A treasury management system (TMS) is software that shows a company's finance team all its cash, in every bank account and every currency, in one view, so that the team can move it, invest it and plan ahead. Treasury is the team that manages a company's cash. It is usually led by a treasurer, who reports to the chief financial officer (CFO).
A large company can have dozens of bank accounts. It may bank with several Indian banks, and also hold accounts abroad for its foreign subsidiaries. Without a TMS, an employee in the treasury team logs in to each bank's website every morning and copies the balances into a spreadsheet. By the time the spreadsheet is ready, some of the numbers are already out of date.
A TMS collects the balances automatically. It receives the statements from each bank's core banking system, through direct bank connections or standard statement files. It also receives the balances held abroad, for example in a multi-currency account. It converts every balance into one currency, such as rupees, and shows the total.
Say an auto parts maker in Hosur has ₹42 crore in 14 bank accounts, plus €1.5 million in Germany. The TMS shows the total and a cash forecast for the next 13 weeks. The forecast lists the salaries, the supplier payments and the customer payments that are due. The treasurer sees that one account will have ₹6 crore more than it needs next week, while another account will be short. She moves money from one to the other. She places the remaining extra cash in a short-term fixed deposit.
The system does other jobs too. It tracks the company's loans and investments. It measures currency risk, the risk that a change in the exchange rate will reduce the value of money held or owed in another currency. It also records hedges, contracts that fix an exchange rate in advance.
The TMS sends its numbers to two other systems. Financial close and reconciliation software uses the cash positions to close the books each month. Financial planning and analysis (FP&A) software uses the cash forecast to plan the year. Payments made through accounts payable and corporate cards all appear in the TMS as cash going out.