What are the benefits of a Treasury Management System (TMS)?

Without a TMS, consolidating cash positions can quickly become a complex task. Treasurers must collect bank balances from each institution, for every account, and in every currency. This data must then be processed in Excel spreadsheets, a clear source of errors and duplicate entries.

Treasury software automates the daily retrieval of bank account statements. It generates a comprehensive, reliable, and immediately usable cash position. The treasurer can focus on analyzing this data to optimize liquidity allocation and banking conditions.

Creating reliable cash flow forecasts is challenging. It requires reconciling accounting and banking data, as well as confirmed and projected flows—a manual process that is tedious and time-consuming.

With a TMS, forecasts automatically incorporate all cash flows: invoices to issue or pay, loan maturities, firm orders, activity budgets, and more. These forecasts are continuously updated to reflect the current situation. Stress-testing scenarios further allow treasurers to simulate the impacts of unexpected events.

With more accurate and responsive forecasts, treasurers can better anticipate liquidity surpluses or needs and make informed decisions regarding financing or investment.

The treasurer maintains complete control over the process by centralizing all payment processing within the TMS. Validation workflows prevent internal fraud, while an audit trail records every transaction. Secure banking communication protocols (SWIFT, EBICS) reduce the risk of file hacking.

The TMS also manages power-of-attorney delegations and dual signatures required by banks to secure payments exceeding specific thresholds.

It also eliminates time-consuming, low-value manual tasks such as entering beneficiary details, reconciling bank orders, and recording accounting entries. The TMS enables teams to focus on more strategic activities.

A treasury TMS includes dedicated modules for optimizing cash management:

• Cash pooling: Automatically balancing accounts to maximize interest income and reduce overdraft fees.
• Netting: Multilateral reconciliation of intra-group flows to lower transaction costs.
• Supply chain finance: Leveraging accounts receivable (factoring) or accounts payable (reverse factoring) to fund working capital at a lower cost.

These tools help streamline account structures, optimize banking conditions, and ultimately generate substantial cost savings.

A finance TMS integrates advanced features for financial risk management:

• Highlighting net foreign exchange positions by currency, maturity, and entity to assess underlying risk.
• Input and valuation of hedging instruments (forward contracts, options, interest rate swaps, etc.).
• Calculation of regulatory ratios (LCR – Liquidity Coverage Ratio, NSFR – Net Stable Funding Ratio) and internal limits.
• Evaluation of counterparty exposure based on outstanding balances, credit lines, and ratings.

With this comprehensive view, treasurers can better identify, measure, and hedge financial risks in line with the policies approved by the board of directors. They also have detailed reports to explain the company’s strategy to banking partners.