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Best Practices

What is a Treasury Management System – and how do APIs make it better?

FinLync | December 30, 2022


There is often a lot of confusion surrounding Treasury Management Systems (TMS) and Enterprise Resource Planning systems (ERP). Many people are not sure what the difference is between the two when it comes to treasury and cash management functionality, or which one they should be using to ensure the best outcomes for their business.


In this blog post, we will discuss the differences between treasury management systems and Enterprise resource planning systems, and how bank APIs are dramatically changing the outcomes of both – at a much lower cost and significantly smaller IT footprint — to the benefit of corporate treasuries worldwide.

What does a Treasury Management System (TMS) do?

A treasury management system is a software application designed to help companies manage their cash and financial transactions. It enables businesses to track and monitor cash flow, process payments, bank reconciliations, accounts receivable, accounts payable, investments , etc. These are third party systems that require integration with the company’s “system of record” – aka the ERP – in order to connect information to complete the tasks required.

On the other hand, Enterprise resource planning (ERP) systems are much larger in scope than treasury management systems. ERP systems provide an integrated platform for managing a business’ operational functions such as accounting, sales and inventory control, customer relationship management (CRM), project management, human resources (HR), enterprise performance management (EPM) and supply chain management (SCM).

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Though treasury management systems and ERP systems both have similar goals, they differ in the scope and complexity of their respective operations. Treasury management systems are designed to help organizations with specific financial tasks such as cash flow management, payments processing, receivables tracking and more. ERP systems, on the other hand, manage a much broader range of business activities, providing an integrated platform that allows businesses to monitor the performance of all departments within a single system.

A TMS is designed to add an extra layer of automation into the financial tasks that businesses must undertake by providing visibility into your finances so you can make better decisions about how to manage them. It should  include features such as automated payments, accounts receivable and payable, budgeting and forecasting, reporting and analytics.


What are the considerations if you use a TMS?

As financial transactions continue to grow on a global scale, it’s become more important than ever for businesses of all sizes to have access to the right tools. However, traditional TMSes are falling short; they lack scalability and fail when tasked with providing cohesive cross-border experience. Recent projections from EY suggest that payments between borders will be significantly larger this year compared with previous years—meaning keeping up with demand isn’t something these systems can handle alone.

Global cross-border payment flows are anticipated to surpass a whopping US$156 trillion. According to EY research, this figure has been rising steadily at an average of 5% annually – with no signs of slowing down. So how can organizations manage all these transactions efficiently? Traditional corporate treasury management systems (TMS) feature multiple accounts in different countries that cannot be managed from one single account worldwide; they might offer convenience but would not meet the scalability needs for such volume.

Despite the convenience of TMSes in tracking, organizing and simplifying international financial operations, they are unfortunately still unable to provide instantaneously seamless cross-border transactions. This lack of immediate transferability limits their potential for companies operating globally with regards to FinOps management.

When considering a corporate treasury management solution, it’s important to realize that most TMSes available on the market are modular. This means you have to either connect multiple solutions or pay for extra functionality within your existing platform – leading not only to increased costs but also extended deployment times of 3-6 months which can be frustrating and costly.

The range of TMS features and customizations can vary greatly from vendor to vendor, but one thing is consistent—these specialized payments systems usually come with a hefty price tag. And even when the setup process is complete, CFOs and Treasurers may still find themselves facing an overwhelming administrative burden due to all the different accounts they need to manage around the world. Despite their immense benefits in terms of payment automation, it’s clear that there are still many areas where treasury management solutions have yet close significant gaps before truly living up its promises.

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How do Bank APIs enhance treasury operations?

APIs offer unprecedented convenience and accuracy when it comes to managing treasury operations. Dynamic feeds mean timely, precise portfolio valuations while bank transactions can be tracked in real time with no more tedious manual checks required – the perfect recipe for intraday cash visibility.

Additionally, APIs are revolutionizing the way data is distributed. By connecting multiple systems to one source, consumers and providers can benefit from minimal connection effort; treasuries can now access banking information and market data via a single standard integration.

APIs provide an added layer of security to digital communication, making it easier for companies to get IT approval and adoption. By relying on file-less technology as opposed to traditional files, organizations can enjoy peace of mind knowing their data is more secure against potential threats or failure points.