At first, for treasuries, STP meant no-touch internal operations. While early advances in treasury automation focused on automating individual time-consuming treasury tasks, they often failed to address the need to transfer the results from one automated task to the next task or computer. The latest incarnation of STP connects the dots and moves an entire process through various automated steps, from start to finish. The concept is being extended to processes involving banks and other providers of financial services. And the keys to achieving true STP are a combination of new, easy-to-integrate software, the emergence of Web-based standards like XML, FTP and PIK, and tech-savvy treasury staffs either working with vendors or able to build their own bridges between systems inside and outside the company.

As is the case at other ahead-of-the-curve treasuries, the STP showpiece at On Semiconductor is foreign exchange trading. "Before, we struck deals by phone, faxed delivery instructions and got telephone confirmations. Now we're linked electronically to platforms where we get bids from competing providers. All the communication and execution are done electronically and automatically," says Freeman, whose treasury uses a combination of Bloomberg data and proprietary bank platforms.

Cash reporting is another STP success story. Freeman estimates that FX activity is now 60% to 70% STP, and cash reporting is 60% to 75% STP. Cash application, he notes, is about 50% automatic and 50% manual at this point.

On Semiconductor, with 70% of its sales outside the U.S. in 30 different countries, relies on ABN Amro Bank to reach its markets with a sophisticated, automated balance reporting routine. Most of the cash reporting that can't be converted to STP involves local banks in remote locations where the ABN Amro network doesn't stretch. Sometimes, as in China, it's regulation rather than technology or geography that dictates manual processing, Freeman says.

SPEAKING THE SAME LANGUAGE

The key to letting the bank's systems talk with On Semiconductor's workstation and ERP system: scripts written by SunGard that allow the Quantum workstation to use MT 940s to collect, strip and parse bank balance reports and load them into the workstation. "We don't have the script parsing mechanism in place for all of our accounts yet," Freeman says. "But events like China's entry into the World Trade Organization mean that we'll achieve even greater automation in the future."

On a scale from one to 10, with 10 being seamless integration, Freeman gives his company an 8.5 or nine for the ease with which its Quantum and Oracle systems communicate automatically. On Semiconductor went with Quantum partly because Oracle's treasury module didn't do fair value reporting for derivatives. The combination "gave us significantly better functionality and still a seamless integration with Oracle," Freeman notes. "We get a preliminary file to the bank a week before we initiate payouts and see the indicative FX rates. Our affiliates can see what will be coming out of their cash balances. By the Monday before Thursday payouts, the files are set and everyone can see the final funds flows. That works because Oracle and Quantum exchange information efficiently."

Where companies falter is not so much in the software they choose as in the way they use it. Workstation implementations chronically suffer from poor planning, notes consultant Craig Jeffery, senior vice president at Atlanta-based Wachovia Treasury and Financial Consulting. That results in underused software and disappointed users. Dissatisfied companies sometimes switch vendors to get better results, but unless they fix the implementation process, they'll just be disappointed again, he says.

Take, for instance, Gold Kist Inc., the $1.9 billion Atlanta-based food provider. Since 1999, Gold Kist had been using a treasury workstation from Vancouver-based Selkirk Financial Technologies, but admits it was less than satisfied. Last year it decided to upgrade its Treasury Manager, but this time Gold Kist's treasury made sure it worked more closely with Selkirk, explains Eric Wilcox, a Gold Kist treasury analyst. The results: "We're definitely more efficient now, especially in our general ledger posting. We've saved a lot of time," he notes. "Selkirk also helped us set up our long-term and short-term debt so that we calculate interest charges properly."

The increasing realization of true STP owes much to the migration of treasury software from desktop installations and dial-up modem linkages to Web portals and the greater bandwidth that goes with these new communication channels. Web-based solutions, combined with emerging universal standards like FTP (file transfer protocol) and SSL (secure socket layer), are helping treasuries operate more efficiently, largely without installed software. "It's a quiet revolution that is well along and making treasury staffs, bankers and software providers all happy," says Arthur Brieske, head of accounts payable and receivable for Deutsche Bank Global Cash Management.

Treasury managers who might have resisted at first are now finding reasons to discard the old dial-up access, reports Mandeep Seekond, vice president for information services in Citigroup's cash management product group. "They can't control phone lines very well, and if a modem fails, it could break off all communication," notes Seekond. "Besides, the needs for information have increased dramatically. Companies that used to get one file once a day now get even larger files several times a day. With its greater bandwidth, the Internet works better for today's communication expectations."

New software and communication channels are opening doors to real-time processing, Seekond says. File transfers used to be scheduled events, done at a prearranged time. Treasury operations were built around processing deadlines at the banks and the times certain reports were made available. That's changing, he insists. "The 'instant messaging age' is arriving. You can send a message to the bank anytime and get a response. You can ask for intraday postings. Increasingly, treasury operations managers are programming systems to call the bank every five minutes and download the latest postings, confirmations, balances and whatever else they need. We've moved the cheese."

