Buying treasury technology: all-in-one vs. best-of-breed

All-in-one treasury platforms

All-in-one treasury management systems (TMS) offer a broad range of functions and features for managing cash, bank accounts, liquidity, debt, investments, and more. Treasurers like these systems because they offer multiple treasury tools through one vendor and user interface. While you may not initially need every function, it’s also reassuring to know that additional capabilities, such as hedge accounting or intercompany loan management, are available should you need them.

The challenge with all-in-one solutions is that the depth of capabilities within each module varies considerably, so it’s hard to know whether each specific tool will be sufficient to handle your organization’s evolving needs. For example, the hedge accounting module in an all-in-one platform may be able to handle simple, low-volume strategies. While this may seem like a “good enough” solution, it often limits your ability to truly achieve your economic hedging goals due to the accounting limitations put in place by the system. If your hedging portfolio includes commodities or your goal is to maximize economic protection of your risk without accounting constraints, it likely won’t meet your needs. For an all-in-one solution to be the right choice, you must accept that some of the tools may not be sufficient as your program grows in size or complexity.

Best-of-breed treasury solutions

Best-of-breed treasury solutions focus on excellence in specific functional areas. Treasurers like these systems because they offer deep capabilities, handle complexity, and can grow and expand along with the organization. For example, if you are a U.S. multinational company with uncertain or fluctuating forecasts, a platform that can handle complex hedge accounting strategies can add significant value by enabling the protection of more exposure without the worry of violating any accounting standards.

The challenge with best-of-breed solutions is that each component is specialized in its ability and not designed to handle anything outside of its focus area. This means the organization must select separate tools from multiple partners and connect them to create an integrated solution. Fortunately, with the advent of APIs and the refinement of SFTP connections, connecting systems has become significantly easier, freeing treasury technology users to choose the best pieces of risk, accounting, and cash management software knowing each system can seamlessly connect with others to deliver best-in-class capabilities. For the best-of-breed approach to be the right choice, you must invest the time to select the superior solution for each key function. As your business continues to grow and change, you want to be confident your selected tools continue to serve the organization's evolving needs. Bringing in key stakeholders early in the process can ensure you select a system that meets all of your objectives and operational requirements.

Selecting the right approach

So how do you decide which approach is right for you? The good news is that both are viable options for automating manual processes and streamlining operations. The right decision depends on your organization's projected growth and specific needs. For example, if you don’t plan to hedge financial risk or elect hedge accounting, all-in-one tools can offer a first step toward automation. When you expand your global footprint and require deeper insight or more streamlined processes, you can then incorporate a best-of-breed tool and advance your program incrementally. Importantly, though, if you project rapid organizational growth and increasing program complexity, adopting a best-of-breed approach from the onset can position your organization to quickly scale its financial risk management program. This option is becoming exceedingly available as best-of-breed technology is getting increasingly better at integrating with existing platforms...

Confidently manage financial risk with ChathamDirect

ChathamDirect is a groundbreaking financial risk management and hedge accounting platform that supports foreign exchange, interest rate, and commodity hedging programs. ChathamDirect provides a clear view of your entire hedging program, including cash flow forecasts, balance sheet exposures, and hedge requests — all securely available on a leading SaaS platform. ChathamDirect is backed by Chatham Financial, an employee-owned, independent market leader with a global team of capital markets experts, risk management advisors, CPAs, lawyers, quantitative analysts, and technology developers who serve more than 3,500 clients annually.