Mobility, Agility and Clouds Ahead

Treasury technology sweeps forward.

An accounting firm partner wraps up the audit of a West Coast company on Friday afternoon and gets a five-figure check. Rather than carrying it back on the plane to her East Coast home and turning it into accounting on Monday, the partner uses a service implemented by the accounting firm's treasury department. She whips out her BlackBerry, scans the check and transmits the image to her firm's East Coast concentration bank account, where the funds are swept into interest-earning investments. This same scenario plays out for a consultant with an iPhone or a college fund-raiser with an Android or a salesman with the right smart phone. As treasury technology sweeps forward, remote deposit capture has joined the mobile revolution.

"We've entered the realm where you don't need a physically stable scanning device for remote deposit. Someone in the field with a smart phone can do it on the spot," says Gary Brand, director of Source Capture Optimization at Fiserv in Brookfield, Wis. Getting the right lighting can be a challenge, especially for mobile devices without flash units, but after a few tries, the operator learns how to get a usable image, he says.

Fiserv started testing its Mobile Source Capture product in pilots last December and in August began to make it available to treasuries through banks. The service also lets treasuries consolidate multiple collection points down to a single operations center where staff can bring together incoming check payments and prepare a clean deposit, Brand explains.

In Singapore, Sandra Wan, a remote treasury manager for $748 million Red Hat, a Raleigh, N.C.-based provider of open source solutions with more than 65 offices across the globe, now opens the JPMorgan Chase Access liquidity portal, where she sees nearly all of Red Hat's Asia/Pacific cash balances in bank accounts. Wan quickly selects investment vehicles in the right currencies from a menu of approved choices and places her order for the day. That order is routed electronically to the corporate treasury in Raleigh for approval and then executed. What until recently involved paper and fax machines and took three to five days is now done without paper in minutes.

In small, tactical ways, as well as large strategic ways, technological advances are bringing significant gains in efficiency, intelligence and security to treasury operations.

For the strategic, consider what is happening behind the scenes with cloud computing. The largest treasury banks are building a cloud computing infrastructure, reports Maggie Scarborough, managing director of FinServ Strategies in Baltimore. Why should that matter to treasury staffs? Because it will make connections more seamless and allow the banks to package multiple applications, including those they get from partners, and make them seem like a single application, Scarborough explains. "It will ultimately make banks and other treasury vendors more agile than they have been in the past," she says.

With installed software, traditional ASP-hosted software or non-cloud software-as-a-service, software resides on a single server somewhere, Scarborough explains. Whatever a user does on his or her screen connects to a specific server. With cloud computing, there are multiple servers--a cloud of computers--and any computer in the cloud can deliver software access. Letting a lot of computers share the load gives banks "a lot of back-end efficiency and makes all the computers in the cloud available to handle peaks in demand," she says. "The cloud can connect multiple computers from different silos across the bank or vendor. It's subtle, but it saves the banks and vendors money and delivers more service to the end user."

Cloud computing alsoworks hand in hand with XML formats, Web services integration, and rich Internet applications, Scarborough reports. Mashups, for example, allow separate, external services to reside inside of a bank treasury management solution, but look and feel like one serviceto the user, she says. For example, one part of a bank may provide cash management services, while another part provides asset management services. With mash-ups, the asset management service can be integrated into the cash management service or treasury management portal, putting both at the user's fingertips with a simple click, Scarborough explains, which can further enable consolidated positioning.

"The integration is all invisible to the end user, but it means less hassle, fewer tokens and a more consistent experience," she notes.

In spite of the distractions and constraints of the financial crisis, banks are moving forward with technology upgrades for their treasury platforms. Chase Access, for example, already a solid hit with smaller treasury clients, is about to be eclipsed by a product that will offer even greater visibility into global cash and an even more robust set of liquidity management tools, reports Randy White, managing director and head of the liquidity business for JPMorgan Treasury Services. "It includes bits of the legacy Access product, but it will offer capabilities that don't exist on the Access platform or on any platform from any bank," White claims. "It will bring a unique way to view cash concentration structures and enhance intercompany loan functionality."

