Treasury & Risk's 6th Annual Alexander Hamilton Best Practices Summit — October 2 and 3, 2001
2001 — Cash Management Winners: Gold—Microsoft Corp. ; Silver: EDS Corp.; Bronze: GMAC Mortgage Corp.
NET GAINS
Microsoft Corp. wins gold in Cash Management
GOLD CASH MANAGEMENT WINNER—For many years, the bulk of Microsoft's revenues came from the Compaq's and Dells of the world. But in recent years, the software giant has set off in different directions and now sees a big chunk of its future on the Web with Internet-related products for consumers and small businesses around the globe. That means not only new ways of marketing, but also new ways of collecting revenues. And Microsoft's treasury hasn't missed a beat.
Realizing that the new marketplace would mean a variety of payment methods, particularly when dealing with markets outside the United States, Microsoft's treasury set off to develop an online payment platform that could handle all the potential payment options for online real-time buyers. The result: NetCollect, which is making its debut at Microsoft just as the company rolls out its new line of Internet-related products in November.
In spite of the vast universe of payment methods available globally, treasury wanted all payments to flow through a single platform because of the efficiencies it would provide in areas like reconciliation and systems support. To achieve that, the software company chose one banking partner, Citibank, which provided a single point of entry for all payment types, including consolidating access to its three regional card-acquiring platforms in the U.S., Europe and Asia. Treasury will be using an existing group at Microsoft, e*Bis, to serve as the gateway for all data going to and from Citibank.
Because the treasury team was able to accomplish all this before the rollout of the product line, there was opportunity to break down the silos, as Jeanne Mendez, Microsoft's assistant treasurer, puts it, and to persuade business units at both Microsoft and Citibank to adopt it. We've been selling it over and over, and our colleagues at [Citibank] have been selling it over and over, Mendez says. You really do get the best solutions when people stop being territorial or parochial and start thinking about enterprise-wide solutions.
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SILVER CASH MANAGEMENT WINNER—Restructuring its treasury operations saved EDS money and increased efficiency. But it also allowed EDS's treasury operations team to reposition itself as an adviser on liquidity management and foreign exchange to other parts of the company.
These days treasury staffers spend approximately 20% of their time processing transactions and as much as 55% of it on consulting and analysis. Before restructuring, those numbers were almost reversed, with 45% going to processing and a mere 22% to consulting and analysis.
Subject-Matter Experts
David O'Brien, assistant treasurer, said shifting treasury's role required the leadership and support of senior management and a change of attitude on the part of employees. Staff members now think of themselves as "subject-matter experts, not transaction processors," he says.
Providing consistently high-quality service is key, O'Brien says. You do one job well and the word spreads. He notes that treasury operations now get an average of 15 calls weekly from other parts of EDS requesting advice.
The restructuring also allowed EDS to consolidate its banking, reducing the number of institutions by about one-third from the 193 banks it was using in late 1999. More than 55% of EDS's business now goes through three global banks. EDS also reduced its average daily bank balances as it cut back on bank accounts and implemented zero-balancing and netting techniques.
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BRONZE CASH MANAGEMENT WINNER—In some ways, GMAC Mortgage Corp.'s solution to improving customer service and realizing savings may seem a bit counter-intuitive in this Internet age. But increasing the use of company checks in loan closings to 46% from 17% is cutting expenses by $1.5 million this year.
Traditionally, GMAC Mortgage, which is headquartered in Horsham, Penn., provides funds for mortgage closings with official bank checks, Federal Reserve wire transfers, and company checks produced on dot matrix printers at its 11 processing centers. But about one-fifth of payments made by bank check or Fedwire were mishandled or misrouted. In fact, treasury had to devote a full-time employee to handle inquiries and problems related to these types of payments.
Checking Check Fraud
Still, company checks had a downside too: The processing centers' use of preprinted check stock left GMAC more vulnerable to fraud. The solution? First, improve the error rate on bank checks and Fedwire. GMAC's treasury did this by by interfacing its origination system to the disbursement system for bank checks and wire transfers. Next, GMAC tried to reduce its vulnerability to fraud. It provided field offices and closing agents with laser printers connected to a central system that reconciles accounts daily rather than just at month-end. The laser-printer system reduces GMAC's vulnerability, because it eliminates preprinted check stock, and the checks are drawn from an account that has positive pay.
—As seen in the November 2001 issue of Treasury & Risk magazine