Stepping Up to Treasury Workstation Technology

If the recession taught business owners anything it was this: Liquidity is key.

“Being able to identify liquid sources of capital is a premium,” says Enrico Camerinelli, a senior analyst covering corporate finance and treasury for the Aite Group, LLC, a Boston research and consulting firm. “When the CEO comes to you and says, ‘How are we doing today in terms of cash,’ and you can pull that number out on the fly, you’re in a very good position.”

But tracking cash isn’t always easy, especially for mid-sized companies that typically rely on Excel spreadsheets to track daily balances and calculate risks.

There is another option: treasury workstation software.

Treasury software, or treasury workstation as it is more commonly known, is a group of applications that automate cash management, funds transfers and other bank communications, provide detailed financial analytics and daily reconciliation and enable companies to manage debt and investments.

Until recently, treasury workstation technology was used almost exclusively by large companies. Mid-sized companies simply couldn’t afford it. With the evolution of software-as-a-service products from financial institutions and stand-alone vendors, treasury workstation has trickled down to the mid-market.

Today, about 26 percent of companies surveyed have some form of treasury automation in place, according to a recent survey by TreaSolution, Inc., a Chicago-based treasury consulting firm.

Treasury technology can improve operations and make cash management something everyone in finance can do. Automating once-manual functions means fewer mistakes and less time spent preparing monthly cash reports, which frees up staff to do more strategic planning, says Richard Barrett, treasury manager for global humanitarian service organization Rotary International. “We can be more proactive, rolling out forecasts up to a year in advance,” he says. “[We] can better plan where we might need to draw money out of our investments, or move money from one [bank] to another.”

Bruce C. Lynn, managing partner at The Financial Executives Consulting Group, says the technology can be especially important for companies that do business internationally. “A workstation answers the questions, ‘What if rates go up? What if the currency exchange changes?’”

Treasury workstation software, which may be used by CFOs, controllers, tax experts and audit and compliance employees, also provides business continuity planning, something mid-sized companies often fail to keep up with, says David Trotter, executive vice president and head of treasury management sales with Wells Fargo Treasury Services. If for instance, a controller can’t make it into the office, financial transactions still can be processed, he says.

Assessing the Options
Some companies use proprietary treasury workstation software available online or sold and installed by their bank or other financial institution. Other programs are sold as on-premise software or on a software-as-a-service (SaaS) basis from vendors such as SunGuard, Wall Street Systems, and IT2 Treasury Solutions.

Costs vary, with upfront installation for on-premise software starting at $100,000 and running into the high six figures, and annual fees hovering around $50,000, according to Lynn. SaaS-based treasury workstation software, which is typically paid as a monthly subscription, costs considerably less. “Generally, the more banks, general ledger accounts and users – the more features in use -- the higher the cost,” Lynn says.

High startup costs have historically kept smaller companies from implementing the software, says Daniel Carmody, TreaSolution’s managing director. U.S. companies with under $250 million in annual revenue might not have the kind of complex financial transactions to justify the expense, he says.

But once a company’s revenue grows or its finances become so complicated they’re hard to track, it’s a good time to consider treasury workstation technology, says Craig Martin, director of executive programs for the Association for Financial Professionals, an industry trade association. It’s not just revenue that matters. Workstation technology is a must if a company uses multiple banks, especially if one or more is overseas, and “they need to access cash positions, investments and debt in multiple currencies, and have it all in the same place.” he says.

The technology also comes in handy if a company has overseas customers or suppliers or is acquiring other businesses, Carmody says.

Making the Move
Once a company decides to add treasury software, making the switch can take six months to a year. When Rotary International moved from a bank-provided treasury product to a stand-alone SaaS treasury workstation, Barrett did a pre-installation assessment and determined that the $418 million organization’s biggest need was for better cash-flow forecasting.

That kind of pre-project legwork is crucial, says Aite Group’s Camerinelli. In addition to outlining which features they’ll need, finance executives also should think about how they can improve existing treasury processes, such as adding benchmarking or having their treasurer assume more duties of a controller. “This might mean optimizing your operations and putting best practices into place before going to a treasury system,” he says.

TreaSolution’s Carmody suggests looking for inefficient processes that treasury software could simplify, including anything that’s overly complicated, requires input from multiple people or takes a long time to complete.

Rotary International, for instance, took its entire finance department paperless while installing treasury software. “Reviews of cash, money transfers – they’re all electronic, so we’re not chasing after paper anymore,” Barrett says.

Finding Support
Support also is important. Trinitas Ventures, a national student-housing real-estate developer, has accounts at five banks, all of which process hundreds of rental payments a month. Bringing all those accounts online involved a lot of work, says Mark Larson, finance and treasury vice president for the $12 million West Lafayette, Indiana, company. “The learning curve was a good three to five months,” he says. As a result, he suggests asking potential vendors what they offer for pre-implementation and day-to-day customer service and technical support. “You want to make sure the people supporting you are going to be physically accessible,” he says.

Treasury workstation’s user interface should be intuitive, too, says Pat Scott, CFO of RS&I Inc., a mid-sized sales and distribution company in Idaho Falls, Idaho. Scotts says having a simple interface made it easy to get treasury workstation she bought from TreasSure Solutions up and running.

Once a system is installed, a company may have to wait to see a return on the investment. In some cases, companies might not see a return for years, says Martin, the Association for Financial Professionals executive. If you can’t save a full time employee’s salary, “it can be really hard to justify,” he says.

But because the technology helps a company better understand where its cash is, whether to use or invest it, and if it should redo that calculation every day, week or month, it more than justifies the cost, says Lynn, with the Financial Executives Consulting Group. “Poor earnings can be disappointing, but lack of liquidity can kill,” he says.