For a large multinational, this problem could have been addressed with a variety of options–more staff, a bigger budget or purchases of hardware or software. But for a midsize company like Fellowes, those choices are available in very limited quantities, if at all. Fortunately, Koch-a former banker himself-was aware of options that many midsize companies think are beyond them but, in fact, aren't. And in a happy coincidence, the treasury technology market itself awoke to the possibilities of the middle market during the decade when Fellowes was making its push.

Meet the mini multinationals, pint-size versions of major multinationals with all the aspirations for expansion, all the challenging problems and, these days, many of the same solutions. The lines have blurred; global middle market companies now have access to a broad range of sophisticated products and services as global technology and banking players cut prices and seek out new markets. "We're seeing a convergence of the middle market and large multinationals," says consultant Stephen Baird, a Chicago-based principal of Treasury Strategies Inc. "Ten years ago, they were dramatically different, but now large corporates are exploiting technology to shrink their global treasury staffs and networks, while middle market companies are becoming more global and sometimes adding staff to do it."

For instance, it's not so unusual for companies under $1 billion in revenues to sign up for notional pooling in Western Europe, a banking tool more commonly used by companies with revenues over $10 billion. "The confluence of rising interest rates, Sarbanes-Oxley compliance and a push for operating efficiency is driving leading-edge [technology] into the middle market quicker than ever," observes Dan McCarty, senior vice president for treasury management services at Comerica Bank. "Even a $5 million company can afford to use the hottest treasury product of 2006, remote deposit."

In fact, besides its two-person treasury and nine-digit sales volume, Fellowes really doesn't look dramatically different from its cousins in the Global 500 with 11-digit revenues. "We had to expand our financial infrastructure to keep up with [the company's] growth and support operations, which were also getting financially and logistically more complex," Koch says. "Effective cash and working-capital management as well as global tax considerations have driven our processes. In each case, however, the business structure and marketplace will drive our treasury and working capital structure–not the other way around."

Ten short years later, Koch and the team he assembled can claim success. Today, Fellowes has doubled its size, with more than $700 million in revenues, and subsidiaries and affiliates in 15 countries, including a new factory on the way in China and sizable operations in Japan, Korea, Russia and eight countries in Europe. The company sells directly to the big office-supply resellers, including Staples, Office Depot and OfficeMax; mass-market retailers, such as Wal-Mart, Target and Best Buy; and a range of global and regional commercial and contract stationers.

Just as importantly, the sophistication of Fellowes' infrastructure has grown as well. To deal with its new complexity, Fellowes' treasury has incorporated many tricks of the trade not typical of most companies its size. "Most banks have a bit of a difficult time finding a single relationship department to meet our needs," Koch acknowledges. "By our size, we belong in their middle market portfolio, but by the products and services we use, we require the expertise of their multinational bankers and product managers. We regularly use products and services that are normally intended for much larger corporations. For example, we are probably one of the smallest users of Bank of America's multilateral netting system," Koch adds. "But once they know our needs, our bankers usually are happy to make those services available to us."

Still, a $700 million company is a $700 million company, and Fellowes doesn't always have the volumes that can justify the cost of using the most advanced variations of those services, Koch concedes. "BofA offers an automated netting feature that we would love to use. [It] would save us time, but all of our spending has to pass through an ROI test, and that service is just too expensive for us. So we do the netting ourselves at our local subsidiaries, while most multinationals would probably buy the automated service."

No doubt, this company profile was what the Fellowes family had in mind when they hired Koch in 1996, and what Koch had in mind when, as one of his first acts, he hired treasury specialist Christine Snouffer, who came to Fellowes from Continental Bank, where she was senior director of global trading operations. Previously, she had been director of financial operations and product development researcher at the Chicago Mercantile Exchange. It was a bit of a culture shock to move from Continental Bank (now Bank of America) to a small, private company, but "there was a lot of excitement in building a global treasury operation from scratch," she recalls.

