The good news for midsize companies is that providers, anxious for middle-market business, now realize they can't just sell the same system to a $300 million company that they would to ExxonMobil and financing has become more flexible. As a result, many have been working on new or modified solutions that require less of a front-end investment, reduce the daunting implementation times of more expansive systems and, for the first time, stress integration with everything, including Excel.

Destination: Internet

One of the economical alternatives may be Web-based (or ASP) solutions that stand to become among the most dramatic technological developments for the financial marketplace in the next few years. While the move to the Web began in 2000, early attempts at ASP cash management proved disappointing and were plagued with security concerns. "It turns out it's not an insignificant problem to convert PC software into Internet-based services," says Jeffrey Wallace, managing partner at Greenwich Treasury Advisors in Greenwich, Conn.

The current crop of browser-based ASP treasury management solutions is considered far superior to the earlier versions, although in certain areas, such as foreign exchange transactions and risk management, some fall short of high-powered workstations. But with their lower cost and ability to operate without much attention from a company's internal IT staff, a Web-based system may be an ideal fit for a midsize company. An ASP approach can also provide a valuable safety net in case of a blackout or other disaster recovery situation that could cripple a company's installed system.

Leading makers of heavy-duty mainstream treasury workstations, including SunGard and Selkirk Financial, have introduced Web-based services that can replicate many, if not all, of the functions that their core PC-based systems offer. Although only a few dozen clients have signed on, both companies claim momentum is building among middle-market companies.

Matching Products to resources

In theory, at least, using the Internet to deliver treasury services should be a perfect solution for smaller companies with limited human and financial resources. From the users' end, off-site ASPs allow a company to avoid upfront workstation costs, such as installing and maintaining hardware and software within the office, although a few upfront fees may still apply. All that's needed is a Web browser that allows a company's treasury to link to the hosting company. With no physical technology to manage, a treasury office can make an end run around its in-house IT department, which in smaller companies may not even exist.

The downside to some Web-based systems, particularly more specialized systems offered by banks, is that not all link seamlessly to a company's existing ERP system or other in-house technology. There also may be a limited number of banks that can be connected to certain ASPs on the market. It's always best to know upfront how scalable and adaptable each system is.

Not all treasury workstation solutions for small and midsize companies are Web-based. One of the most popular PC-based, software-driven systems for midsize users is JPMorgan's Insight. Similar to the core workstations of SunGard and Selkirk, Insight allows its users to drill quickly and deeply into the details of cash and other accounts and carry out multi-bank and multi-currency operations in a flash. Other modules include a general ledger interface, FX trading and investment and debt management.

Insight has two features that make it attractive to middle-market companies, which currently account for more than a quarter of its client base. Because it is modular, companies can buy the pieces that they most need, rather than having to buy a whole system at once. In addition, JPMorgan prices the system based on modular fees and other services used–another factor that can keep its price low.

Insight also gives its clients a choice of abandoning Excel for its own programs or using it as an interface, as do SunGard's and Selkirk's ASP tools. "Cash positioning can take hours using an Excel spreadsheet," says Kathleen Folliard, senior product manager for Insight at JPMorgan. "You can cut that time down to seconds, while also dramatically decreasing the error rate, by using Insight as the power behind that Excel program."

ERP vendors are also giving the basic Excel program and the best-of-breed workstation vendors a run for their money in the treasury management space by throwing in treasury modules as part of the deal. For instance, at Viking Range Corp., the privately held manufacturer of high-end appliances, Treasurer Jane Moss didn't go out looking for an automated treasury management system, but ended up getting one after her company purchased an ERP system from Oracle, which included it to help land the deal.

German ERP maker SAP also uses its treasury services module to offer what it calls bundled implementation and value pricing to midsize clients. Although the perception is that SAP serves mainly large multinationals, more than 60% of its worldwide customer base has revenues below $1 billion.

But to many, even giving up a portion of their Excel functions to a vast, new and unknown technology is daunting. "There's a lot of fear about new systems, a lot of burnt fingers out there," says Steve Pugh, chief executive of the U.S. arm of CODA Group, a U.K.-based accounting software producer better known in Europe than the U.S. CODA found loyalty to Excel spreadsheets among finance executives to be so steadfast that it designed a product that works with Excel rather than trying to replace it. The software, called CODA Excel, operates invisibly in the background, verifying data and controlling access to a company's most sensitive financial information, while the executive continues to interact with Excel. One drawback: It interfaces only with CODA's financial software system.

A New, Improved Excel

Meanwhile, Microsoft is not standing still in the face of mounting competition. Its newest version of Office System 2003, released in October, begins to address the problem of efficiently moving data into and out of Excel by incorporating XML capabilities within the program. That allows a financial institution to deliver data directly into a customer's Excel template, eliminating the need for any data rekeying. The next step may be for Microsoft and leading banks to establish Web-based standards and services for such transfers, but such a move is not imminent. Microsoft is also collaborating with other software vendors to enhance Office 2003′s simultaneous use of real-time data. CODA's Collaborative Close, for instance, allows employees to work simultaneously on closing reports, accessing Office (and Excel) at the front-end through a company intranet.

