Treasury Management System

What is TMS? Here are a few things to consider before diving in

12 May 2022 - 7 min read time

Working within the financial function of a real estate company is often everything but easy. The risks span from crucial financial risks to small human errors with tremendous consequences. Thankfully, there's plenty of help available. A risk management system, or a Treasury Management System (TMS), minimizes the amount of manual work you need to perform (and consequently, a lot of the risk). By doing so, it also makes sure that the organization's decision-makers are able to make more informed and well-planned long-term decisions when it comes to the company's finances. In other words, it's a pretty easy way to save both time and money since the processes are made both more efficient and more reliable. 

But where do you begin once you're ready to take the first step from the manual processes and start implementing a TMS? What are some of the things you need to consider before getting started?

We know that the first steps can feel overwhelming. Therefore, we've put together a list of important things to think about in the early stages of your TMS journey. It's actually quite simple: for you to be able to start implementing a TMS, you first need to go through all the processes used in your organization today. 

  1. Make a list of all your manual processes
    Start by listing all of the manual processes that people within your organization use at the moment and try to estimate the amount of time it takes to maintain and perform these processes. Creating a better overview of your manual processes will make it a lot easier to see what a TMS could help you improve.
  2. Go through the systems you use today
    Once you know what all the manual processes are at the moment, it's time to take a closer look at how they are performed. For example, what programs and systems are used to help perform the processes? How do these different systems interact with each other? Is there any way to verify the financial data and the results with these tools, or is that process also entirely dependent on manual work?

    In this step, it's also essential to look over the routines in place for the processes. For example, is one person responsible for the processes, or do several people share the responsibility? Are they developed individually by the people working with them, or have you made sure to synchronize the processes through the organization so that you don't risk ending up in an expensive and complicated situation due to key person dependency?
  3. Go over your reports
    To further understand your specific organization's needs, you need to list all the financial reports you produce and their individual purpose. Is the same source of data/system used by everyone in the company, or is there a risk that different people are using different data? Is, for example, your Treasury Manager using the same system and data source as your Controller and your Financial Analyst? And are they, in turn, using the same system as your Accounting Manager and the temporary consultant?

    Not using the same system for all the financial processes in an organization comes with a lot of risks, and in this step, we figure out precisely what your specific risks are.
  4. How do you administrate your debt portfolio?
    The administration of the debt portfolio is also an important factor to resolve early on. For example, where do you store the data that the debt portfolio is based on? Who is responsible for the administration at the moment? Is there a risk you'll end up with key person dependency here?

We know how complicated it can feel to get started. But once you have gone through all the steps on the list, you'll have an excellent foundation for when it's time to start comparing different Treasury Management Systems and how they match your needs. You will also have a much better overview of your financial work, which in and of itself is super valuable. 


But what are the actual benefits of using a TMS? And what should be your goals with the implementation?

First of all, a TMS helps you standardize your processes throughout the entire organization so that you never stand the risk of ending up being dependent on one or several key people – which is something that quickly can become incredibly expensive. When processes are created individually by the people using them at the moment, and the data they use is stored in, for example, excel spreadsheets, you quickly paint yourself into a corner. For example, suppose that person was suddenly not available for one reason or another. In that case, the data and information that the person has been responsible for also become unavailable. With a cloud-based TMS, all of the company's financial processes are standardized, and all the data is safely stored and readily available in the cloud. That way, you can quickly get ahold of the information you need – whenever you need it and wherever in the world you happen to be.

Another benefit of having a TMS is that defining relevant KPIs for your financial reporting becomes a lot easier. You also get a highly accurate prognosis tool, and this combination makes it much easier to predict risks and avoid any unpleasant surprises. In other words, you get more control over your company's financial situation, and who doesn't want that?

As we mentioned earlier, one of the keys to minimizing the risks of time-consuming manual work and human error is making sure that everyone works towards the same data source. In this case, that means gathering all of your debt instruments and assets in one place. However, it's equally essential that all the relevant market data is updated automatically and continuously so that the numbers you're working with always are updated and correct. Since what can look like small mistakes can have tremendous consequences, it's, as you already know, crucial that the numbers you are using are relevant. A TMS can also minimize the risk of having to redo lots of work in case something goes wrong. And, of course, that results in you saving both time and money. 


To Err is Human – and Expensive

We have already mentioned it a few times by now, but one of the risks that can have the most significant consequences when it comes to financial work, in particular, is often the human factor. Rounding numbers might seem insignificant, but the change risks becoming huge when done repeatedly, and suddenly the numbers you're working with and reporting are entirely wrong. Many financial departments also tend to use Excel as their primary tool, with processes developed by individual coworkers. Excel can, of course, be an incredibly valuable tool for a lot of people, but the fact is that it's a manual tool that depends on manual input despite its digital form. So, what happens if a number is accidentally missed when it's time to update the spreadsheet or if a decimal is wrongly placed when working with six-figure numbers? As you've probably guessed, the consequences can quickly become massive. 

By instead using one common and digitalized system throughout the entire organization, you suddenly have the possibility to gather all of your debt instruments and assets in one place while also being able to automatically collect all the relevant market data you need. This way, you can ensure that all the numbers are updated and correct and that everyone is working with the same information – no matter what part of the organization they're a part of. You also get improved transparency between the company's different functions and departments, making it easier to work seamlessly with each other since you're all already using the same data. 

I doubt that the benefits of using verified and secure market data for all your financial calculations need more explanation: it's simply another important part of working with correct numbers and minimizing the risk of errors that otherwise quickly occur. Thanks to the processes and data being synchronized throughout the company, it's also a lot easier to perform control functions and make sure that the rules that need to be followed actually are. 

When we reduce the amount of manual work performed by your financial function and automate vast parts of the processes with the help of digital tools, the financial work isn't just made more reliable and secure – it also becomes more efficient. When you minimize the repetitive manual labour, you free up both time and resources, and your employees can focus on more value-creating work.


Digitalized Processes in a Digitalized World

The world we live in is becoming more digitalized by the minute. With that, our needs and demands change, too – not least due to the pandemic and the digitalization that almost forcefully took place because of it. A lot of people worked exclusively remotely for nearly two years, and even though we hopefully can leave the pandemic behind us soon, remote work seems to be here to stay. That means that we're now in a situation where we are a lot more dependent on our processes and routines working properly, regardless of where the team members are working from. A digitalized and cloud-based system allows for this possibility since everything performed in the system is saved and stored directly in the cloud – available from wherever and whenever. 

In addition to the benefits of this type of availability, a digitalized system also makes it possible to perform calculations and simulations that are nearly impossible to achieve manually (and with a reliable result). With a TMS, you can easily simulate your debt portfolio and, for example, create a clear interest rate risk. This can be incredibly useful for budgeting and risk planning since it allows you to see how your costs might change over time based on how the market predicts that the interest rate will change, or even with your own interest rate scenarios. 

A treasury management system also makes the financial work much more user-friendly since the processes are synchronized and digitalized for everyone. This makes the TMS the perfect bridge between precision and availability – and who doesn't want that?

A reliable TMS can, in other words, be the key to efficient and long-term risk management while also making your work both more painless and efficient. Financial work shouldn't be keeping you up at night, and a treasury management system could be the crucial difference there.

If you want to know more about the benefits of working with a TMS, you can find more on that subject here.

Are you ready to take the next step on your TMS journey, or do you want to know more about how Nordkap can help you and your company? Don't hesitate to contact us here. 

Treasury Management System