Koch also inherited a part-time treasury administrator, Barbara Frantum, who was performing basic bank reconciliation and investment under the direction of a controller when Koch first arrived. But she had the potential to grow along with the more complex treasury operation Koch and Snouffer were building. "She had a great appetite to learn new things and expand her role, and that's what we wanted her to do," Koch observes.

But a two-person treasury requires generalists, and Snouffer splits her time between treasury operations and risk management, spending roughly half her time on each. She oversees all of the company's insurance programs and claims management. She oversees banking relationships, which include a four-bank revolving credit syndicate led by Bank of America, a European depository network and pooling account with ABN AMRO bank, a multicurrency credit facility with ABN AMRO, and a suite of sophisticated cash management products and services with Bank of America. She negotiates banking contracts and prices, makes sure treasury interfaces smoothly with other corporate functions and, in her spare time, looks for process improvements and ways to cut costs.

Fellowes is not alone in its quest for more treasury skills. Middle market companies–which in the past would often operate without even a treasurer–are putting more of a value on securing that skill set. "They are more aware of the risks today," notes treasury consultant Craig A. Jeffery, head of Atlanta-based Strategic Treasurer LLC, "and are bringing in a treasury pro sooner than they would have in the past."

Besides being able to attract more skilled finance professionals, the middle market is also benefiting from a revolution in finance technology. Services that once required scale and technical support are now available in hosted applications and priced for smaller-scale users.

In particular, there are two technologies–treasury workstations and enterprise resource planning (ERP) systems–that have been primarily responsible for delivering newfound sophistication, especially in treasury, to the middle market. According to Jeffery, Kyriba and Thomson are the most aggressive in pushing ASP-hosted treasury software to the middle market, while Gateway is making headway through its Bank of America channel.

Middle market firms are also learning how to use ERP systems for cash accounting, interfacing their ERP systems to their online banking system to initiate payments out of the ERP, notes Cindy Murray, executive vice president and head of transaction banking for North America at ABN AMRO. And they are taking BAI information files back into the ERP system for automatic reconcilement, she adds.

Fellowes, for instance, has a newly upgraded Oracle 11i ERP system and relies on Bank of America Direct as its primary treasury portal and then concentrates a majority of its domestic cash management business with that bank, Snouffer reports. BofA Direct interfaces with the Oracle system, she explains, making no other treasury software necessary.

Fellowes' treasury sophistication makes it a natural choice to beta test treasury solutions. "All of our key banking relationships like to test new products and services with us because we are looking for continuous improvement and cost reduction," Frantum notes. The banks agree. "Christine is a very sharp user of Bank of America Direct," notes Gerry McHugh, a BofA senior vice president and the Fellowes account officer. "She has set up IDs for users all over the world so that they can log in and see just what they need to see."

One source of efficiency has been the use of an image lockbox service, Snouffer says. Fellowes doesn't have the volume to justify data capture at the bank and a nightly transmission–only about 1,000 payments a month come in through the lockbox–so it has always done its own remittance capture and posting. That used to mean receiving a daily box of paper from a courier, who would make the drop anywhere between 10 am and 3 pm, she recalls. Then someone would have to sort through the paper and manually post payments to open receivables, paper document by paper document.

Now a person simply connects with the bank via the Web, views the images of remittance documents on one screen and keys the information into the Oracle A/R system on another screen. "It's been a wonderful improvement for us," Snouffer says. "It has really cut down on our processing time, reduced our overall cost and allowed us to handle a growing number of remittances without increasing head count." Having no paper to file (just a monthly CD-ROM) means no investment in filing space and quick retrieval of archived documents, she adds.

A second project on the A/R side–a change in the merchant processor used for credit card sales and a process to capture the cardholder's address and the three-digit number on the back of the card in addition to the card number–has enabled Fellowes to qualify for a lower interchange rate and, as Snouffer is quick to note, save "a couple thousand dollars a month."

