There is also a psychological component in this because using a standard solution keeps the project manageable. Furthermore, employees who are working hard on the project and who see that the project is advancing at a good clip remain motivated. Beyond that, it is easier and quicker to communicate the added value of a solution to senior management and other departments. Such a solution also makes plugging in add-ins, such as the roll-out of a liquidity planning process to a subsidiary, after the go-live relatively easy because the process has already been implemented in the standard software at the parent company. 

Of course, companies who are not satisfied with a ready-made solution will still want to speak to experts who will be able to build them a system from scratch that is easily scalable and expandable. It’s a good thing that both options exist. 

Source: KPMG Corporate Treasury News, Edition 97, December 2019

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