A treasury management system (TMS) is a

software application Software is a set of computer programs and associated documentation and data. This is in contrast to hardware, from which the system is built and which actually performs the work. At the lowest programming level, executable code consists ...

which automates the process of managing a company's

financial Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

operations. It helps companies to manage their financial activities, such as cash flow,

asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value ...

s and

investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

s, automatically. A TMS is commonly used to maintain financial security and minimize

reputational risk Reputational damage is the loss to financial capital, social capital and/or market share resulting from damage to a firm's reputation. This is often measured in lost revenue, increased operating, capital or regulatory costs, or destruction of sh ...

. It can be used by a company's internal management, and may be purchased from a technical supplier.

Functions

A TMS can use data to analyze and report

payment A payment is the voluntary tender of money or its equivalent or of things of value by one party (such as a person or company) to another in exchange for goods, or services provided by them, or to fulfill a legal obligation. The party making the p ...

s, cash management and

flow Flow may refer to: Science and technology * Fluid flow, the motion of a gas or liquid * Flow (geomorphology), a type of mass wasting or slope movement in geomorphology * Flow (mathematics), a group action of the real numbers on a set * Flow (psych ...

, banking and

accounting Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...

. Its functions are: *Real-time cash management: Cash management aims to increase available cash and reduce shortfalls as quickly as possible. It enables companies to eliminate unnecessary

expense An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition is a ...

s and possible

financial risk Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financial ...

. A TMS provides a range of uses for cash balances, and can access business accounts at any time. Users can view accounts in detail, including

saving Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash. Saving also involves reducing expenditures, such as recur ...

s and

lending In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that de ...

balances and transaction histories. *Cash-flow forecasting: This projects expectations of

revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive reven ...

operating expense An operating expense, operating expenditure, operational expense, operational expenditure or opex is an ongoing cost for running a product, business, or system . Its counterpart, a capital expenditure (capex), is the cost of developing or provid ...

s and profit, and is a primary business task. A TMS can predict estimated annual sales and expenses (including time frames), influencing a company's direction. *Payment reconciliation: A TMS' payment-reconciliation software reports discrepancies in account transactions between internal and external sources. Reconciliation automatically ensures that a business's financial transactions match those of a

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

, credit-card company or other

financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial insti ...

for investigation by accounting staff and analysis of discrepancies. The software includes

audit An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.” Auditing ...

ing and local work-process approval, standardizing

workflow A workflow consists of an orchestrated and repeatable pattern of activity, enabled by the systematic organization of resources into processes that transform materials, provide services, or process information. It can be depicted as a sequence of ...

and collating and integrating financial documents for review. *Debt management: Debt may help a business achieve its objectives, and a TMS can manage

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

to minimize its cost. *

Trade finance Trade finance is a phrase used to describe different strategies that are employed to make international trade easier. It signifies financing for trade, and it concerns both domestic and international trade transactions. A trade transaction require ...

: A TMS can manage trade finance, a driver of economic development. It includes lending facilities, issuing letters of credit,

export An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...

factoring (assets against invoices or

accounts receivable Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. These are generally in the form of invoices raised b ...

), and export credit and delivery

insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

. A TMS reduces the amount of paperwork involved in trade finance, and can help free up cash (via factoring) and centralize data. Trade-finance software offers businesses automated processing of import and export

documentation Documentation is any communicable material that is used to describe, explain or instruct regarding some attributes of an object, system or procedure, such as its parts, assembly, installation, maintenance and use. As a form of knowledge manageme ...

remittance A remittance is a non-commercial transfer of money by a foreign worker, a member of a diaspora community, or a citizen with familial ties abroad, for household income in their home country or homeland. Money sent home by migrants competes wit ...

s and

negotiation Negotiation is a dialogue between two or more people or parties to reach the desired outcome regarding one or more issues of conflict. It is an interaction between entities who aspire to agree on matters of mutual interest. The agreement c ...

. *Technology: TMS software has become more sophisticated to deal with

globalization Globalization, or globalisation (Commonwealth English; see spelling differences), is the process of interaction and integration among people, companies, and governments worldwide. The term ''globalization'' first appeared in the early 20t ...

. With a single

local function In computer programming, a nested function (or nested procedure or subroutine) is a function which is defined within another function, the ''enclosing function''. Due to simple recursive scope rules, a nested function is itself invisible outside o ...

, TMS technology might rely on a

spreadsheet A spreadsheet is a computer application for computation, organization, analysis and storage of data in tabular form. Spreadsheets were developed as computerized analogs of paper accounting worksheets. The program operates on data entered in cel ...

or bank system for bank reporting, financial evaluation and lending management. There are two types of the TMS: local and cloud-hosted (or cloud-based) systems. Local systems are installed on a business's home server, and enable maximum control of features and security protocols. Cloud-hosted systems are more economical, more serviceable and can be deployed more quickly.

Trends

TMSs are transferring to, and improving, the cloud-based system.

Software as a service Software as a service (SaaS ) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. SaaS is also known as "on-demand software" and Web-based/Web-hosted software. SaaS is con ...

(SaaS, a subscription system) can upgrade more quickly and is becoming more popular. The most important part of a cloud-based system is data protection, and improved data

encryption In cryptography, encryption is the process of encoding information. This process converts the original representation of the information, known as plaintext, into an alternative form known as ciphertext. Ideally, only authorized parties can decip ...

database In computing, a database is an organized collection of data stored and accessed electronically. Small databases can be stored on a file system, while large databases are hosted on computer clusters or cloud storage. The design of databases sp ...

s in a country with tight data security laws is a TMS trend; market consolidation is also a trend, enhancing functionality. An increasing number of companies have adopted cloud-based systems, which are evolving in features and security.

References

{{Management Management accounting Financial software

Functions

Trends

See also

References