In the end, moving on from basic spreadsheets is going to be a luxury every company can afford and many will find mandatory to keep pace with mounting regulatory and other financial tasks. Greenwich Treasury's Wallace notes that automated systems have made huge strides in reliability in the last two years and that financing has become more flexible, making it a good time for midsize companies to explore the benefits they stand to gain. "You're going to find middle-market companies managing treasury and cash flow consistent with how the big boys are doing it." With better automation that is easier and more reliable to use, costly spreadsheet mistakes may become a distant memory.

——————–

FINANCIAL SUPPLY CHAIN MANAGEMENT

A company's treasury, accounting and procurement functions often intersect in the numerous cash and payment transactions overseen every day. For midsize companies, the chance to automate these functions with banks and suppliers presents an opportunity to efficiently organize the processes in ways not possible before.

USBank offers PowerTrack, a Web-based business-to-business payment platform. Among its features, PowerTrack can manage pre-payment audits, real-time exception identification and integrated A/P and A/R processing. Companies can electronically submit purchase orders and invoice and receipt information through the Web, while PowerTrack automatically creates an audit trail of every payment made–an important feature for regulatory reporting requirements. PowerTrack can be linked to numerous in-house ERP systems and with external vendor and bank payment systems.

Bank One has partnered with Great Plains, the ERP subsidiary of Microsoft, to offer online services known as Integrated Cash Management Solutions. The system can automate a company's payrolls, A/P and check origination files. Other features include check outsourcing, which allows a company to send an A/P file to its bank and then leave it to the bank to handle all check creation and mailing duties. Currently, the system links only to Great Plains' ERP system and to no other banks besides Bank One.

——————–

TREASURY WORKSTATION ASP OFFERINGS

SunGard Data Systems Inc.'s Web-based service, AvantGard ASP, can replicate nearly all functions of its high-end workstations, such as providing direct, real-time connections to financial service providers, including ABN Amro, Citicorp and others. The target market: Companies with revenues between $250 million and $1 billion or those that have outgrown their spreadsheets, but still don't have the transactional needs or resources to go with a fully installed workstation. Michael Poisson, senior vice president and managing director at SunGard, says that middle-market companies were unimpressed with a slimmed-down version of AvantGard ASP offered two years ago. "The more functionality we added, the more attractive it was to middle-market companies," he says.

Clients can pick and choose customized AvantGard ASP functions that best fit their needs and their budgets. The functions include cash positioning and consolidation among multiple bank accounts and services, cash forecasting, debt and investment options and limited foreign exchange functions. The product allows clients to download real-time data into an Excel spreadsheet report or use its own functions instead

Selkirk Financial TECHNOLOGIES INc., the Vancouver-based company, recently unveiled a Web-based service called Treasury Anywhere, which it plans to market with banking partners. Treasury Anywhere marks the first time Selkirk has partnered with banks to sell treasury products. "We thought we needed to expand our market but we thought that the smaller market would be overrun by banks," says Weldon Jones, product manager at Selkirk. He said that in just a few months on the market, more than half a dozen companies have signed on.

The system, which is sold on a monthly subscription basis, is meant to link easily with multiple banks. Features include the ability to track, report and manage cash positions in one consolidated database, forecast cash positions and automatically capture data from multiple financial institutions. There are also debt and investment management functions available and reports can be downloaded into Excel. Clients pay based on the functionality and applications needed. On average, Selkirik says charges range between $1,000 and $3,000 per month, with no upfront installation fees.

——————–

DERIVATIVES AND RISK MANAGEMENT SYSTEMS

Reval offered one of the original treasury management Web-based products. Its HedgeRx allows companies of all sizes to manage their treasury exposures to derivative trading in foreign exchange, commodity and interest rate instruments. New York-based Reval targets companies that are large enough to use derivatives to manage their exposures, but either don't want a workstation or must add to their workstation's capabilities. This puts it squarely in the middle market's domain.

Without Reval, companies tend to manage their hedging activities with spreadsheets that must be updated and can contain manual errors–just ask the folks at TransAlta. With Reval, an executive can get an updated view of a company's exposures in a matter of seconds. HedgeRx provides automated end-of-day data and market standard pricing for benchmarking against bank rates. Reval's products also help companies organize their reporting functions under FAS 133, the accounting regulation requiring derivatives be carried on the books at current market value. Clients can also run sensitivity analyses of their positions on Reval, changing key variables to see how their positions will be affected.

FXPress, a treasury and risk management service provider, recently released an ASP platform called FXpress Interest Rate System Trader (FIRST). The new product takes many of FXpress's earlier desktop solutions and offers them for the first time on the Internet. With FIRST, a client can manage investment and debt-trading functions, including commercial paper, money market instruments and lines of credit through a single browser-based program. FIRST also helps companies manage their FAS 133 compliance needs. Later this year, an online foreign exchange module will be added.