How to Evaluate a TMS in 2022

TMS technology and applications have advanced greatly in recent years, making for quicker, easier, and cheaper deployment, with superior results. Michael Kolman, Chief Product Officer, ION Treasury, explains to TMI just how far the TMS has come since its arrival 40 years ago, and why today there is a solution to fit the needs of most organisations.

The TMS has been the core system of choice for a select group of treasurers since it first arrived on the scene in the early 1980s. Indeed, it’s often seen as a specialist technology for the benefit of only the largest corporates with the deepest pockets and most complex needs. But today, the message for any business thinking the TMS is somehow ‘not for the likes of us’, is that this view really is outdated.

For those with a negative or uncertain approach, it’s important to realise that TMS technology has evolved. It is now a tool for the many, catering to a broad spectrum of needs for an even broader scope of organisations. In essence, it can be shaped to become all things to all treasurers. Its progress is driven by market trends for digitalisation and automation, and the need for visibility of cash, liquidity, exposures, and other core financial data, and these are drivers pertinent to companies of all sizes, many of which might not even have a full-time treasury function, notes Kolman.

“Every company, at a minimum, has bank accounts and needs visibility and control of cash,” he explains. “A democratisation of treasury functionality has occurred, and treasury teams now have choices in their solutions.  Today, multiple TMSs exist, each designed for a treasury team’s profile and specific set of needs making it possible to choose the solution that best fits their company’s requirements.”

ION Treasury’s own product suite includes TreasuraSpark, which is a solution focused solely on essential cash management needs, with a rapid deployment application aimed at delivering cash visibility for smaller companies. It purposefully does not have the great breadth and depth of functionality that a product such as ION Treasury’s Wallstreet Suite enterprise solution offers.

“There are three key benefits of having a choice of solutions from a vendor such as ION Treasury. First, treasury teams can find a TMS that fits their current needs. Second, they are part of a broad peer community that unites people with common challenges, facing various levels of complexity, using different TMSs,” says Kolman. ”And third, they have a long-term partner with ION Treasury. Should their company’s needs evolve and they require expanded capabilities, they don’t have to migrate to an entirely unknown platform and build a new partnership.”

“Regardless of the solution being used, having access to treasurers who are facing the same issues or may have already solved problems you are now dealing with, is a valuable benefit. For larger companies, being able to talk to treasurers of smaller businesses also serves as a great reminder that processes and functionality do not necessarily have to be complex.”

Essentially, modern TMS technology negates the old argument against deployment that ‘we’re not big enough’. Even ION’s enterprise-level Wallstreet Suite has been componentised to enable users to pick and choose the functionality they wish to implement. It’s an influence infused throughout the broader ION group, taking the architectural philosophy to create what Kolman describes as “attainable, low-latency, or real-time platforms that meet client needs”.

TMS vs ERP

The broadening appeal of the TMS still comes up against the view that a corporate with an ERP has no need for a TMS. It’s an argument with which Kolman is well-versed and his counterpoint is compelling.

An ERP expected to support treasury is subject to one important distinction compared with the TMS. The ERP has a role that has been broadened out to such an extent that it cannot simultaneously be a generalist and specialist system; something has to give and the niche (but vital) demands of treasury are rarely met.

“ERPs are typically built for backward-looking accounting processes, and are formed around shared services functionality,” he explains. “The TMS takes a backward-looking view too, because it is accounting for all the transactions it manages, but its focus is on providing a forward-looking position on, for example, forecasting future exposures and liquidity, ensuring the business does not run out of cash.” In this context, asking a system primed to look backwards is never going to be as effective as one whose chief purpose is to look ahead.

It’s why, for Kolman, the ERP can never equal the TMS as a treasury tool. Adding fuel to his counterpoint is the way in which ERP systems that have been accumulated by acquisitive corporates often fail to easily – and cost-effectively – communicate one to the other. Multiple instances even of the same system are a roadblock for the smooth flow of data between entities. In terms of gaining visibility over something as vital as cash positions, if the data cannot be aggregated easily, gaps in timely understanding will appear. In volatile periods, these gaps present a serious risk.

Yet it takes a single TMS to act as a centralised source of data and a hub for all cash, payments, and trades to manage financing and risk, even if supplied with multiple sources of data, says Kolman. As an extreme example, he cites a client case where more than 80 ERPs were being channelled through one TMS.