Equally impressive gains in treasury efficiency came from linking Oracle to the company's remittance bank for A/P payments. Outgoing wires and ACH transactions used to be keyed in manually, something that took Frantum a full afternoon each week. But Snouffer and Frantum linked Oracle A/P to an automated payment network so that a file of all wires and ACH transactions can be delivered to the bank electronically, with no additional keying. These are levels of automation that not even all Global 500 companies can boast.

Security around payments is also state-of-the-art. Fellowes quickly took advantage of the benefits of positive-pay check processing when it became available and can now protect itself from fraud related to a forged or stolen check through zero-balance disbursing accounts. Once all legitimate presentations have been funded for the day, no balances are exposed. Concentration accounts have debit blocks so that no criminal can "do a reverse ACH and dip into our account," Snouffer explains. "We keep the safe triple-locked. As the keepers of the company funds, we take our responsibility seriously."

Hedging is, of course, Snouffer's forte. Foreign exchange exposures get the most attention, she says. "Our subsidiaries buy a lot of inventory from our factories around the world, which puts payables on the subs' books outside their notional currencies," she explains–an exposure Fellowes regularly hedges through several global banks.

While Snouffer calls Fellowes' hedging program "pretty conservative," all her experience in the world of commodity hedges makes her comfortable with flavors well beyond vanilla. "It helps if you've been on the other side and understand how the market works. I know how the transactions play out mechanically, nuances of the customized products available today and how to deal with default risk," she says. Fellowes has a March 31 fiscal year and typically spends the first quarter of the calendar year on budgeting, planning and hedging for the coming fiscal year, she adds.

For global liquidity management, Fellowes uses a cross-border pooling structure in Europe that complements its sophisticated commissionaire tax and legal structure. "Everything rolls up into the pool, and we pay suppliers out of that pool account," Snouffer notes. ABN AMRO operates the pool and holds most of the local accounts that roll up to the pool. Daily reports are available through a web-based reporting system.

While Fellowes, like most multinationals, would welcome complete, global, daily electronic reporting of all cash, for now it settles for a North American banking structure and the pooling system for most of Europe. Fellowes has not yet centralized Asia-Pacific as a region, working with separate banks in Australia, Japan, China and Hong Kong. "Some day we'd like full visibility of all our cash," Snouffer says, "but banks have made great strides with services like multibank reporting, and we can manage our global liquidity pretty well with what we have now."

Domestic liquidity is fairly simple and largely managed by Frantum. Fellowes draws on its bank revolver sparingly. "We tend to have a strong financial position and carry very little debt," Snouffer observes. Any borrowing or investment is done at the corporate level on a net basis to get the best rates. Business is seasonal, with September through March being the busiest time and therefore the most intensive time for working capital management.

While Fellowes' treasury is distinctly 21st-century, the company retains a down-home flavor that Frank Capra or Norman Rockwell would have loved. Harry Fellowes started the company in 1917, shortly after the passage of the first U.S. income tax act. He concluded that a nationwide income tax would require a lot of paperwork that would need to be stored. So he produced the first "Bankers' Boxes" and began to make sales calls up and down LaSalle Street, calling on Chicago banks.

Needless to say, Harry Fellowes was right about all that paper and document storage. But when excitement began to stir in the 1970s about the "paperless office," Fellowes expanded their product line by manufacturing paper shredders and later moved into the field of computer and technology accessories. Today Harry Fellowes' grandson James still runs the company and other family members serve on the board.

While Fellowes has much to celebrate, all eyes are focused on the future. Koch was recently promoted to COO and is currently helping Fellowes find a new CFO. That CFO, he says, will inherit a treasury operation that is in "very good shape" and will probably have to focus more on the business itself. For Koch, the essence of Fellowes' success has been its ability to keep treasury and risk management in sync with its growth, and that challenge will still be there for the new CFO in the next decade.