From the February 2012 issue of Treasury & Risk magazine

Stepping Up To Best Practices

Middle-market companies like the Columbus Regional Airport Authority and TriNet aggressively pursue treasury efficiencies.

Columbus Regional Airport Authority CFO John Byrum and Randy Bush, director of finance and administration Columbus Regional Airport Authority CFO John Byrum and Randy Bush, director of finance and administration

Faced with volatile markets and economic uncertainty, middle-market companies are moving from OK practices to best practices. For example, the $81 million Columbus Regional Airport Authority in Ohio is liquid enough and stable enough that it could have continued to run its sleepy paper-based, manually intensive treasury operation indefinitely. Instead, CFO John Byrum brought Randy Bush over from the parking division as director of finance and administration, and together they launched a transformational project to replace outdated practices with best practices across the board. Their search for guidance led them to Treasury Strategies, an industry leader in defining forward-looking best practices as Treasury 3.0.

Treasury Strategies (TSI) first signed on in 2010 as a consultant to help CRAA design a slick but compact treasury gem and then re-upped in 2011 as project managers to direct the implementation of their design.

The much more aggressive use of bank cash management services has upped the banking fees CRAA pays, Bush says, but he estimates the savings outweigh the costs by $163,000 a year. While only one employee was not replaced, several others have been “repurposed” to more productive duties, he says. “With Treasury Strategies’ help, we’ve become well-informed, able to go to our banks and aggressively negotiate the best fees,” Bush notes.

While CRAA is aggressively improving processes and leveraging banking services, it has not stocked up on technology. TSI looked into sophisticated software like treasury workstations and in the end recommended that CRAA not buy it. “They were candid and said that on our scale, it wouldn’t really pay us,” Bush says. “We appreciated their honesty.” The only third-party software CRAA uses is SymPro to monitor its very conservative investments, he says.

The phenomenon of outsourcing noncore operations to tightly focused providers is feeding the rise of a new breed of middle-market company that is compact when measured by revenue or balance sheet but large when measured by its chosen activities. That’s San Leandro, Calif.-based TriNet, with 2010 revenue of $192 million. That makes it jockey weight in the Fortune lists but an NFL player when it comes to payments because TriNet handles payroll, workers comp, and health and retirement benefits for more than 5,000 employers. For payroll alone, TriNet runs more than $8 billion a year through its bank accounts, first collecting from employers and then paying their 80,000-plus employees, explains Garth Hobden, vice president of treasury, who's pictured at left.

In the wake of TriNet’s 2009 acquisition of a smaller competitor, Gevity, big gains in treasury efficiency have come from consolidating TriNet’s PeopleSoft ERP system and Gevity’s Oracle system into a single instance of PeopleSoft. Additional gains came from improving and automating the critical credit reporting function by getting to automatically upload Dun & Bradstreet credit scoring data when TriNet’s sales team identifies a prospective client. Sales can then enter a verification of the deposit amount from the employer’s financial institution and receive a consolidated credit score, and the system typically approves prospects. “It’s all automated,” Hobden reports. “We only see the exceptions.” That automation has allowed TriNet to streamline its credit review process since the Gevity merger and keep the credit management headcount at one, he adds.

Gevity allowed its clients to fund their payrolls by check, a slower and somewhat riskier process. Now TriNet insists that new clients fund either by ACH debit or reverse Fedwire. Existing clients that still fund by check must fax or e-mail the check to TriNet, which processes the check using a remote deposit program so the money is in the bank the next business day. The reverse Fedwire option is expensive for TriNet’s employers—$15 to $20 a pop—so TriNet encourages ACH debit. Some employers apply debit blocks to restrict the amount of funds TriNet can access, but virtually nobody balks at allowing debits. TriNet is a trusted provider, and ACH debit is what principals in the professional employer organization industry expect, Hobden explains.

The heavy reliance on ACH debits for funding means TriNet is married to Key. “There is required NACHA documentation around ACH debits,” Hobden says. “If we switched to another bank, we’d have to do the documentation all over again, which would be a huge job.”

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