Payment Hubs - The overlooked advantages of using your TMS and not your ERP for commercial payments

Continuing our series on opportunities for treasurers around ERP upgrades, it’s worth taking a closer look at the specialist bank connectivity functionality within their TMS. Typically treasury payments are made via the TMS and commercial payments by finance colleagues from various ERPs. After all, ERPs are marketed on their full payments approval functionality and ability to make payments directly either manually or automatically. Commercial payments themselves, being bulk, lower value and lower urgency are naturally going to be made via cheaper and slower channels. Finally, as the TMS is owned by the treasurer, there may be a perception in the finance team that it’s “easier” not to involve another team in the commercial payments process. 

But as the payments and business world change, the security and payment hub functionality offered by TMS solutions is becoming ever more attractive. And for corporates, that is including their commercial payments. For these businesses the cost of doing so is offset by a number of advantages:

• Reduced interface costs and increased scalability - A single bank connectivity platform provides clear cost benefits for the treasurer. Pre-set with many of the formats of the banks, it also reduces the reliance on internal resources.
• Reduced payment costs – One payment hub allows the treasurer to better monitor payments and send them via the most appropriate route - reducing cross border payments, payments that involve currency conversion and unnecessary same day high cost payments.
• More efficient short-term liquidity management – Routing commercial payments via the TMS allows the treasury team greater visibility of flows helping them time releases to optimise global liquidity needs. Based on my work with clients, interest savings from this could be material.
• Improved controls - Having one secure bank connectivity channel provides greater protection against fraud risk, helping meet SOX or other internal controls reporting requirements. This is particularly relevant where the alternative is an upload of payment files to electronic banking solutions with the potential opportunities for file change en-route.
• Enhanced payment approval opportunities - Channelling payments through one tool allows for more robust internal payment approval processes. This was the deciding factor for a business we worked with in the Middle East.
• Easier to meet sanctions and other regulatory requirements - TMS solutions will often have inbuilt sanctions screening and payment validation functionality.
• Reduced payment costs by netting inter company flows – the TMS will allow netting of inter company payments, reducing their number and cost without the need to use standalone tools or ERPs.

What should the treasurer do?

Consider the TMS alternative as part of your ERP upgrade. The more banks and ERPs in your payments realm, the greater the opportunity.

I would happy to discuss how the PwC might assist you to consider the options.