Treasury management systems must adapt, not stifle

category BEST OF BREED

by Jukka Sallinen

reading time 4 min

This blogpost was originally published on on 30. September, 2020.

Of all the pressures faced by corporates, one of the biggest confronts the treasury function

Chief financial officers everywhere report that they keep an eagle eye on cashflow, debt, receivables and every other centrally managed function in the wake of the pandemic.

But are current treasury management systems up to the job in this new world? That’s the question posed by Jukka Sallinen, deputy chief executive and head of cash management at Nomentia, the newly formed company of Analyste and OpusCapita. Two companies who have been on the forefront of innovation within the cash management solution space since the mid 80s. And the company doesn’t hide its scorn for what it calls “monolithic platforms” designed for another era. Nomentia espouses more flexible, scalable and easily implemented systems that it describes as “best of breed”.

This is one of the reasons why OpusCapita and Analyste joined forces. To provide just such a platform, to offer what some call the three pillars of treasury functionality – payments, liquidity and reconciliation.

Avoid the monolithic platform at all costs, advises Sallinen: “Many come with a massive implementation protocol, or with a significant upfront cost where you pay for features and modules you don’t need,” citing reports that suggest up to 50 percent of some of the expensive features of a typical software platform are never used. “I believe that systems with a massive monolithic core are slowly fading as corporates are forced to adapt new ways of working and supporting applications and services to meet the requirements of digital business.

So are best-of-breed systems the secret for corporate treasuries as they cope with the post-pandemic revolution triggered by a virtual revolution in payments, extra risks resulting from working from home, potentially crippling cyber-attacks, increases in fraud and other emerging risks in what many describe as a perfect storm?

“It’s not the treasury that’s really changing but the world around it,” observes Sallinen in what may yet be prophetic words. “It’s in the way that companies are purchasing goods, sales are becoming digital, marketplaces are evolving, technology is changing. All this is affecting treasury functions. Enterprises that run a single, pure monolithic platform [will be left behind].”

Reflecting the nature of its product, Nomentia revels in being a lean and nimble company. In the spring of 2020, the OpusCapita Cash Management business line was in a separation process from the bigger source-to-pay provider that it was part of at the time. “We did it differently [from the monolithic systems],” Sallinen explains. “Our vision was to have a lean and mean set of tools, tools that did the job exactly. We also wanted to be cost-sensitive – and I don’t think there is anything to be ashamed about that. We decided from the very beginning that we would not spend our money on implementation processes and licenses. We need to spend money on sales and marketing and development of our products.

The pay-off was quick for the company in the speed with which it was able to bring its new business processes to life. “In just a few months we ended up building and, for the most part, going live with a best-of-breed set of tools that requires minimal customisation,” he says. “The systems are extremely functional and talk to each other where they are supposed to. We saved a truck load of money and time.”

The key phrase for Nomentia is “cloud native” – that is, a system that’s born and bred for the cloud. “You buy software that has been designed for the cloud, not a system that has been lifted and adapted to it. It is software that is built for a particular function, for smaller services sometimes known as micro-services.”

Here, the ubiquitous API architecture makes the integration of multiple solutions more affordable and manageable. It’s all about a highly scalable product, whether horizontally or elastically according to the buyers’ ever-changing needs.

“When you are delivering systems from a public cloud [like Azure, Amazon or Google], this gives providers an advantage because there is a robust baseline platform that helps to build modern, scalable and secure products,” he explains. “The architecture makes it more affordable and manageable to create multiple solutions. At Nomentia we believe you should only pay for what you use, not for a monolith. Pricing supports scaling and vice versa – you pay for what you consume.”

Even better, adds Nomentia’s deputy chief executive, the cost of such a highly flexible system plummets relative to the kind of an all-singing, all-dancing product that treasuries have typically gone for. After all, as Sallinen says, treasury and cash management has long been a niche and, as a result, a largely neglected market, in part because of the proliferation of legacy technologies and complex protocols. This in turn has led to excessive, redundant and dated technologies.

But that’s all changing. “In our opinion [the current environment] creates a free horizon for corporates,” he predicts. And if that’s true, the obvious option is best-of-breed, which he defines as “more like a network of integrated services” that are tailored to the precise requirements of the client. “You choose and pay only for what you really need. The implementation time is quick – and so is the payback. Customisation is not necessary; in fact it may be impossible with best of breed. And integration is often surprisingly simple because best-of-breed providers usually work very well together.”

According to Sallinen, corporates should first analyse exactly where they are in their commercial journey in relation to a fast-changing outside environment. “Where will that [world] take your treasury function? List your banks, list your systems, identify your policies. And look at it from the treasury, finance and IT perspective. Do it together to avoid getting into silos. Treasury and finance need to be cross-functional. The most important thing is to understand what you need in your company.”

So, the message is: install a real-world treasury system that fulfils all your current and prospective needs. In short, design systems and processes that scale with you, not make you scale with them.


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