When Pankaj Sardana came on board as vice-president treasurer at Toronto Hydro, the largest municipally owned company in Canada, there was no obvious treasury to manage. “”We had to start from scratch when I arrived in 2002. We lacked important structures and we had no clue what the cash flow was

like,”” says Sardana.

The company’s newly minted treasurer did, however, know what he wanted. “”We needed to connect the treasury functions of every part of the company. This meant getting on top of the billing engines from the beginning — we send out 17,000-20,000 bills every day — and using that information for cash forecasting,”” he says.

The ability to gain command of cash resources and use this knowledge to increase efficiency and even generate additional revenue is the aim of treasury managers at organizations throughout Canada. But with increasingly complex transactions, greater demands on finances and calls for stricter regulatory compliance, managers who once relied on hard-copy methods or Excel spreadsheets are turning to the automated advantages of sophisticated technological solutions.

For Sardana, a technological approach was a no-brainer. Servicing the electricity needs of the Greater Toronto Area, Toronto Hydro is a holding company whose diverse operations also encompass selling energy efficiency products and telecommunications services. These feed into a giant treasury that adds up to a $2.5-billion company that’s handling $1.2 billion of debt. With cash flows of $300 million in some months, efficient cash and debt management is vital. “”Stakeholder relations are a big challenge for us, especially in the area of debt servicing. We also manage the employee insurance system, which adds another level of complexity,”” says Sardana, who heads a staff of six.

When it came to instituting a new treasury system, the team explored some of the plethora of dedicated software solutions on the market, ultimately choosing Vancouver-based Selkirk Financial Technologies, recently acquired by Thomson Financial. The company’s Treasury Manager suite was integrated with Toronto Hydro’s existing systems and up and running within three months for a total cost of less than $100,000.

“”We had some minor hiccups connecting interfaces in the beginning, but overall the integration was quite smooth and it’s proved to be a very user-friendly system,”” says Sardana. “”Now we can predict our cash flows and, when we have a positive flow, we can invest the excess. We’re contributing valuable income to the company — in 2003, we added $10 million, before taxes, to the bottom line.””

Level of control

The high-level of control promised by many software solutions also attracted Lynne Peloquin, assistant director for risk management and banking in the Province of Manitoba’s treasury division. “”We’re basically the bank for the province, but, as with any organization or company, the challenge for us is to increase efficiency so that we can do more with less,”” says Peloquin, who administers a diverse range of financial resources, including the province’s vital borrowing function.

Her department had previously relied on an outdated and inefficient legacy system that contributed “”bits and pieces”” of information, none of which was unified or available in real-time. Examining solutions on the market in Canada in 1998, the department became one of the earliest adopters of the fledgling Selkirk system.

“”We were their biggest client. They were still learning with us and developing their software at the same time. Some functionality was missing so we had to work closely with them to make it operate the way we wanted. But we built a very strong relationship with them and that was vital,”” says Peloquin.

Aiming to empower staff to spend less time collecting treasury data and more time developing strategies for maximizing available funds, it took two years to bring the new system fully on line, a lengthy period that Peloquin attributes to the software teething issues and the cautious approach of the department in rolling out the new system slowly, section by section.

The benefits, though, have been enormous. “”Being able to manage information in real time is the biggest advantage,”” says Peloquin. “”Since all the data is stored together, we have greater access to our information and vastly more efficient reporting. The bottom line is that it helps us to maximize the financial resources of the province through efficiency and productivity improvements.””

Despite the endorsement, Peloquin warns companies not to jump into a sophisticated system until asking themselves some fundamental operational questions. “”You have to do your homework. Find out what you want to accomplish with your financial resources before you look at the systems that are out there,”” she says. “”And remember that any software solution will likely be a compromise on your goals. You’re unlikely to find a system that meets 100 per cent of all your needs, but it’s possible to find one that meets your main critical requirements.””

It’s important not to view a new system simply as a licence to print money, according to analyst Jeanne Capachin, research director at Financial Insights, a division of Toronto-based IDC Canada. “”Treasury management is about having visibility into your company’s financial transactions so that you can quickly answer the questions: What’s my cash position? Where is my money now? Where will it be soon? It’s about always knowing your financial position so that you can report it internally for effective management and externally for compliance,”” she says.

Best-of-breed

Microsoft Excel spreadsheets are still the most common treasury tool at most companies, but many are turning to best-of-breed systems like those offered by Selkirk, Sun Corp. and PeopleSoft, which deliver heightened management functions. “”There are a lot of solutions out there and it can be difficult to choose one. It’s a good idea to first talk to treasury managers at other companies to see how they’re doing this,”” says Capachin, who says mid-sized systems typically cost $50,000 or more.

One of the biggest challenges for many treasury departments is convincing a company to make the investment in the first place. “”There’s a perception that new systems are too expensive and difficult to integrate, but the latest solutions are much cheaper and easier to use. Many now employ a browser interface and costs can be reduced by adopting a user-fee system rather than taking on a large licensing fee,”” says Capachin. “”There’s no doubt that there is more value in a treasury management system than many companies currently believe.””

It’s an area of their operations that most organizations need to address more fully, according to Valerie Gillis, senior manager, advisory services at KPMG. She says a significant majority of companies can make important and valuable adjustments to their treasury management systems. “”Almost every organization can improve its procedures,”” she says. Even those that don’t have a sophisticated automated system need to create stronger manual protocols.

Blair McRobie, executive director of the Treasury Management Association of Canada says treasury managers must keep up with an ever-increasing roster of new developments, such as emerging regulations on the reporting of company transactions.

“”If companies are not on top of their treasury operations, they don’t realize what they are missing. Treasury managers are as vital a profit centre as anyone else at the company and an effective treasury management strategy can reduce costs and ensure money is claimed as efficiently as possible — and that falls right to an organization’s bottom line,”” he says.

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