Managing Financial Transactions: How Treasurers can Unlock the Full Potential of their ERP

December 2013 by Bart Parren, Managing Director, Hanse Orga International B.V.

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Managing Financial Transactions How Treasurers can Unlock the Full Potential of their ERPThe Whitepaper looks at how corporate treasurers can put their financial decisions on more solid grounds with technology that provides an integrated view for treasury transactions. It makes the case for integration with the ERP system, and discusses alternatives and disadvantages.

Most large organisations use an ERP system of some sorts. It is used for financial management – in fact mostly for accounting, and it is used for managing various operational activities such as the supply chain; it handles commercial processes and is connected to (or includes) customer relationship management. But does it also handle treasury? In most organisations the answer to that question is a clear and resounding “no”. Instead, spreadsheets are used or specialised treasury systems.

The Case for the ERP SystemThere are some very sound arguments for handling financial transactions within the ERP. There is the technical side of things: no need to purchase and support additional hardware and software, automatic inclusion in the organisation’s back-up solutions, availability and clustering solutions, technical monitoring and scheduling solutions, to name but a few. The ERP also provides a functional basis that treasury can use: master data are readily available and do not need to be entered again, security features guarantee the separation of data and processes, and rates will typically be available, etc. These are arguments, however, are arguments that the average treasurer is not very interested in. He or she wants to know how the ERP can make life easier in the day-to-day management of financial transactions.

Any system that handles financial transactions will, in the end, have to be integrated into the ERP, since financial transac-tions need to be accounted for. It is a well-known fact that the easiest interface possible is no interface, so the back office would be much helped, if the ERP could directly account for financial transactions.

What is less well known is the high potential that lies in the fact that the ERP handles a lot of operational data, and ope-rational data are the direct or indirect reason why financial transactions are being done. The ERP is THE place to find supplier and customer invoices, to find information about orders and information about how many quantities of a certain commodity will be used over the coming weeks and months; and information that is needed for position management in the front office, which together with an investment, funding or hedging policy forms the basis for doing financial transactions. Thus, the ERP provides excellent data for FX hedging (on the basis of invoices and/or orders), for managing commodity positions, and for investment or funding transactions (when combined into a liquidity plan).

Front office position management belongs to those areas in corporate treasury that are least standardised. Every organi-sation seems to have a different approach to defining positions and exposures, and there are many policies that govern when positions need to be covered. One reason for this is certainly the fact that each organisation has different operations and goals. Yet, another one is a lack of system support – this is often the case where traditional systems “give up”, since the data are not readily available. They are, in fact, only readily available in one place: the ERP system.

Alternatives to the ERP systemIf we leave out spreadsheets as nobody’s preferred solution, then we are left with several specialised solutions on the market. They may be hosted by a solution provider or installed at the corporate.

The hosted, cloud-based solution relieves the treasurer of many tasks and is cost-effective, but especially here integration with real-time company data is a long way off. On top of that, archiving business-relevant treasury data in the cloud is considered as too great a risk by many corporates, as they are perceived to be open to security risks.

Installed solutions sometimes provide real “best-of-breed” functions including profound functionality in the front, mid and back office, reporting capabilities, and a treasury subledger. Here, too, the integration for data for the front office is often the weak point.

In addition, in both cases they are off-the-shelf solutions that can neither be adapted to specific requirements a corporate treasury may have nor do they provide the global overview of the entire cycle of a transaction.

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Disadvantages of the ERP SystemSo, why does not everyone use the ERP as a system to manage the lifecycle of financial transactions? There are a number of reasons; some explain it better than others. ERPs are often perceived to be heavy and costly – the very opposite of reactive when a new requirement needs to be covered. Treasurers do not like dependency on IT resources – they want to be able to make basic structural changes themselves, produce reports and analyses as they want. Not all entities may be included in the ERP system, or there may be multiple ERP systems. And last but not least, the required functions are not there, or at least not in the depth required. An ERP is by definition a generalist, and not a specialist.

The Solution: a Specialist within the ERP SystemAn ideal solution for treasurers would be a solution that would combine the best of both worlds: specialised but customis-able treasury features that can be integrated within the central ERP system and provide a high level of automation and integration.

Such integrated and automated solutions should also be able to cover corporate entities that operate outside of the ERP system, and should be able to seamlessly include them in the corporate-wide overview of treasury data. Due to the inte-gration, treasurers can directly use all relevant data from the accounting and operational modules within the ERP system to handle both front office and back office tasks with ease. Treasurers get information faster and they know the data is complete and fully reliable.

In an ideal solution, operational business and financial transactions become visible in a single dashboard so that treasurers get a holistic view of corporate positions and financial transactions instead of sketchy individual snapshots. They can base financial decision on a solid basis of reliable data instead of gut feeling.

Better still, if cash and liquidity management solutions can be integrated with the treasury solution: the very same infor-mation needed for cash and liquidity management can form a sound basis for FX management or funding decisions. The treasurer gains a complete and integrated overview based on reliable and fast data that needs to be collected and processed only once.

The company builds on its investment in the ERP system, in addition to getting best-of-breed functions.

Conclusion If treasurers want to achieve a holistic overview of corporate transactions – spanning from the beginning of a business deal all the way to securing it with a financial transaction, they should move beyond spreadsheets. They should carefully look at the alternatives on the market. Solutions that combine the advantages of ERP systems with specialised technology can drive significant efficiency gains for the entire company: a high degree of automation and centralisation due to custo-misable features enable a better control of financial risks and positions, shorter cycle times, automation, centralisation, accurate reporting and lower costs.

How Hanse Orga Can Help to Unlock the Full Potential of the ERP System Recognising the benefits of a central ERP system for treasury management, Hanse Orga developed the specialised solution FinanceSuite Treasury Management. The SAP-embedded software offers treasurers key features for an efficient management of financial instruments including money markets, loans, derivatives and others. Treasurers benefit with this solution from a central overview of all instruments and from automated processes for their treasury transactions. The key features of the solution includes the following:

� Centralisation and optimisation of treasury and cash � High degrees of automation � Control of financial risks � Direct posting in SAP FI � Complete and secure solution for front, middle and back office � Modular and comprehensive solution

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About Hanse Orga

Hanse Orga is one of the leading providers of specialised finan-cial software solutions for SAP®. We are certified as a SAP® Software and Technology Partner. With over 180 dedicated employees, we successfully completed over 90 projects in 2012 to the benefit of our customers. Our customer base consists of 500+ worldwide companies, spanning all industries including: Oil and Gas, Chemicals, Insurance, Retail, Manufacturing, Consumer Goods, Telecom, Logistics, Government, etc. Hanse Orga offers fully integrated SAP® software solutions for optimising all pro-cesses along the Financial Supply Chain. For more information about Hanse Orga and our solutions for cash application, pay-ments, treasury management, cash and liquidity management, bank account management, or our consultancy services, please contact us at www.hanseorga.com