Treasury reporting and planning:

Corporate Treasury fulfills a variety of functions in line with the corporate strategy. Based on the approved treasury guidelines, the classic tasks range from cash and liquidity management to investment and financing management up to hedging financial risks. In addition, many treasury units are responsible for other sub-areas such as insurance management or pension management. In order to achieve transparency about the current situation and also to be able to assess future developments, a clearly structured reporting landscape and detailed planning at various levels are required. Depending on how it is used, the practice here differentiates between operational reporting, management reporting and regulatory reporting. Basically, this division conceals not only different groups of recipients, but also different technical requirements in each case. In addition, the system landscape plays an essential role in report design and implementation.

Based on the type of reporting and planning, this article provides an overview of the software used. 

Operational reporting: Elementary control element of daily treasury tasks 

A wide range of activities are performed in the daily "Treasury Doing". The daily activities and processes are running on the implemented Treasury Management System (TMS). The operational reports and dashboards deal thematically with the active management of financial resources, monitoring of lines or the balance in the treasury subledger. In this way, the existing data from the transactional system, the TMS in use, is utilized. Typically, operational reporting is implemented within the system using the available on-board resources by means of so-called standard reports. Actions can then also be triggered directly from these standard reports. As a rule, the technical requirements are largely implemented in the standard reports and no individual setup is required in this case. In the SAP S/4 HANA environment, these are, for example, the Fiori app "Cash Flow Analysis" or the Fiori app "Treasury Position Subledger". However, it has proven effective in transformation projects to ensure right from the start that the selected TMS can fully implement the business requirements for operational reporting. A one-to-one reconciliation between the current reports with their requirements and future reports can be an approach here. For some functions, operational reporting also overlaps with management reporting. 

Management reporting: Reporting to Management in line with the target group  

Many Treasury units report to the management on a monthly basis as part of the treasury report. Ad-hoc requests can also come from senior management and, depending on the maturity of the treasury reporting landscape, present a minor or major challenge to those responsible. In future-oriented treasury departments, appropriate business intelligence (BI) tools are also used to provide management with their own dashboards. Management can dynamically and interactively generate the relevant information to a certain degree and define the necessary level of detail via drill-down functionalities. Very often, the challenge in management reporting is that the relevant data resides in a variety of systems and must first be consolidated and aggregated in a specific data warehouse for reporting purposes. This may include outsourced subject areas in third-party systems, such as trade finance, liquidity management, pensions, financial investments to an asset manager. One specific example of this is the utilization of credit lines. Depending on the system landscape, these can be managed in a trade finance solution such as GTC, for example, with the general current account lines of the subsidiaries being represented in SAP TRM, for instance. To overcome this fragmentation of data and consolidate it, relevant data and tables are usually extracted from the systems and transferred to a data warehouse. The database is then the focus of the ETL (Extract, Transform, Load) process. The data is subsequently transformed in different stages, and if necessary several intermediate calculations are performed and then presented in a visualization solution such as SAP Analytics Cloud or Microsoft Power BI. The focus here is on the design of the report- and analysis-specific data model and the technical infrastructure. One of the goals in these projects is to allow the end user, and thus the treasury user, a high degree of flexibility in designing new reports and ad-hoc analyses without depending on the IT department. 

The approach described so far for management reporting also applies to the special area of liquidity planning. Based on different empirical values from practice, a final planning of liquidity in a transactional system does not lead to the desired comprehensive picture. A classification of actual cash flow data is usually created in the ERP systems or based on bank statement data, which can be extracted for the further ETL process. In the BI-supported implementation of the planning process, it is important to ensure that a high degree of flexibility is maintained – for instance by making final manual adjustments to the planning data at different levels – and that the data is appropriately adjusted in the back end. Solutions frequently used here are the SAP Analytics Cloud and Microsoft Power BI. Besides a variety of options for data integration, these BI reporting systems offer flexible, fast and addressee-oriented data preparation as well as, in particular, automated report preparation.

Regulatory and contractual reporting: reporting obligations a system-wide patchwork quilt 

Depending on the scope of the functions of a treasury department, regulatory and contractual reporting obligations arise, which are classically subsumed under the term regulatory reporting. Some common examples are the European Market Infrastructure Regulation (EMIR), Dodd-Frank Act obligations or the reporting forms for foreign trade reporting (AWV and Z4, Z5 etc.). However, in practice, no uniform approach can be observed. For EMIR reporting, there are usually solutions from within the treasury management system, although this can also be outsourced to the respective bank. The reports within the scope of the Foreign Trade Regulation have the option of being made directly from the ERP via standard programs, for example with SAP S/4 HANA. For certain contractual obligations, in-house developments are also used or third-party providers, such as Finastra, can be relied on. 

Treasury reporting obligations are becoming increasingly dynamic and complex. Experience has shown that a division into the areas of operational reporting, management reporting and regulatory reporting makes sense. The supporting system architecture for reporting can be designed and implemented easily using this functional classification. During the implementation of treasury systems in current transformation projects, it is worthwhile to invest in the design and implementation of the corresponding reporting. 

Source: KPMG Corporate Treasury News, Edition 121, May 2022
Authors:
Börries Többens, Partner, Finance and Treasury Management, Corporate Treasury Advisory, KPMG AG
Mattis Schwind, Manager, Finance and Treasury Management, Corporate Treasury Advisory, KPMG AG