The product, called Access Liquidity Solutions, has been crafted for global multinationals but is useful to domestic U.S. companies, White says. It is now in production with a few clients in Asia and is scheduled to be rolled out to Europe and North America in October, with fuller functionality coming in 2011, he reports. JPMorgan Chase, which has been less distracted by the financial crisis than many of its peers, is capitalizing on its advantages to aggressively "build out our global corporate bank," White notes.

Chase will selectively build interfaces to major ERP and treasury workstation systems for feeds, but so far it is concentrating on bank-client interfaces, he reports.

Whether a beefed-up Access will move up market to larger corporations remains to be seen. The online banking platforms like Chase Access, Wells Fargo's CEO and the Bank of America IT2 offering provide light workstation features that are popular with their target market of smaller companies, says Elaine Filus, a principal in the technology consulting practice of Treasury Strategies in Chicago. "You hear a lot about them, but most of the large companies and a growing share of the midsize companies have moved to more robust workstations," Filus says. "We estimate that workstations have penetrated 30% of the small corporate market, 50% of the market for corporations with $1 billion to $5 billion in annual revenue and 70% of the corporations over $5 billion."

Budget cutbacks are not hampering treasury technology advances, Scarborough reports. "Preservation of liquidity is a huge corporate priority now, and much of the technology that can aid treasurers is high quality and pretty cheap, especially software-as-a-service solutions," she says.

Some companies are buying software now on a pay-as-you-go basis and locking in contractual rates before they go up, Scarborough adds. "There are a lot of low-cost solutions out there. It's a good time to buy." Being able to subscribe to a service rather than buy a product has reduced the overall cost as well as the front-end investment.

John Engeman knows a thing or two about preservation of liquidity and having the right technology tools to do the job. In early 2009, the credit crunch knocked Liz Claiborne, a New York City-based apparel company with $3 billion in sales, out of its unsecured revolver and into an asset-backed facility with capacity dependent on monthly increases or decreases in eligible inventory and accounts receivable. That plunged Liz Claiborne's treasury into a new urgency about liquidity management and cash forecasting, reports Engeman, the company's assistant treasurer and vice president, and increased its dependence on its Kyriba treasury workstation. In addition to its visibility and forecasting tools, that system allows Liz Claiborne to concentrate cash automatically, he adds.

"We had the capacity we needed but not the cushion we were used to," Engeman says. "It became critical to know exactly on any given day how much cash we had, where it was located, and what our borrowing availability was." If anything, it became even more critical to look ahead at what would be coming in and going out. "We started weekly meetings with treasury, financial planning and analysis, accounts receivable and accounts payable," he says. "We have to report our borrowing base [eligible assets] to the bank monthly, but internally we do it weekly just to stay on top of things."

Liz Claiborne and its European subsidiary, MEXX, both draw on the same asset-backed lending facility and use the same Kryiba system to track cash closely and forecast cash flows, Engeman reports. "We're constantly aware of where all our cash is so we can use it to pay down debt or minimize borrowings. We can't control our borrowing base, so we have to forecast it as precisely as we can." Having a single instance of the Kyriba workstation shared by corporate and European treasury operations makes the job possible, he says. "It's all about eliminating excess balances and improving the cash conversion cycle."

Engeman credits Kyriba with helping him do that. "We keep implementing more of the functionality of our system, and we're partnering with them to develop more features. We gave them a wish list several years ago. We wanted automated GL posting. We wanted a cash dashboard and a debt dashboard. We wanted integration with our payment factory. Together we have implemented all of them."

Treasury operations managers have long faced a dilemma: whether to buy an integrated solution from an ERP or treasury workstation vendor and get parts that were built to work together or buy best-of-breed specialized applications and find ways to make them work together. The winner is best-of-breed specialists, Filus reports. "Treasurers of large corporations with complex needs like applications that focus on a single activity and develop really robust support for that activity, narrow but deep solutions." She mentions Reval, FiREapps and Speranza as examples.

"Complex treasury processes require the functionality and they accept the need to make these applications work with their broader systems," Filus says. "That integration keeps getting easier as technology evolves." The comprehensive systems aspired to cover all the bases, but other providers were quicker to market with more robust solutions, she notes.

