To get people who know how to find and use the tools, midsize companies are hiring outsiders with treasury expertise. "A sign of maturity in a middle-market company is the creation of a true treasury function," McCulley says. "As the financial landscape changes, middle-market companies are finding that they need someone expert at managing cash, debt and liquidity." That's what happened at National Financial Partners.

Motivated to Be Automated

Sophisticated automation is reaching middle-market treasuries. With $1.15 billion in 2008 revenues, National Financial Partners has just selected its first treasury workstation, and assistant vice president and treasury manager David Miller is delighted. "The products are phenomenal," he says. "The automation is terrific. The capabilities are endless. We'll see big improvements from putting all our treasury activities into one system that ties it all together and automates most of it. We'll be gaining a lot of efficiency."

After reviewing offerings from SunGard, Wall Street Systems, Kyriba, Thomson and Chesapeake, New York City-based NFP chose the system that best fit its needs but isn't ready to announce its decision. Getting a workstation that was ASP-hosted was critical from a technology maintenance standpoint. "Buying it hosted makes it relatively inexpensive," Miller says. "The biggest expense is the time it takes to make the selection and the implementation. The hard-dollar cost is nominal, and it delivers so much value for the cost."

NFP is on a roll that has cut its banking fees by 60% over the past several years, Miller estimates, largely by implementing remote check deposit in its more than 150 offices, closing a lockbox and eliminating almost all outgoing wires.

These tactical moves by treasury play into NFP's strategic plan. "Streamlining our infrastructure and realizing economies of scale are important aspects of our strategy, and complement the strong cash flow generation of our businesses," says NFP CFO Donna Blank. "Efforts like the ones we are accomplishing in treasury have allowed us to maintain a focus on our cost structure and actively manage our working capital. Our rapid de-levering over the last year shows our commitment to this focus."

Tight liquidity management that reduces fees and interest expense is important as NFP, an independent financial services distribution company that provides corporate benefits and wealth-management services, copes with the recession. Over the first three quarters of 2009, it saw a 21% decline in revenue and a 1.7% decline in cash earnings compared to the same period in 2008, according to its public financials.

Embracing scanning technology for remote check deposits has been a home run for NFP. "Starting in 2007, we rolled out remote deposit capture to all of our 150-plus offices spanning the U.S. and Canada, and that was the key to cutting seven days off check 'desk and mail' float," Miller says. The payments come largely from corporate vendors such as insurance companies.

Prior to adopting remote deposit, NFP had been overnighting checks to a bank-run lockbox. But sending the checks was cumbersome. NFP was also paying approximately $50,000 a year in overnight shipping charges, which are gone now. Remote deposit alone cut the company's banking fees in half.

It also improved liquidity management. "Now when someone in one of our offices clicks 'finish deposit,' the check hits the bank immediately and I get an e-mail notification," Miller says. "We can see all our cash and manage it in real time."

In addition to the big savings in fees and overnight shipping charges and the pickup in float, the automation of manual processes has been a big gain. "We had the lockbox people keying in check payments to 200 different depository accounts. With a manual process, naturally there were errors," Miller reports. "Now each office enters its own data into the remote deposit system. They prepare the deposit and can see exactly what is happening. With no discrepancies, reconciling 200 accounts now takes just 10 minutes, well below what it used to take."

The availability cutoff with the lockbox arrangement used to be noon. Now it's 8 p.m. ET for remote deposit. That helps NFP, which operates in almost every state and six time zones, gain a little more float, Miller explains.

To convert to remote deposit, NFP had to buy 200 scanners. It purchased them directly from its bank's hardware supplier, which agreed to drop-ship to each location. Training was a very simple hour-long, Web-based call. Now staff in the offices routinely scan and deposit checks upon receipt. Each location is assigned a unique zero-balance account that feeds into one main consolidation account.

NFP is at the forefront of a concerted effort by middle-market companies to cut working capital costs by speeding up collections, notes David Trotter, executive vice president and head of treasury management sales at Wells Fargo Bank, which inherited the NFP collections business with its acquisition of Wachovia. "Companies with a lot of branches and disbursed cash collections are leveraging desktop deposit to deploy cash quicker," he points out.

Miller, 32, had three years of treasury experience at UBS Financial Services and three years managing treasury at Datek Online (now TD Ameritrade) before joining NFP five years ago. He came in determined to make NFP's treasury operations more efficient.

In the last year, outgoing wires, an obvious target on the payment side, have been almost completely eliminated. NFP now makes all payments by check or ACH. "We used to manually key in wires for a certain type of recurring large payments 15 times a month and now we take an upload from our general ledger system three times a month and transmit it as an ACH file to the bank," he explains. "That project, completed in 2009, gives us better control over our cash flow, since we know exactly how much goes out the door and when. And eliminating wires cut another 5% from the company's bank fees."

In the last year, Miller worked with the finance and legal teams to review all of NFP's bank accounts and closed more than 100 that were unused or underused, resulting in another cut in bank fees. He also got all the company's banks to send electronic statements instead of mailing paper ones.

The reduction in manual activities, especially the bank account reconciliation the treasury workstation will provide, is allowing NFP to redeploy half of Miller's staff of four to other areas.

The gains in cash visibility have worked in lockstep with NFP's efforts to increase operating cash flow, Jessica Bibliowicz, NFP's chairman, president and CEO, noted in reporting the company's earnings for the third quarter of 2009. "The actions we have taken over the past year to increase cash flow and reduce expenses continue to be effective."

Compared with the year-earlier period, in the third quarter, "cash flow from operations increased 40% and the gross margin percentage improved meaningfully," Bibliowicz said. "The amount outstanding under our credit facility has been reduced by 56% from the beginning of the year to the end of October."

