From the June 2008 issue of Treasury & Risk magazine

When Vendors Cooperate, Customers Win

Thermo Fisher Scientific just got more scientific about setting its cash position and making its cash forecasts. By stepping up from spreadsheets to an ASP-hosted treasury workstation, the Waltham, Mass.-based provider of laboratory supplies and equipment for clinical, pharmaceutical and scientific uses is part of a growing wave of companies making that move. A familiar story. But by getting its solution through triangulation, it is part of the latest delivery wave, a not-so-familiar story. This triangulation has nothing to do with global positioning and satellites. Its corners are occupied by Gateway Systems, Chesapeake System Solutions and Bank of America, three technology vendors teaming up to push the envelope for slick technology, low cost and good service.

Treasury managers can expect to see more vendor teamwork, predicts consultant Craig Jeffery, managing director of Atlanta-based Strategic Treasurer LLC. That's because banks, battered by their subprime mortgage losses, have cut back drastically on research and development spending. While "cool tools" are coming from banks to help treasury staffs manage the cash conversion cycle and financial supply chain, the more cost-conscious banks may be inclined now to let technology ventures fund the development and then offer their customers white-labeled versions of others' technology, he suggests.

Called "SmartTreasury" by Chesapeake and "Global Treasury Director" (GTD) by BofA, the offering is a basic cash management system that is being embraced by first-time treasury workstation users, mostly middle-market firms, with a smattering of large corporations. Gateway manufactures the technology, Chesapeake hosts and supports the system and BofA owns the treasury relationship in most cases, explains John Snyder, Chesapeake's director of business development. Future product development is largely in the hands of Gateway, he says. While it is a complete, multibank workstation, ease of use is perhaps its biggest selling point. "We can mimic spreadsheets," Snyder says. "For the novice user, it's not a steep learning curve." BofA is Chesapeake's biggest deal so far, and the source of most of its customers, he adds.

Using this vendor triangle is paying off for BofA client Thermo Fisher. "With our growth pattern, this was the logical next step," explains Stacy Cordier, assistant treasurer, who was hired by Fisher Scientific prior to its merger with Thermo Electron, partly because she had experience implementing a treasury workstation at another company.

While Fisher had started workstation shopping prior to the merger, adding Thermo pushed the number of accounts to manage to more than 350 and made the job of keying (into spreadsheets) more than 100 disbursement account balances per day an onerous one, Cordier adds.

Some treasury operations pros might consider the Global Treasury Director package basic, but Cordier calls it efficient. "It's pretty streamlined and tightly focused on setting a cash position quickly, efficiently and securely with some pretty robust cash forecasting features," she says. "We don't need bells and whistles like interfaces to the GL, A/P or A/R. We have far too many systems for that to work for us."

Getting that cash position automatically saves a treasury analyst at least three hours a day, Cordier estimates. "It's a huge savings," she says. All 350 bank accounts are now on the system. "Before, it was strictly spreadsheets, and we were keying in data from more than 100 disbursement accounts, which meant inevitable errors that sometimes resulted in an overdraft." No more. And getting a quick, hands-off cash position is important. "We consistently have our cash position before 11:15 am Eastern time, which is critical to our getting the best borrowing and investment rates," she explains.

While the GTD's robust forecasting capability is a strong attraction, getting that up and running is a work in progress, Cordier reports. But the old spreadsheet forecasting model has served Thermo Fisher well and will be replicated in a more automated fashion in GTD. That process takes historical data, applies parameters and then generates a forecast that basically projects a business unit's track record. These tentative forecasts are then sent to business unit controllers with a questionnaire that requires them to report key developments that would change their projected cash flow--things like when they release A/P checks, whether they follow corporate policy for payroll dates or the addition or loss of a major customer. It's up to the unit controllers to bring the forecast in line with business developments, she says.

The old Fisher was a net borrower and needed its spreadsheet-based forecasts to time borrowings. The new Thermo Fisher is cash positive, but a series of recent stock buybacks were partially funded with short-term debt, and forecasting "provided a way for us to see when we would have cash on hand to repay that borrowing so that we could determine how far on the curve to go to balance the interest rate expense with our ability to repay," Cordier explains.

BofA may be white-labeling a Chesapeake solution that packages Gateway technology, but when it comes to implementation, the treasury people work directly with Chesapeake, Snyder says. "Banks often don't want the burden of installing the system, even though it is ASP-hosted, so we work with their clients directly on implementations and problem-solving."

Adding a third party's workstation to its technology menu made sense to Chesapeake as a complement to its core strengths in bank data collection and bank reconciliation, Snyder explains. While Chesapeake does not change codes in Gateway's software, it does offer some customization through system configuration, he claims. "We're very good at moving information in bank formats," he boasts.

And that's a big part of an implementation, Snyder claims. "The challenge is to take data from various bank sources with various looks and nuances and put it all together so the user sees everything in one consistent report. We collect the data in all the various formats the big banks like to use, including SWIFT data, homogenize it and deliver it through the workstation," he explains.

While Chesapeake sells directly to corporations and could go up against either Gateway or BofA in direct competition for a sale, that rarely happens, Snyder says. Chesapeake also cross-sells SmartTreasury to some of its bank reconciliation customers, many of them small or midsize retailers, he adds.

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