New tools for new challenges

When the first TMS was created, as part of a Bank of America project back in the early 1980s, it was a simple (yet sizeable) tool with a limited but useful objective. That system eventually became IT2, which is now part of the ION Treasury family. Along with the rest of ION Treasury’s current seven-platform-strong treasury product suite, IT2 has a rich heritage of development that has seen its functionality and delivery model change almost beyond recognition.

Driving greater integration across multiple inhouse and third-party applications (from banks and technology vendors), one of today’s game-changers is the API. The key component to leveraging the API phenomenon is a suitable underlying platform. Having a well-developed TMS enables treasurers to do just this, says Kolman. IT2 may have been one of the first, but it has kept right up to speed and is fully API-enabled, supporting real-time visibility for its users. And with real-time delivery of well-managed data comes the possibility of leveraging cutting-edge Machine Learning (ML) tools.

“There are a number of treasury-specific ML use cases that can drive insights and automation,” explains Kolman. Accurate and timely cash forecasting often requires heavy-lifting of data. It’s a demand that can leave some companies with information that lags behind their cash reality by quite some margin. “A rich history can be built up quite quickly – through the TMS, via API-delivered banking information – and this can be used to train ML algorithms to automate forecasts. It’s only possible to leverage this technology with an underlying core platform such as a modern TMS.”

It would be fair to say that the TMS has evolved in line with market trends, and this has a distinct advantage for treasurers. The capacity, for example, to connect to APIs, and to extract and leverage data from a corporate ‘data lake’ to feed ML, is the bedrock of low-value task automation. By creating an organisation-wide self-service information resource, it enables treasury itself to progress beyond manual responses to piecemeal requests for information. Whether driven by cutting-edge developments, new pressures to find efficiencies, or by regulatory change, Kolman says the development path of the TMS now ensures it is easier for treasuries to adapt to new environments, and scale operations accordingly, with the vendors making system adaptations for their clients.

Indeed, significant regulatory events such as the transition from IBOR to risk-free rates can be made easier when the platform vendor has kept pace with technological advancements. “A modern TMS should enable treasury to quickly gain visibility over its exposures, upload market data for the new reference rates, then account for and value those rates appropriately,” explains Kolman. The same transition advantages were achievable for modern TMS users when IFRS 9 replaced IAS 39, and they will be seen again with the shift from MT to MX/ISO 20022 messaging standards.

Quantifiable benefits

One persistent barrier to TMS adoption is allocation of budget. However, a strong business case is not difficult to build, says Kolman, who believes the benefits of a TMS for most companies fall into four drivers of value.

The first is strategic, where an enterprise-wide view of exposure risks is possible through the integration of internal and third-party applications. The second is financial, reducing costs through technology synergies, better controls over elements such as fraud prevention, and via process automation. The third is through consideration of tactical elements such as improving cash visibility and how this may facilitate smarter investments or more timely draw-downs on facilities, and through automation of functions such as front-office trade processing. The fourth area of benefit relates to the platform itself and how it realises scalability, flexibility, general performance enhancement and, of course, the value of a single source of truth.

With these points in mind, it’s possible to build a quantified business case, states Kolman. This may demonstrate how a TMS increases efficiency and reduces operational risk and cost when rationalising systems across an organisation. It may also show how optimising working capital and cash concentration using, for example, in-house banking (IHB) tools, reduces the number of external payments and their associated bank fees. Of particular benefit is how the increased accuracy of cash forecasting reduces cash buffers, enabling greater investment returns or debt repayment acceleration.

While the deployment of a TMS can drive distinct efficiencies, reduction of headcount should not necessarily be top of the agenda, says Kolman. “If companies go into a TMS investment thinking that the benefit will come from reduced headcount, they will probably not hit the mark. The key is to understand that the type of activities that treasurers undertake shifts. The TMS provides automation-led savings on the tactical and operational elements, leaving more time for treasury to add value by analysing the data and improving decision-making.”

