Article When is the right time to move off spreadsheets to a Treasury Management System (TMS)?

When is the right time to move off spreadsheets to a Treasury Management System (TMS)?

Spreadsheets have become increasingly outmoded and are no longer fit for purpose, when compared to a treasury management system (TMS). Most treasurers and finance professionals recognize that using spreadsheets for cash, treasury or risk is not only inefficient, but also increases potential for errors and losses.

The shortcomings of spreadsheets are well documented. However, because they offer a means of collecting and organizing data, many organizations are reluctant to abandon them and adopt a TMS. A recent survey of CFOs and senior finance professionals by the UK research group FSN indicates that 71 percent of organizations still rely on spreadsheets to collect data across most of their business units, even though most are fully aware that better options are available.

Unsurprisingly, an estimated 88 percent of all spreadsheets have errors, reports Oracle. Errors that may seem trivial can result in serious consequences, such as failure to comply with regulations. The past two decades have seen a steady increase in rules and regulations, from Sarbanes-Oxley, Dodd-Frank and Basel III to Europe’s General Data Protection Regulation (GDPR). It is essential that reporting to the regulatory authorities, regulators and boards be accurate. The flaws of spreadsheets can make this more difficult than necessary.

Equally serious is the potential business impact caused by such mistakes. Incorrect cash positions and forecasts can arise far too easily in these cases. This can lead to misinformed decision-making in relation to such vital areas as payments, funding, trading and hedging.

Tangible losses

Nearly one in five major corporations have reported losses resulting from spreadsheet errors, as the Oracle report notes, and mistakes of this kind can cost a company significantly. For example, ContractWorks explains that one simple spreadsheet snafu prompted Canadian power generators TransAlta to unnecessarily spend $24 million on U.S. power transmission hedging contracts. Consider also the case of Citi’s $5.75 million settlement last August with the SEC for unauthorized trades by its broker-dealer subsidiary resulting from a spreadsheet error.

While big businesses can withstand financial pains like these, spreadsheet errors can devastate smaller organizations. In October 2017, California’s San Luis Obispo County revealed an $8 million discrepancy in its budget, which transformed a $3 million-plus surplus into a $4.8 million deficit after approved salary increases were inadvertently omitted from a spreadsheet.

The Guardian reports that last April, U.K. drink retailer Conviviality, owner of the Wine Rack and Bargain Booze stores, was forced into administration after a spreadsheet error contributed £5.2 million to their £14 million profits shortfall.

The TMS solution

The European Spreadsheet Risks Interest Group (EuSpRiG) has a list of similar situations, but many of the issues created by overreliance on spreadsheets can easily be addressed by adopting alternate solutions. For instance, switching to a TMS with a single source of data can enable treasury officials to oversee cash and liquidity positions more accurately.

Over nearly three decades, treasury technology has steadily developed in sophistication and affordability to become the first choice for automating, recording and controlling key treasury functions within a secure and compliant framework. Enabling full straight-through processing (STP) and automating standard treasury tasks removes and reduces the potential for human error.

The case for moving from spreadsheets to a treasury management system was originally based on three main benefits: timesavings, improved efficiency and increased productivity. While these points are still important, TMS capabilities have further expanded to include full cash visibility (reflected in an improved bottom line) and scalability that enables treasury departments to accomplish more with less.

Using TMS solutions, CFOs and treasurers can access not only a holistic overview of their current day cash positions but also the tools and insights needed to anticipate volatility, apply high-level management analytics and adjust the company’s risk management program accordingly. Companies can customize and tailor TMS solutions  to meet their specific needs. The advent of cloud technology has improved scalability to the point where a given solution can be rolled out globally.

Additionally, with defense against hackers and fraud at the top of treasury’s risk agenda, TMS providers have given priority to enhancing security, data encryption and messaging encryption to offer firms additional protections and convenience.

In today’s unforgiving business environment, the mantra “stop using spreadsheets” is no longer an aspiration; it is now an essential goal for any company that wants to thrive rather than merely survive.

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