Understanding the Value of a Treasury Management System

Companies are focused on improving working capital as the business environment continues to fluctuate and remain unstable. Implementing a Treasury Management System (TMS) can bring additional cash visibility to decision-makers within companies by allowing them to make more strategic choices. Additionally, a TMS can help streamline processes, identify inefficiencies within them, and make them more developed on the process maturity scale. A mature and fully optimized treasury department can help companies shore up their treasury operations to increase cash flow visibility, fine-tune forecasting processes, and enhance the overall operational effectiveness. Treasurers and Treasury Managers will benefit from fully understanding the value of a TMS. 

 

There is a lot to be gained by developing and investing in a TMS. Discovering the ROI on a TMS solution involves looking at the strategic hard and soft benefits of a TMS, cost savings, enhanced compliance to internal and external standard rules and regulations, and industry metrics. 

 

In terms of the hard benefits and potential for cost savings, consider the benefits by the numbers: 

  • Idle cash can be put to use, typically up to 10% returns
    • Increase EPS through stock buybacks
    • Dynamic Discounting can drive return even higher
  • On average, there is around a 15% increase in interest income from long-term investments
  • Expect a 15% decrease on interest expense
    • Paydown using outstanding debt
  • Bank Fee Analysis
    • Around 10% decrease in bank fees
    • Supports bank rationalization
  • Up to 80-90% productivity gains through standardization and automation
    • Cash reporting and forecasting
    • Bank connectivity
    • Bank account management
    • Bank account reconciliation
  • An average time savings of 2 days per month for each entity related to netting intercompany transactions and effective dispute management
    • Estimated $250,000 to $1 million in related annual cost savings for 30 entities (bank fees, currency exchange, etc.)
  • Increased IT cost avoidance with a cloud solution (around 50%)

 

Beyond savings by the numbers, a TMS offers automated and scalable treasury business processes. Real-time visibility into cash positions and risks & exposures, best practice regulatory compliance and controls, enhanced analytics of treasury activities, mobile accessibility, as well as straight-through processing are some of the other elements of a TMS that are useful to have. 

 

Interested in learning more about treasury management systems? Download our In-House Bank Whitepaper here or our Treasury Process Maturity blog post.