Chapter 19 Treasury Information Management

1
Chapter 19Treasury Information Management
Order Order Sale Payment
Sent Cash Placed Received
Received
Accounts
Collection lt Inventory gt lt
Receivable gt lt Float gt

Time gt Accounts
Disbursement
lt Payable gt lt Float gt

Invoice Received
Payment Sent Cash Disbursed
2
Key Information Flows
Strategic Level
Management Level (analysis and
decision support)
Operations Level (data and value flows)
3
Treasury Information Management Objectives

• Information availability
• Information accuracy
• Information timeliness
• Information system cost
• Automation of information generation,
  transmission, analysis, and decision making
• Electronification of information and payment
  systems

4
Treasury Information Management Objectives

• Integration of treasury with other operational
  areas (finance is clearing area of intracompany
  information)
• Compiling, integrating, reporting and accounting
  for external data
• Integration of all datausually requires
  Enterprise Resource Planning (ERP)
• Primary responsibilities
• Reconciling the prior day cash balance
• Prepare a daily cash position worksheet

5
Daily Information Management

• Cash manager prepares daily cash position to
• Reconcile the prior-day cash balance
• Determine cash requirements
• Track activity
• Identify opportunities
• Update cash forecasts
• Update management information

6
Treasury Management Systems and Software

• TMS may be linked via middleware to financial
  risk management software
• FX exposures
• Interest-rate risk
• Commodity risk
• Counter-party risk
• Counter-party exposures
• Market rates and conditions

7
Treasury Management Systems Benefits and Costs

• Improved productivity
• Expedited data gathering, compilation and
  analysis
• Increased forecasting accuracy
• Reduced borrowing expenses
• Improved short-term investment returns
• Improved management reporting
• Consistent TMS infrastructure assures best
  practices, resulting in improved quality
  control, and lower costs

• Hardware and software selection, purchase and
  installation
• Startup and training expenses
• Fixed costs
• Administration
• Maintenance, overhead
• Licensing and upgrades
• Variable costs
• Telecommunications charges
• Transaction service charges
• System security expenses

8
Electronic Commerce

• EDI and the current system
• Benefits and costs of EDI
• Company-to-Bank EDI
• Electronic Funds Transfer (EFT)
• EDI Communication Formats
• Benefits of and problems with EDI

9
Relationship Between EDI, FEDI and EFT
10
EDI, FEDI and EFTParties and Applications
11
E-Commerce Benefits and Costs
Costs
Benefits

• Improved productivity
• No data reentry
• Lower error rates
• Faster data processing
• Eliminates mail time
• Improved communication capabilities

• Hardware and communications upgrades
• Training
• Maintaining economies of scale
• Effect of implementation on payments and credit
  terms

12
EDI Communications Formats, ASC X12 Standards

• 810 Invoice
• 820 Payment order/remittance advice
• 821 Financial information reporting
• 822 Customer account analysis
• 823 Lockbox information
• 824 Application advice
• 828 Debit authorization
• 832 Price/sales catalog
• 835 Health care claim payment/advice

13
Format Options for Funds Movement, NACHA

• PPD Direct deposit
• CCD Cash concentration and disbursement
• CCD Same as CCD with addendum space
• TXP For express purpose of electronic tax
  payments
• CTX Corporate trade X12 format with variable
  data fields
• RCK Re-presented check entries format
• ARC, POP, WEB and TEL

14
How Transaction Sets and Payment Formats Are Used
at GM
FOCUS ON PRACTICE
General Motors divisions transmit remittance
instructions using the ASC X12 820 format to
their banks. The banks convert the 820
transmission into the CTX format, which includes
both payment instructions, dollars, and invoice
remittance data. At this time, not all banks can
handle a CTX format. If the suppliers bank
cannot handle such a format, GMs bank will send
the payment instructions in a CCD format and will
then route a printed report of the remittance
data to the supplier.
15
E-Commerce and the Internet

• Information reporting
• Transaction initiation
• Image access
• E-Procurement
• Internet invoicing and payment
• Digital marketplaces
• Future role of the Internet

16
Assessment of Treasury Management Workstations

• Balance reporting module
• Bank information
• Cash mobilization
• Consolidation of information
• General investment module
• General debt module
• Communications and system features
• Vendor services and support

17
Assessing ERP Systems

• ERP systems are comprised of software programs
  which tie together all of an enterprises various
  functions.
• A new competitor ASP offerings
• a web-based treasury information services offered
  over the Internet with quick and low cost
  implementation, or
• a hosted Treasury Management System which has the
  flexibility, integration, and cost structure of
  an installed ERP system