The 2017 Treasury and IT Project List

Ashish Advani, Former Director of Global Treasury and International Tax, SWM International, Corporate Treasury Adviser & Private Consultant
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Ashish Advani, Former Director of Global Treasury and International Tax, SWM International, Corporate Treasury Adviser & Private Consultant

The new year is upon us and as the festivities die down, my mind wanders to the critical projects that need to be undertaken within Treasury for 2017 which require assistance from the IT department.

The adage–Cash is King, rang true in 2016 and is still on every Treasurer’s list in 2017. The misconception that no cares for cash since borrowing is cheap, never did quite take hold during the massive liquidity tidal wave of 2009-2016. Yes, the focus was not as acute in the early part of the phase, but starting 2012-13 onwards, cash and cash balances have become critical in terms of management as well as its movements.

One hears about large sums of cash stock piled in large corporations. While this is true, when you drill down into the cash balances, often one notices the ‘’trapped cash” situation. The “trapped cash” is a phenomenon where the US corporations have cash in the system, but this cash exist overseas. Cash does exist, but almost out of reach for US needs due to high tax rates on repatriation of cash. Many US corporations decide to leave the cash overseas and not pay taxes on those international profits.

In the past few years, Corporate America has seen a deluge of new regulations which have put a significant strain on cash and the ability to use this cash efficiently. The effects of Dodd Frank, FATCA and FBAR rules combined with the enforcement of BEPS (Base Erosion and Profit Sharing) in the US, has led to US auditor’s becoming more vigilant around cash stashed overseas by corporations. The corporations are scrambling to manage the cash outlay in the US (Dividends, Stock buyback, M&A’s + Capital outlays) with the limited cash flow availability.

 The increased desire to manage global cash has made the need to manage cash dynamically much more urgent and a critical ask from the CFO's and treasurers 

CFO’s and Treasurers in the United States are becoming laser focused on cash management strategies and are demanding real time visibility into global cash. Once they can track the actual movements of cash, they are in a better position to devise tax and treasury strategies to manage the overseas cash balances efficiently.

In the old days, just knowing the cash balances in a historical fashion was deemed adequate. The increased desire to manage global cash has made the need to manage cash dynamically much more urgent and a critical ask from the CFO’s and treasurers.

The technology that the banks offer to assist corporates manage the cash is limited and misses the critical component of forecasting. The tax and cash strategies than can be implemented demand that the treasurer to have a solid and dependable cash forecast. The need for effective tax and cash planning need information not just on where your cash is globally at any given time, but also the cash balances as they will grow and get utilized to give an accurate forecast of cash balance out in the future.

Having determined that the visibility into cash as well as forecasting of cash globally is critical, the next step in this puzzle is to determine the best methodology as well as technology to be deployed to ensure that the goal of managing cash is achieved. There are some powerful solutions available in the market to help manage cash as well as assist in its forecasting. While the traditional players for treasury platforms such as Sun Guard and Kyriba have been in existence for a while, we are seeing the emergence of extreme competition in this field from challengers such as Bloomberg, REVAL and Chatam Financial.

These solutions need a fair amount of integration into the company’s ERP systems and the depth of the integration depends on how extensive the company wants to implement the solutions utilizing STP (Straight through Processing). Some companies want to manage the solution on a standalone basis and then integrate results into their ERP while others want the treasury platforms to integrate directly into the ERP so that human errors are reduced and true integration can be achieved.

Within IT departments, the competing needs for the IT project management resources are getting more acute than ever. Every IT department is faced with competing needs for its resources and often Treasury department needs are superseded by the traditional Accounting department project needs. The demands from the treasury department are new and not quite mainstream in their needs as other departments. Yet the management of cash and forecasting of cash projects are one of the fastest to implement and have a significantly short payback.

Once a vendor has been selected along with the implementation strategy, the time lines of integration can last anywhere from a couple of weeks to a few months. The key to the time needed will be dictated by how much STP is desired and how the results will get integrated into the daily/monthly accounting process. The data capture of historical results can occur independent of the start of the IT project of integration. Once the software solution is primed with historical data, it will be ready for integration.

Integration will affect cash module, journal entries, mark to market which affects various positions within the balance sheet where derivative balances and equity reside. That will cover the critical components of integration. The forecasting piece of the solution will require linkages from capital projects and the traditional accounts receivable and accounts payable modules which will need to be built up from annual budgets within the ERP sections than store the data.

While the solutions can get tricky, the integration of the software into the ERP is manageable if the project is well scoped out and the testing of results is well defined. Once completed, this project will help enhance the treasury department effectiveness and assist the corporations’ needs to manage cash and allow the best control and management of cash globally and domestically.

Cash is King and when the company manages its cash within the tax restrictions, the company enjoys the benefits of higher dividends, increased M&A activities, and stock buybacks. Most company senior management is keenly interested in increasing the value of the shareholders stake and this single project can work extensively helping fulfil several of those management targets.

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