A lot of treasuries are buying new software. A lot are moving to hosted software, or software as a service (SaaS). With money and time short during a global financial crisis, though, not that many are doing a thorough reengineering to make all the pieces work together in a sophisticated way. But $8.3 billion not-for-profit Horizon Blue Cross/Blue Shield of New Jersey is.
The Horizon BCBS project was a "textbook" reengineering, says consultant Craig Jeffery, managing partner of Strategic Treasurer in Atlanta. "They looked at what was available and what they needed. They picked providers and then they made and executed a plan. They built it out in phases. They had a road map and followed it. Now they have visibility, efficiency, economy, speed and control."
One of the payoffs of the move to SaaS is that "we can now get reports and distribute them internally by 8:30 a.m.," reports Susan McCarthy, manager of cash and investments at Newark, N.J.-based Horizon, "and we have enough tagging rules around our posting and reconcilement that we don't have to identify very many kick-outs to resolve manually. Before, we couldn't get those reports out before 10 or 11." Distributing the reports earlier means people throughout the organization can see what's happening and take appropriate action sooner, McCarthy says. It also means that people on the cash desk can take care of other chores instead of being tied up with routine daily tasks, she adds. The new software comes largely from Kyriba Corp. of San Diego and Chesapeake Systems Solutions of Owings Mills, Md.
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Horizon's first treasury workstation was an installed version of Selkirk's Treasury Manager, purchased before Selkirk was acquired by Thomson Reuters. In 2008, Horizon's treasury went shopping when it became clear that Thomson would phase out Treasury Manager and support SaaS Treasura. Among the options Horizon considered were Treasura and Kyriba, another SaaS offering. Horizon liked the forecasting tools better in Kyriba, and Kyriba offered to download all the company's historical data from Treasury Manager and Thomson didn't, explains John Monahan, treasury manager. So the health insurer chose Kyriba that year and began a deliberate implementation process.
The treasury workstation still feeds Horizon's PeopleSoft ERP system but "we're able to do more now," Monahan says. "Instead of the old two-line journal entry, we can now allocate dollars to as many general ledger accounts as we like."
At the same time that Horizon BCBS was upgrading to Kyriba, it was moving to a newer version, also SaaS, of its Chesapeake Enterprise reconciliation system, McCarthy reports. "We had been using the older application just to store check data," she explains, "getting in checks and getting a paid file back from the bank but not getting a [general ledger] feed. Now we do the whole reconciliation within the system." The tighter controls make auditors happier, she adds.
Horizon BCBS "had a triggering event," notes Jeffery, who consulted on the project. "The vendor was sunsetting support for their treasury workstation, so they had to replace it." But rather than the quick fix of simply replacing the workstation, Horizon "took this as an opportunity to take a fresh approach to their technology and business needs," he says. "They were able to capitalize on the latest technology."
The key benefits of the new technology have been enhanced controls, increased efficiency and better forecasts, Monahan says. And forecasts are important to the health insurer. "Historical analysis is the key," he says. "We now have the ability to compare where we are cash-wise to any point in time." What is nice is the ability to load a forecast into Kyriba using a flat file, he says. "We have become better prepared for tracking things that affect our forecast. We actively reach out to internal areas that could impact our cash flow such as claims, sales and legal departments. Our forecasts are better informed.
"With the old system, cash forecasting was a cash analysis exercise," Monahan says. "It was numbers. Now we can use actual data points and see trends. It's both historical and current. When we see current trends start to skew our forecast, we can rework it."
While Horizon BCBS is reluctant to claim that its better forecasting is raising investment returns in today's low-yield environment, it is "giving us a more accurate picture of our cash flow and lets us adjust our borrowing and investments quickly to reflect that reality," McCarthy says. "It minimizes portfolio turnover and lets us allocate more accurately." The cash forecasting is done largely in Kyriba.
The biggest benefit of the new reconciliation system is tighter control and less danger of a SOX write-up, but the system also provides efficiency and better intelligence. "It pretty much does the reconciliation for you, and just leaves you with the kick-outs and coding errors," Monahan says. "And it lets us contact the bank quicker if there is a problem."
As an insurer, Horizon is naturally treasury-intensive, so having the right systems is particularly important. "They have a lot of claims, disbursements and investments," Jeffery points out. "They have multiple disbursing systems that have to be reconciled and used for forecasting. They have to connect their system to many internal systems and databases, to multiple banks, to investment managers and custodians. It's a lot more connections than the typical nonfinancial company would need."
It took IT help to make all the connections, reports Ric Thomson, senior technology analyst at Strategic Treasurer, who worked with Jeffery on the project. "With the switch to SaaS, they could use IT for internal connections instead of hardware support, which is where their IT people excelled."
Proceeding deliberately, Horizon started in September 2008 and completed the project seven months later. It ran the old and new systems in parallel for three months to ensure it was ready before throwing the switch, Monahan reports.
Horizon was midway through the implementations when the financial turmoil struck and it was able to get some benefit from the better systems, Jeffery reports.
Moving to hosted, state-of-the-art treasury systems has given Horizon's treasury more time for the big project it faces, which is moving payees like doctors, hospitals and clinics to its payments portal where they can see pending payments. When providers get paid via ACH, they can match their payments with the explanation of benefits (EOB) forms that health insurers use as remittance documents, Monahan explains, by viewing or printing out the EOBs.
"We want to get out of the business of mass printings and mailings," he says. It hasn't taken off yet, he concedes, with an ACH-to-check ratio of just 12% or 13%, but it's "the next big thing we are tackling."