Breadcrumb

What is a Treasury Management System and Do You Need One?

Written by

The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedMay 20222 min read

A treasury management system (TMS) is a software designed to automate tedious manual treasury processes. This often helps to organise and collate information into analytical form, allowing for greater cash and liquidity visibility.

In this post we’ll answer the question “what is a treasury management system?” in depth, as well as delve into some of the benefits of using a treasury management system. That way you’ll be thoroughly equipped to make the decision as to whether TMS is right for you.

What is a treasury management system?

TMS is a software application which automates treasury operations. This facilitates the management of various financial activities, such as cash flow and investments. Companies that acquire TMS typically do so to benefit from enhanced financial security while minimising potential reputational risk such as loss to financial capital or market share.

What does a treasury management system do?

TMS provides a number of functions, some of which are listed below:

Provides insight into cash management & forecasting

A treasury management system can organise a business’ daily cash position at the start of each business day, offering insight into bank balances, transactions, and cash flow predictions. This means businesses always have an up-to-date picture of their cash position. Naturally, this helps inform a more accurate cash flow forecast.

Optimises cash accounting

A TMS can eliminate the burdensome task of posting to the general ledger (GL) by automating the whole process from start to finish.

Streamlines bank relationship management

TMS allows for more control of bank accounts and clearer insight into bank fees by offering bank account management and bank fee analysis tools.

Provides insight into financial transactions

Top-tier treasury management system providers track financial transactions with integration to payments, accounting and cash forecasting. This paints a complete picture of treasury financial transactions, which is vital for effective treasury management.

Enhances compliance

The automatic generation of journal entries and automated integration with the general ledger and general ledger reconciliation makes it much easier to comply with any and all industry regulations.

Benefits of having a treasury management system

Having a treasury management system comes with a slew of benefits for businesses. Some of these are outlined below:

Improved efficiency - Businesses can save countless hours through automating various payment processes. As well as speeding these processes up immeasurably, it also frees up time for employees to spend on other tasks making the department as a whole more high functioning.
Reduction in costs - TMS tools allow businesses to see clearly the cost of bank transactions and associated fees. Having all these costs laid out clearly allows business owners to see where they may be incurring additional fees unnecessarily, meaning they can reduce them.
Greater cash visibility and forecasting - Having more complete control over the management of financial processes can help make financial planning more accurate.
Enhances productivity - Automating formerly manual processes such as financial data entry and management allows for greater productivity in a working day, simply because it results in more work being done more accurately.
Fraud protection - A huge advantage of TMS is enhanced fraud protection. The software has in-built tools for protecting against fraud and data breaches.

Do you need a treasury management system?

Whether or not you need a treasury management system depends on the size of your business and treasury. While businesses still in the fledgling stages may not require a TMS, growing businesses could benefit greatly from the enhanced efficiency, productivity and error reduction the software provides.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.