But don't expect banks to embrace near-real-time reporting enthusiastically. "It exposes their middleware," Seekond notes. "Before, a bank might get a wire initiation and execute it an hour later. The customer would never know. With near-real-time reporting, the customer can check five minutes after the initiation and see that the wire hasn't gone out yet. And check again after 10 minutes. Everything is exposed, and some banks will balk at that."

As STP improves and expands, treasuries also see the prospect of significantly improving their cash flow forecasting ability–increasingly a must if companies are to get the most out of their cash. "Most companies today only try to forecast cash out two weeks, which limits planning and hedging," says Ken Dummitt, SunGard Treasury Systems' president. "One significant cost of treasury is undoing hedges based on bad forecasts. Better forecasts conserve cash."

To address the need, SunGard has developed LEX, a forecasting platform that reaches across the enterprise to expand the information on which cash forecasts are based. It looks, real-time, into systems that record new orders, returns and disputes as well as A/P and A/R, and allows companies to forecast further out with greater accuracy. SunGard also has been getting into the business of data collection, aggregation and formatting–a vital piece in any STP or forecasting scenario. "It's a way to outsource the connectivity issue," Dummitt says.

But SunGard is not alone in cash flow forecasting. There is also Selkirk's stand-alone Forecast Analytics (see page 15), XRT Inc.'s Liquidity Manager and a host of features from Trema and the major ERP providers.

GLOBAL SHRINKAGE

While most treasuries still have a distance to go to achieve STP, there are many factors driving them to get there. First and foremost is the increasingly global nature of business and the risk of too decentralized a treasury. With the newer technology, corporations can manage treasury operations globally from a single database. "They get a near-global view of working capital and their risk profile," notes Thomas Nelson, business consultant for treasury tech vendor Trema Americas Inc. "And applications can be distributed anywhere."

And the more global a company's business gets, the more pressure is on treasury to consolidate the information and systems. "The treasury mindset these days is to bring everything together on one global platform and look for treasury software that will communicate easily with other financial software like A/P, A/R and budget systems," notes Glen Solamine, vice president for sales at XRT.

Another significant driver has been regulation. Sarbanes-Oxley and new SEC reporting standards have made even $50 million public companies aware that they need to standardize their processes, and the centralized systems available not only lead to "better use of capital and a lower cost of treasury operations, but also substantially improve audit trails and generally produce a more transparent process that makes it easier to see quickly exactly what is going on," explains Garfield Hayes, head of client research and strategy for high-end treasury workstation provider Wall Street Systems Inc.

The bottom line for the treasury tech marketplace: Well, there is a bottom line for a change. After two years of lackluster sales and ruthless cost cutting, treasury solution shopping is back in vogue. Financial Insights, an IDC company, now projects sales growth of 9% annually through 2008, which is a vast improvement over flat-line growth in 2002 and anemic growth in 2003, but well below the 20% or better most software providers were enjoying before 2000.

That's not surprising since the treasury workstation market is relatively mature. Still, there are reasons to upgrade. Today's workstations have familiar functionality, but a new "dashboard look and feel," Wachovia's Jeffery observes. "They let users see their position across all banks and all countries. It's a nice step up." Since newer models are likely to be ASP-hosted, upgrades are easier, and users dodge the upfront capital investment of a license fee, he notes.

Even better news: Consultants are predicting more attractive prices. Once vendors pay their development costs, every sale is incremental income, so it pays to negotiate price, notes Jeff Wallace, a partner in Treasury Alliance Group LLC, a consulting firm based in Chicago. "More sales in Europe are helping developers cover their nut, and the marginal cost is zilch, so prices in the U.S. should be coming down," he suggests.

Yet, there are some treasury experts who believe that effective treasury automation has more to do with understanding what needs to be accomplished than it has to do with sophisticated technology. David O'Brien, the tech-savvy assistant treasurer at EDS Corp. in Plano, Tex., contends that for treasuries execution is the key to good results. "We have a reputation for being good at cash forecasting," notes O'Brien. "We're forecasting free cash flow 30 days out with 97.5% accuracy. So other treasury managers often contact us to find out what technology we use. But it isn't the technology; it's the subject matter expertise, knowing what the numbers mean. You have to understand the business before you can apply the technology."

STRETCHING THE TECHNOLOGY

In fact, EDS uses an older XRT treasury workstation. "Every year since 2000, we've looked at what we could get with an upgrade and decided not to do it. We've always found that we could build whatever we needed outside the workstation for less money. We don't do a lot of analysis and reporting from the workstation any more. We use data in the workstation to feed other tools we've built ourselves to do the analysis and reporting," O'Brien explains. "But we still have a ways to go in learning to slice and dice the data and deliver it exactly where it's needed, when it's needed, so that transactions are processed seamlessly, with no manual touches. I've seen treasurers change workstations because they decided they needed a particular metric and their old system didn't deliver it. There are so many ways to process data to get a metric if we just learn to think outside the box."