Can you afford to run your treasury on spreadsheets?

By Kyriba May 30, 2014

We recently launched the results of our second annual treasury survey, in conjuction with the Association of Corporate Treasurers. One of the questions discussed the biggest risk factors impacting treasurers today. Among respondents as a whole, three of the most commonly cited risk factors for the coming year were those from outside the corporate walls – FX, counterparty and broader macroeconomic factors. The turmoil of the past few years is certainly still clear in the minds of many.

However, the biggest concerns varied considerably depending on what platform an organization uses for managing their treasury operations. In particular, organizations who solely rely on spreadsheets for treasury management view their biggest risk factors completely differently to companies who use either a treasury management system or an ERP treasury module.

The lack of visibility into liquidity and cash forecasts is one of the top three risks for 60 percent of spreadsheet-only treasuries, compared to just 32 percent of those with treasury management software. Simply put, it’s a lot more difficult to gain that deep visibility into your current cash position and forecast using spreadsheets as your primary tool. While this could be simply an inconvenience for some companies, where cash is in short supply – as it was for many companies during the last recession – the inability to accurately forecast cash flow could be fatal for the organization.

Biggest risk factors

Spreadsheet errors – for example miskeying data or working with incorrect formulas – are the second most common risk factor for those who use spreadsheets as their primary treasury management tool, with 43 percent viewing them as one of their top three concerns. This compares to just 15 percent of those who use a dedicated treasury platform or an ERP treasury module. While the vast majority of treasury departments still use spreadsheets to some extent, they are certainly a much larger source of concern if relied upon as the primary mchanism for cash management.

So, while spreadsheets may seem at first glance to be the most cost effective tool for managing treasury, it can often prove to be a false economy when the risks it presents are highlighted. Even for companies whose spreadsheet-oriented treasury operations don’t cause them headaches, using manual processes for cash management and forecasting can still be a highly time-consuming and inefficient task. Looking at the average amount of time spent on manual tasks (such as bank account reconciliation and data inputting), treasury teams who primarily use spreadsheets spend almost 4.5 months on these processes, more than twice that of treasuries using a dedicated TMS.

Obviously this improved effeciency can benefit a treasury by freeing up headcount, but the benefits can go far beyond that. It gives the treasury team more time to focus on more high-value tasks, such as cash optimization and providing deeper strategic counsel and analysis to the wider finance team (also aided by the insight that a TMS can provide). There can also be very specific and tangible benefits that this additional time can offer. As one example, a company which frequently issues commercial paper can enter the market approximately 90 minutes earlier each day, thereby improving the interest rates available to them. This alone saves the organization more than $500,000 per year. 

So, although spreadsheets may be ubiquitous and (more or less) free for the treasury team, they are both inefficient and provide an unacceptable level of risk for the organization. Maybe it’s time to cut the cord and reduce your dependency on the spreadsheet.

Time spent on tasks
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