So what's the problem? Many treasurers don't believe that their day-to-day cash management is really "routine" or that rules can be written to cover all contingencies. "We're always making last-minute decisions and digesting acquisitions," says Judy Schrecker, treasurer for North America at Pittsburgh-based Alcoa Corp. "We'd like to simplify, standardize and automate, but things don't work that way here. I can't fathom how anyone from outside could run this treasury."

At some companies, particularly retailers, day-to-day treasury operations also provide insight into the underlying health of the business. "We've heard proposals for outsourcing treasury, but have not considered them seriously," reports Clarence Otis Jr., senior vice president and CFO of Orlando, Fla.-based Darden Restaurants Inc., parent to the Red Lobster and Olive Garden chains. "As a national retailer with 1,200 outlets, treasury operations help us keep a finger on the pulse of the business."

The other major question with which CFOs and treasurers wrestle when it comes to outsourcing is whether there are really savings to be captured. For instance, by outsourcing payroll, A/P or A/R to large cash management banks such as PNC Corp., corporations have eliminated hundreds of staff positions. "It [A/P] was an activity we didn't do very well," says Steve Skerl, treasurer of $300 million rubber manufacturer Day International Inc., based in Dayton, Ohio. "By outsourcing it, we were able to save money, cut staff and make the process more secure."

Guidelines to Consider

In contrast, treasury staffs typically are small and duties are divided, so that everyone has some strategic and some transactional duties. Even treasurers of Fortune 500 companies release large wires themselves. If you outsource the routine, you take away some of everyone's duties but usually don't end up with many, if any, staff cuts or cost savings, Baldoni points out.

Okay, so outsourcing is not for everybody. But can guidelines be developed for when it makes sense, at least, to consider it? Absolutely. Take the plight of Eastman Chemical's Watts. In Kingsport, Tenn., where Eastman Chemical has its headquarters, Watts faces a difficult chore recruiting the kind of expertise needed to run a $5.3 billion chemical company's treasury. Clearly, one important determinant about whether it makes sense to outsource must be a company's depth of personnel and the availability of affordable talent.

Another instance in which outsourcing makes a lot of sense to corporations is when the decision is made to move into a new region of the world to do business. For instance, as U.S. companies look increasingly to Europe and Asia for more and more business, they often sign up with global banks to get tax benefits and quickly add the pooling, FX management, tax management, regulatory compliance and payment services offered by these banks. It is the quick, safe and convenient way to enter a complex, unfamiliar environment. Yet, even when companies have more than a decade of overseas experience under their belts, many still maintain outsourcing arrangements for efficiencies.

Now J.P. Morgan Chase & Co. is getting ready to offer its European model to domestic customers, testing it with an unnamed global company that has substantial U.S. operations, reports Ian Talbott, head of global treasury agency services for the bank. "We do their investing, short-term borrowing, cash concentration and balance reporting in the U.S. and tie it into their global treasury operations," he says. But since treasury departments are slow to accept outsourcing, vendors are hesitant to commit much in the way of resources to develop outsourcing-services products.

Missing the 'Strategic'

Situations in which companies cannot either hire the right expertise or hire it quickly enough are obvious cases for an outsourcing solution to be considered. But consultants like Baldoni argue that there is a more philosophical question that treasurers need to ask when they contemplate outsourcing: Are you missing out on strategic opportunities because of the crunch of day-to-day operations? "When process duties compete with strategic opportunities, the process chores win every time because they have to be done," Baldoni notes. "If you outsource the routine, the staff may actually get to the strategic and add value." Watts, for instance, has felt the crunch of the daily versus the strategic at Eastman Chemical, which was forced to delay its plan to split in two by the end of 2001. "[The routine] definitely takes time away," he notes.

In the current climate in which top priorities are cutting costs and containing capital spending even on state-of-the-art technology, CFOs and treasurers may be more willing to listen. "CFOs are willing to give up some control over routine treasury activities to get best-in-class technology and investment service," says Andy Mayer, managing director of Arc Partners, a New York consulting firm that helps banks build treasury outsourcing solutions. "Investment alternatives have grown too fast for some treasury staffs to keep up with." But, he adds, "I haven't met a treasurer yet who is willing to give up the final say over what happens to the corporation's money."