Friendly systems

The modern TMS makes it easier to bring about a deeper understanding and stronger response to the data. This is because the design of the user interface and user experience (UI/UX) tends to follow that of intuitive modern consumer systems. Kolman also notes the increasing presence of the digital native generation in senior treasury roles. More incumbents are entirely comfortable with the operation of their TMS, and are able to leverage dashboard technology to find precise answers to their strategic questions, he reports.

With most TMS platforms, and all of ION Treasury’s suite, being accessible via the web, the UI/UX has ensured that working in the TMS environment has largely become “self-service”, says Kolman. “Almost everyone is now familiar with navigating websites, and that is essentially how a user will navigate a modern TMS.”

That web-enabled approach means once monolithic on-premise systems have morphed into light footprint solutions. This in turn implies rapid deployment. ION Treasury’s TreasuraSpark is at the extreme end, with a go-live possible within 24 hours.

The difference today in the UI is that it has been designed to help users understand their daily processes, taking them through a “daily journey”. ION Treasury’s IT2 UI, for example, enables treasury to capture, review and update their processes directly in the system, removing any need to manage offline documentation.

With processes documented in a system such as IT2, where the UI is intuitive, it enables the smooth continuation of workflow, even during major disturbances such as the pandemic. “And where new staff are coming on board, their ability to learn the application quickly and continue to leverage its value is really important,” comments Kolman.

Retaining knowledge of a system is indeed a vital component for continuity. However, Kolman also reports that ION Treasury user groups have been keen to discuss the further elimination of offline processes and paper-based documentation. This became a hot topic recently because the pandemic moved the working world away from offices, offline processes developed into a serious problem. Shifting processes and workflows to a digital environment within the TMS is helping to accelerate the digitalisation of treasury.

Indeed, with requests from ION Treasury’s client base for more user licences, treasury processes are increasingly being pulled into the digital realm. Many people are now users of the TMS, and gaining a first-hand understanding of the benefits of leveraging their platform. Treasuries with a pressing need for cash visibility that are making their first steps into the TMS world, are realising the advantages of automation and digital workflows.

Distinguishing features

Taking formative steps into the TMS world, or even upgrading, can sometimes be perplexing. Although many systems now offer similar functionality, Kolman says it is “still vital to find the one that fits your needs the best”.

Long-term needs might not be known, so while obviously current requirements must be met, he urges teams to consider what might be required in the medium term, about five years ahead. “As your needs evolve and possibly become more complex, some solutions might not be a good fit today but could be perfect tomorrow. Through a portfolio such as ION Treasury’s, the ability to migrate from one to another need not be a daunting task.”

Looking specifically at functionality, because it can be difficult to understand the differences between applications, Kolman suggests being more focused on core needs than the wider menu of options. Treasuries submitting industry standard RFPs often present lengthy questionnaires to vendors. However, indiscriminately asking for details on functionality that may not be important will not necessarily help in the quest for the right solution.

“The vendor must fully understand a treasury’s priorities, so it is incumbent upon that treasury to discover the requirements that will address the biggest challenges they’re trying to solve,” advises Kolman. “If curious, ask those other questions, but make your real interests clear to the vendor as there can be strict processes prohibiting communication outside of the standard channels; without the vendor’s understanding of what is truly important, it becomes difficult to address the most critical needs.”

With technology advancing at pace, the challenge of assessing the points of differentiation in the TMS market requires treasury to reflect on the additional services offered by each vendor. Here, delivery models should be considered, says Kolman. ION Treasury offers a managed cloud service that supports and fully monitors the clients’ applications, or delivers through a true SaaS model, as with ION Treasury Reval.

Kolman also suggests that treasurers should consider the vendor itself, for example, exploring where treasury technology sits within its business line. “ION operates five different business units, of which treasury is one, so it is absolutely core to our group vision,” he explains. “Our ownership structure is also unique in that it enables us to invest in the long-term future of our technology. It means we can also provide ongoing system support, ensuring the value of our clients’ applications is retained and enhanced over time.”

The last point is a strong play for any treasury where organisational expansion is likely. It’s easier and less risky to upgrade an application within the margins of a single service provider than it is to switch provider completely. “ION Treasury’s suite of products service all points on the continuum of needs,” says Kolman. “It means that from the most basic requirements of cash visibility, all the way up to the largest multinationals processing hundreds of thousands of transactions a day, our clients will never outgrow their TMS.”