The Cost of Tech Debt in Treasury

Are you aware of the immense cost of Treasury technology debt? With the ever-evolving landscape of finance, it’s easy to forget about the underlying costs and risks associated with outdated systems. Just like a car needs fuel and checking of its oil, Treasury operations need regular 'upkeep.' Unfortunately, this maintenance isn't always addressed in an organization, and the cost of delaying these administrative tasks can add up - becoming a costly issue over time. This unaddressed 'debt' is referred to as technology debt, which can be detrimental if ignored. In this blog post, we will take a deep dive into identifying what causes Treasury technology debt and explore how you can manage your organization’s financial lifeblood better by understanding the true costs associated with such debt.

What is Tech Debt?

Technology debt, or “tech debt,” is the accumulation of technological costs incurred by an organization due to not properly maintaining its IT infrastructure and processes. This debt can come in many forms, including aging software, hardware depreciation, neglected security updates, and failure to stay current with the latest technologies. Tech debt does not happen overnight, but lack of attention over time can have long-term damaging effects.

In a Treasury operation, tech debt can manifest through outdated processes, potential cash losses, lack of automation, and inefficient data collection. This can lead to increased operational costs and staff resources efforts spent on manual work instead of driving tasks that push company goals. Heavy reliance on manual work increases the risk of error and potentially exposes the organization to operational risk, particularly in payments.

Tackling Tech Debt

Tackling tech debt within Treasury operations can be intimidating, and Treasury leaders face various challenges impacting ROI. Conducting a full review of your current processes and pain points is an excellent place to start. Focus on identifying gaps in processes and opportunities to create efficiencies in daily workflows. It is also important to look at both the soft and hard costs of tech debt.

Soft Cost refers to the indirect impact of using outdated or inefficient technological systems. This can affect employee productivity, compliance, and delays in processes. Often, resource inefficiencies are overlooked that result from slow manual processes, duplication of efforts, and spending hours fixing mistakes due to a lack of key internal controls. Errors in Treasury can also negatively impact other departments like accounting and finance. Therefore, it is important to involve these functions in any analysis of your Treasury Tech debt. Improving and automating workflows between Treasury and Accounting can create synergies between departments as well as generate an improved project ROI.

The hard costs of technology debt refer to the direct financial impact of using outdated or inefficient technological systems. Hard cost can cause decreased productivity due to system issues, increased maintenance and repair costs, and increase regulatory compliance costs.

Overall, both soft and hard costs can add up to significant costs to your Treasury department and to the department's overall value in the company.

Investing in Treasury Management Systems

Investing in Treasury Management Software (TMS) is a great way for organizations to reduce tech debt, as these solutions offer a range of features tailored toward modern Treasury operations. Integrated risk management tools and automated workflows can significantly increase operational efficiency while simplifying complex processes.

Accurate cash flow management is also key to a well-run Treasury organization. Remember, if you cannot adequately get cash in and cash out, the transaction execution is for naught! A well-configured TMS system will manage cash flows more effectively and provide real-time visibility over your financial position. This enables better decision making when managing payments and investments and improves liquidity planning in relation to market changes or upcoming expenses.

For organizations that already have an established TMS infrastructure, it is essential to organize regular maintenance cycles for all system components (both hardware and software). Keeping up with system updates is one way to ensure that you are operating with top-of-the-line technology. These upgrades can also be an opportunity to test new features and improve your Treasury processes.

Execution

Executing the action plans related to the identified key areas of improvement can be the most challenging part. After performing a gap analysis and functional reviews, a plan of execution must be defined and an agreement formed. Forming a thorough plan is always the first step. “Establishing a project plan for process improvement and software implementation can be challenging. By leveraging expert knowledge of those that have “done this before” and by leveraging existing project supporting templates, significant hours of pre-work and countless days of re-work down the line will be saved – time that can then be utilized for an organization’s “non-standard” business requirements,” said Michelle Bruce.

It is also vital to factor in proper testing and change management. The lack of a post-implementation plan can put your department over budget and unprepared to use the newly acquired tools, thereby creating further tech debt with insufficient employee adoption of the new software.

Investing in proper project tools and services can speed up projects and set your department up for long-term success. Top tools and services include cloud-based PM software, Managed Testing Services (MTS), and extensive user guides that will allow for a reusable template for years to come.

Consulting Firms

Consulting firms, such as Optimus, who specialize in delivering expert Treasury consulting services, can help you identify and address any tech debt that may exist in your operations. A team of experienced consultants will collaborate with you to review your current Treasury systems, identify areas for improvement and customize solutions specific to your business needs. The consulting firm ought to possess the necessary project tools and managed testing services to mitigate against cost investment.

In conclusion, tech debt in Treasury should be treated seriously by organizations as there is potential for a direct impact on both operational efficiency and overall security posture. While it may require additional investments upfront, these investments will pay off in the long run by allowing Treasury teams to become more efficient while limiting any potential risks posed by out-of-date technologies or processes. Ultimately, an organization’s tech debt can be much costlier than the of new technology.

By Darren Hartzell, Managing Director