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Treasury and Payments

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Commercial Real Estate

Can a Treasury Management System Help Your Commercial Real Estate Organization? 

A treasury management system (TMS) can add value to your real estate business, but it’s not a cure-all. Find out how a TMS can help your company—and how it can’t.


Like all businesses, commercial real estate organizations face growing pains. These pains can be exacerbated by:

  • Complex account structures with many banks and stand-alone accounts that often can’t comingle funds
  • Functionally unique business units that frequently use different financial systems and enterprise resource planning systems (ERPs)

To manage these growing pains and automate cash management, you may want to consider a treasury management system (TMS).  

 

3 Areas Where a TMS Can Help Your Real Estate Organization

A full-suite TMS offers functionality ranging from cash management, accounting and reconciliation to risk management and derivatives, trade solutions, and investments and debt management. But there are three areas where a TMS can have the greatest impact for large commercial real estate businesses. These include:

  1. Cash positioning, forecasting and liquidity management: Commercial real estate organizations that lack automated sweeping can benefit from these TMS modules. A TMS can also automate data pulls from banks, position calculation, and overall reporting and analytics of your company’s liquidity. For organizations with massive account structures that can’t comingle their funds—whether that’s between different properties, investment funds, development accounts or other industry-specific accounts—a TMS can speed up slow manual processes to more efficiently perform daily cash positioning.
  2. Electronic bank account management, bank relationship management and bank fee analysis: These tools can help your team manage many bank relationships by serving as a repository for your bank information and, in some cases, your documents. TMS bank account management modules can help real estate investment, construction and development business lines track accounts and signers so it’s easier for your organization to communicate and enact changes to its accounts.
  3. Payments: Using TMS payment modules for both your treasury and traditional commercial payments can simplify internal processes. If you use your TMS for all payments instead of a mix of your TMS and ERP, you could have fewer payment connectivity points to manage. Treasury can also benefit from a more holistic view and better controls when it has a single location for liquidity monitoring and payments release.

 

The Limitations of a Treasury Management System

Despite its functionality, a TMS can’t replace great employees, processes and existing systems. Before you invest in a TMS, analyze your commercial real estate organization for issues that a new system won’t solve.

 

Banking Structure and Legacy Systems

Your current technology and banking structure can make it more difficult for your organization to view and move cash at critical times. Look for issues such as:

  • Banking relationships without the ability to connect with a TMS: It’s important to know that not all banks have the capability to connect with a TMS to provide file or API-based reporting and payment execution.
  • Untapped ERP potential: Many ERPs have robust cash and banking management modules. Depending on how much analysis and customization you need, you may be able to significantly lower costs by using these ERP modules instead of a TMS.

 

Employees

Your company’s organizational structure can have a major impact on the effectiveness of your cash management. A TMS can’t solve problems resulting from:

  • How effectively internal parties communicate: A TMS with automated positioning could address your problems. However, re-establishing processes with your decentralized treasury team members who work on cash positioning might help you reach the same goals.
  • Your staff’s skills and enablement: Are your team members effective in their roles? If not, look at the training and tools—aside from a TMS—that can help your team members better execute their tasks.

 

Governance

When considering a TMS, focus first on improving the efficiency and accuracy of your controls and processes. Your governance can be the determining factor in your need for a TMS. Proper governance can relieve your need for a TMS; left unchecked, poor governance can diminish the benefits of a TMS. Some common areas of focus include:

  • Your transition plan for acquisitions: Make sure to create a standard playbook to integrate new accounts and banks into your standard cash management processes.
  • Tasks that are redundant or centered around institutional knowledge: Ensure you have current process documentation, as well as mechanisms for cross training and knowledge transfer to help with onboarding and business continuity.
  • How well your organization enforces controls: It’s not always technology that’s lacking. Sometimes, individual accountability within the treasury ecosystem is broken. A TMS might help you track signers and accounts across banks. However, enforcing organizational controls on who can open or close accounts can do the same by removing the potential for surprise accounts.

 

Best Practices for Selecting a TMS

If you’ve determined that a TMS is the best solution for your commercial real estate business, it’s time to begin the selection process. Be sure to engage your technology team early on and consider multiple factors, including the implementation resources required to integrate a TMS with your other systems and how you’ll maintain the system in the future.

 

The bottom line: Before you invest in a TMS, analyze your people, processes and technology to uncover fixable issues. Then work with peer companies, consultants or banking providers to understand your options.

JPMorgan Chase’s Corporate Treasury Consulting team can help your commercial real estate organization find the tools you need. Fill out the form below to get started.

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