Why bother with treasury technology?

January 20, 2014
Bob Stark
Treasury management - why bother
Why not?
 
It’s tempting to just write that. However, unlike the urban myth about ‘why not’ being a scholarly answer to a philosophy exam, ‘why not’ does require further explanation here. 
Depending on the studies one reads, somewhere around 35-40 percent of corporate treasurers continue to rely on spreadsheets for their treasury operations. The majority of those know they really shouldn’t be using spreadsheets, but lack a meaningful business justification. So, instead of explaining why they should be using a treasury system instead of spreadsheets, perhaps it’s more helpful to discuss some of the reasons you shouldn’t be using treasury technology instead of manual processes. Bear in mind that all of these are based on real discussions I’ve had over the past few years (discretion prevents me from saying who the conversations were with).
 
1) Treasury systems are for lazy people”
No, I’m not making this up. I was actually told this once. If you think about it, maybe it’s not completely wrong. Treasury technology offers significant (sometimes exceptional) productivity improvements. It will save time, which can be used for so many different things. However, if one was really lazy, they would use that free time to just sit at their desk, not even bothering to play Freecell (too much mouse clicking). I haven’t met anyone like that in treasury, but if there were such people, I could see how a TMS would be bad for them. For the rest of us, I think the time saved from downloading bank statements and comparing accounts could be better served analyzing the effectiveness of cash forecasts and hedging decisions.
 
2) “We don’t forecast because we have too much cash”
Also a true story. And I couldn’t disagree more with this train of thought. Apple has more money than…well, almost everyone combined. They forecast. Qualcomm has a healthy balance sheet. They’re exceptional at forecasting. In fact, companies that have excess cash invest time and resources in improving their forecasting more often than those organizations that are not cash rich. Cash forecasting is a best practice, aided significantly by treasury technology that can not only consolidate the forecast data sources, but also measure the accuracy of forecasting. 
 
Cash forecasting not only delivers visibility to aid financial decisions, it also offers confidence to ensure that cash is optimally deployed to maximize investor returns. Many of our clients choose to invest more to increase interest income or look to pay down debt balances; although more and more are looking at other opportunities such as in the supply chain or other parts of the value chain. Whatever the use, it’s difficult to see a downside to knowing exactly how much money you have.
 
3) “We don’t have budget”
This is a very reasonable problem for many companies. Very few treasury teams have a pot of money just waiting around for software salespeople with nice smiles and football tickets. My question, when I hear that a company doesn’t have budget or an active project is: what would allow you to get budget? Would a way for treasury to generate a meaningful increase in shareholder value be considered during budget discussions? If so, maybe the objection should instead be: “We don’t have a business case to get budget.” That sounds more realistic and is something we can invest the time in to help you with.
 
4) “Our spreadsheets are more flexible and easier to use”
Agreed! Well, except for that time that I had to figure out why that formula didn’t…<enter favorite spreadsheet problem here>. Personally, my favorite is when you start running scenarios using pivot tables and you have to paste values in a new sheet, then change the variables, then paste more values, then someone points out that there was a mistake in the original formula, and…<enter favorite expletive here>. 
 
Spreadsheets are great fun to play with, but realistically they have their limits. If you want to manage your intercompany netting, reconcile your global cash positions to give an excess cash number to your investment team, or calculate headroom in your revolver to determine your required repayment…are you still as confident in that spreadsheet or are you checking it twice? How many times are you going to give the once-over for that forecast that goes directly to the CEO’s iPhone when it’s the spreadsheet you prepared with formulas that your former colleague originally wrote?  
 
Sure, spreadsheets can be easier sometimes, but the risk of error is so high that the costs to the organization are just high to ignore. One treasurer told me that he threatened to replace his cash manager’s laptop with an iPad just so they would stop using spreadsheets (alas, there are workarounds, but you see where they were heading). Even if you don’t personally think a spreadsheet is that bad, your future boss does. Don’t be the one who hears “I told you so” after a gigantic error. 
 
There are, of course, many more reasons “not” to use treasury systems – yet all are easily answered. Those that resist are a shrinking minority. Every day, your compatriots are abandoning the spreadsheet cause and moving to treasury technology. And, no, they aren’t coming back.