Despite their inability to keep up with specialized vendors in hot areas, treasury workstations, buoyed by ASP or SaaS delivery, are increasingly being adopted by large corporations and are also moving down into the middle market, Filus reports.

Midsize companies have "relied on spreadsheets until recently, but spreadsheets pose significant control issues," she says. "They are prone to keying errors and a corrupted formula can go unnoticed for a long time. With spreadsheets it takes considerable time to run daily processes, and usually only one person understands how the spreadsheet is set up and how to change it.

We see more and more treasuries picking their first workstation, even if they continue to use spreadsheets for some things," Filus adds. "They need to move scarce resources from transaction processing to analysis and planning. If a new treasurer comes in, it's a popular first win to upgrade the technology."

ERP systems' modules for activities like treasury have been left in the dust, Filus reports. "The ERP approach is to customize everything to the user, which takes time. Treasuries are more likely to grab an off-the-shelf solution that is ready to go," she says. "When treasury uses an ERP module as its system, the choice is usually driven by IT, not treasury."

Similarly, more companies are opting to outsource rather than build their own treasury systems, Filus notes. "There had been resistance around data security, but that's gone, even for sensitive information like how much cash is in which accounts." Software as a service works, it has proven to be secure, and it lets companies avoid the hassles of maintaining technology on their own servers, especially since more and more companies have now outsourced their IT, she reports. "SaaS has become the preferred solution."

The power and economy of Web-based SaaS means that sophisticated technology is reaching smaller and smaller companies, says financial technology veteran Scott Montigelli.

And smaller and smaller computers. Today's more powerful, more secure mobile devices are definitely ready for treasury applications, says Rhys Jones, head of innovation at Fundtech in Jersey City, N.J. However, as a result of mobile devices' small screens and processing times, it's not data-intensive communication but things like remote approvals and alerts that may prove most useful. A traveling treasurer could review and approve outgoing wires, receive notice that an important check or wire had arrived (and view an image of the check, if that is useful), receive notice and even inspect images of positive pay exception items and approve or deny them, or be alerted about an overdraft situation.

Treasury pros also still welcome relatively low-tech, stand-alone applications that solve a particular problem. For instance, the problem of monitoring debt compliance covenants, a once-routine chore that became particularly important when the credit crunch hit. The solution is Web-based software developed by Debt Compliance Services, whose partners are Jim Simpson of Corporate Finance Solutions and Jeff Wallace of Greenwich Treasury Advisors. The application takes the long, dense, paper loan agreements and converts them to Web pages with hyperlinks that let users jump to defined terms and section references. "You're clicking links instead of flipping pages," Wallace notes.

There is also a workflow element that directs Web-based questionnaires to people with knowledge about individual covenants. "You might have a covenant restricting the sale of fixed assets and the use of the resulting proceeds, and you might have operating plants that routinely dispose of unwanted equipment," Wallace says. "We have a Web process in place for the individual plant controllers to report to treasury on proposed and actual equipment sales to make sure that the equipment sales and the use of proceeds do not violate a covenant and cause a default/cross-default on the loan agreements."

While progress has been impressive, there is still room for improvement, says Bruce Lynn, managing partner of Darien, Conn.-based Financial Executives Consulting Group. Even the impressive gains in comprehensive information reporting still have gaps, he notes. "A treasurer of a Global 500 company needs to know what he or she is paying Citigroup across the globe, but there is no technology to report it," he says. "Weiland does it domestically, but nobody can do it globally."

Another weakness is that treasury technology works better for recording and tracking repetitive transactions than it does for compliance, and compliance, with risk policies or debt agreements, for example, is becoming a bigger part of treasury's responsibilities, Lynn says.

But the prevailing mood in the treasury tech world is buoyant optimism. Now that treasury systems have dramatically increased the data they capture, the frontier has become doing more with that data. "Systems have been rigid and limited in what they can do to stress-test cash forecasts and run what-if scenarios," Montigelli notes. Now vendors are starting to offer more analysis and reporting features that are C-suite friendly.

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