From the March 2004 issue of Treasury & Risk magazine

We Are Treasurers, Hear Us Roar

GE organizes multinationals to pressure overseas banks for electronic billing

Want your vendor to change the way it's doing business? Maybe you should join forces with other big corporations to put more purchasing power behind your request. That's the model General Electric Co. followed as it put together a group of more than 30 companies, 80% of them Fortune 500 members, to work with international banks on a standard for electronic billing.

Electronic billing by banks is common in the U.S. and Canada, but hasn't arrived in the rest of the world. Corporations are eager to achieve it because of the savings it can provide. The GE-led group, dubbed the International Bank Compensation Initiative, includes such prominent companies as ChevronTexaco, Lucent Technologies, PepsiCo, Pfizer, Textron and United Parcel Service. "We didn't want to approach banks on a one-off basis and ask them to develop something specifically for GE," says William Faulkner, manager in operations services at GE. "We're trying to enlarge the scope and get a standard developed from these international banks, a common format for the transmission of this data."

Robert Hemstreet, director of global treasury operations at Textron, says he gets far more information from banks in North America than from those overseas. Textron's U.S. and Canadian banks provide monthly account analyses that detail "every line item the bank is charging us for, the unit price [and] number of transactions," he says. For its operations overseas, Textron's corporate treasury doesn't get consolidated data on the volume of business, the charge for each item or the total charges, and it must rely on the overseas operations to monitor costs. "In some respects, we fly blind in terms of our costs," Hemstreet says.

The greater detail paves the way for cost savings. Once piles of paper are replaced with electronic account analysis statements, as the monthly bank bills are called, companies can deploy software that searches for pricing errors. The Weiland Financial Group Inc. of Lake Bluff, Ill., which provides such software and also checks account analysis statements on an outsourced basis, says that as an outsourcer, it can find enough errors to save companies an average of 4.77% a month on their bills. Wayne Francis, senior treasury manager at Lucent Technologies, says that when Lucent started getting its U.S. bank statements electronically, it identified enough pricing discrepancies to offset the implementation cost in the first year of use. GE says its move to electronic billing in the U.S. saved it $3 million over the last two and a half years. "The scary thing is that when you ask a treasurer what he or she is paying in international bank fees, they have some idea but they don't have a complete knowledge of what they're paying," says Terence Devine, manager of global operations services at GE. "It's an issue of control for the corporates to know what they are paying."

Executives argue that banks will benefit, too. If banks are having a hard time giving customers detailed bills, they probably don't have a good grasp internally on the business they do with each customer, says Lucent's Francis. Electronic billing "would probably provide them with better competitive information going forward, as far as services being used, and allow them to price more efficiently," he says.

Faulkner suggests that the 822 EDI format used in the U.S. for account analysis transmission is a possible starting point, but adds that the group is not trying to impose a U.S. standard on overseas banks. And he disavows any intention of pressuring the banks: "It's a partnership between the companies and the banks, much like what was done in the U.S.," Faulkner says. "It's a win-win for everybody." The group will focus on Europe first, then Latin America and Asia, and Faulkner says he hopes for quick results: "We would like at least one bank to be able to deliver this by the end of the year and so far that looks doable."

Textron's Hemstreet says that it will be interesting to see whether banding together proves successful. "This is the first time I've been involved with a group of multinational companies that have come together to work on an issue with our banks," he says. "I can see a huge value to us and other U.S. corporations. I can't tell you how many conversations I've had with our foreign banks about getting this information."


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