The multitude of treasury-based transactions can take up a large part of the finance staff’s work day, and is highly subject to error. These tasks involve management of a company’s cash position, investment and debt portfolio, and risk analysis. The normal approach to these tasks is to track, summarize, and analyze them on an electronic spreadsheet, with manual input derived from all of a company’s banks and investment firms on a daily basis. In addition, any changes that result from this analysis, such as the centralization or investment of cash, must be manually shifted to the general ledger. Given the highly manual nature of these tasks, this frequently results in errors that must be corrected through the bank reconciliation process. A treasury workstation can greatly reduce many of these work steps.
A treasury workstation is a combination of hardware and software that will manage cash, investments, debt issuance and tracking, as well as provide some risk analysis functions. It is an expensive item to purchase, typically ranging from $30,000 for a bare bones installation to $300,000 for a fully configured one. The difference between these prices is the amount of functionality and bank interfaces added to the treasury workstation – if a buyer wants every possible feature and must share data with a large number of financial suppliers, then the cost will be much closer to the top of the range. Given these costs, this best practice is not cost-effective for companies with sales volumes under $50 million. Also, because of the large number of interfaces needed to connect the workstation to other entities, the installation time can range from one to nine months.
Why spend so much money and installation time on a treasury workstation? Because it automates so much of the rote finance tasks. For example, if an employee enters an investment into the system, it will create a transaction for the settlement, one for the maturity and another for the interest. It will then alter the cash forecast with this information, as well as create a wire transfer to send the money to an investing entity. Here are some of the other functions that it can perform:
- Bank reconciliation. It can do the bulk of a bank reconciliation, just leaving a few non-reconciling items to be resolved by an employee.
- Cash forecasting. It can determine all company cash inflows and outflows from multiple sources in order to derive a cash forecast.
- Cash movement. It can originate electronic funds transfers.
- Debt tracking. It can follow short-term debt with a link to a dealer-based commercial paper program.
- Financial exposure. It can identify and quantify financial exposure.
- Foreign exchange. It can determine a company’s cash positions in any currency.
- Investment tracking. It can track and summarize a company’s investment positions in money markets, mutual funds, short-term and fixed-income investments, equities, and options.
- Risk analysis. It allows an employee to use it as a giant calculator, performing “what if” analyses with yield-curve manipulation and scenario analysis.
Based on this lengthy list, it is evident that a large company can derive a sufficient benefit from a treasury workstation to offset its substantial cost. For more information about treasury workstations, contact any of the following workstation suppliers: SunGard Treasury Systems, Advanced Risk Management Solution, Selkirk Financial, or Integrity Treasury Solutions.