In the future, Miller plans to further cut costs on the payment side by reducing the use of checks and moving more toward ACH.

Determined to Drive Efficiency

The rational elegance of a fully automated treasury operation with full global visibility, straight-through processing, an executive dashboard refreshed in real time and optimized liquidity usually collides at some point with the messy realities of commerce. At Carlile Transportation Systems, the collision is conspicuous. Anchorage, Alaska-based Carlile is a $135 million trucking and logistics company with 650 employees. It has offices in five states and Canada, and its revenue has doubled in the past seven years. Carlile annually processes about 300,000 bills of lading to move more than 1.2 billion pounds of freight.

This asset-based, less-than-a-truck-load carrier primarily moves freight from the continental United States north to Alaska and delivers it wherever its customers need it. Heavy-haul work involving oversized or overweight loads is a specialty. About half Carlile's revenue comes from the oil and gas industry or that industry's service firms.

All companies talk about compressing the order-to-pay cycle to expedite cash flow and minimize debt or maximize investment returns. But suppose a customer decides it is most economical to move a large shipment of equipment from Carlile's Houston, Texas, terminal to the Tacoma, Wash., terminal by truck, then offload it onto a barge to be hauled by water to Anchorage and then to Carlile's Prudhoe Bay terminal in Alaska or beyond. Complex freight requirements may mean that the shipment sits in a warehouse until it can be broken up or joined with other freight needed for specialty engineering projects waiting for seasonal schedules such as ice-road completion. Sometimes, parts of a shipment are carried to remote areas only accessible by small aircraft. In extreme cases, the order-to-pay cycle can take months, explains Terry Smith, Carlile's CFO.

Under Smith and controller Judy Eckart, Carlile is no slouch at moving money, but when your business is moving stuff, there are limits to how quickly you can make the money move. For example, many large companies outsource the management of their transportation payments because transportation is what Smith calls "a very fragmented industry," by which he means that moves can be complicated, touched by multiple providers and subject to multiple special surcharges or discounts. Carrier size, rate agreements, documentation requirements, communication and logistics issues all offer great potential for disputed payments. Sometimes there are many degrees of separation between the parties involved in moving items to Alaska.

"The Carlile supply chain gets complex when freight gets dropped off at our dock in Tacoma with little information from the inbound carrier," Smith says. "Our job is to get it to Alaska safe, according to terms, and billed out right. When you add a third-party payment company into the mix, it offers another challenge.

"We work with about 25 of these third-party payment firms that review and approve transportation payments on behalf of their clients," he explains. "They make their money by auditing and paying carrier invoices, and some are predisposed to disputing everything they can for as long as possible to maximize float."

When Carlile gets a payment from one of these third parties, it's likely to settle invoices for a group of their clients, so it is currently not always easy to see which invoices are covered by any one payment, he says. "Each third-party payor has its own processes, which we have to understand and manage. Some are electronic and sophisticated. Between EDI settlement, third-party technologies and relationship-building, it takes work to streamline processes, settlement and reconciliation cycles and find the right technology to make them most efficient."

Carlile faces many challenges around the freight and logistics it handles. Trucking margins are tight and Carlile runs lean in treasury. While it has an effective treasury operation, there is no treasurer, assistant treasurer or director of treasury operations. All the work is done by Smith and Eckart, with a small staff of accountants, clerks and regional service managers handling dispute resolutions and collections. Except for the service managers, they all report to Eckart, who reports to Smith.

But with inexpensive, easy-to-use technology, the help of their principal bank, KeyBank, and hard work, they are able to "use just about every treasury management product and service Key offers to keep staff light," says Smith. That includes imaged lockbox, nightly transmissions and dual sweeps–into investment vehicles or applied against the balance Carlile has on its line of credit with Key. Carlile also initiates electronic EDI, wire and ACH files for outgoing payments and then receives inbound data from a few customers. The company uses direct deposit of payroll, and is rolling out pay cards for employees who don't have bank accounts. In the next 12 months, Smith expects to leverage the new ERP that Carlile rolled out last March to further integrate electronic feeds. Carlile also clears about $3 million annually in foreign exchange trades through KeyBank's online system and brought on a corporate fuel and purchasing card program two years back. That p-card is offered through another bank in a package designed for the transportation industry.

Carlile worked with KeyBank to streamline the company's reconciliation process, says Tammy Stewart, assistant vice president at KeyBank and the treasury relationship manager who works with Carlile. Carlile uses the bank's Web-based platform for reporting, ACH, lockbox and wire transfers. "We worked together to find solutions that would make the jobs easier and still be cost-effective," Stewart says.

The image lockbox operation is pretty slick until Carlile has to do the cash application. "Right now, everything is processed, imaged and sent to us by 11:30 a.m. every day. We can see exactly what we have coming in every morning, including wires and ACH. That gives us the visibility to manage our cash better to reduce debt or make investments," Smith explains. "In the next phase of our ERP, we will be rolling out document imaging and work flow automation to bring all the elements together on one platform. For now, the biggest payoff is that Carlile staff can see payment-related data quicker when they need to apply payments and research customer questions," he says.

Today, cash application is still completely manual. The problem has been an antiquated accounting system that "didn't have the right buckets or [had] programming workarounds that were overly complex" for automatic application, based on the lockbox transmission, Smith says. Carlile hopes to soon link the transmission to its new ERP system. "That's one of the Holy Grails for us right now," he says. But getting a high hit rate will still be a challenge since payments do not always come in with the reconciling data attached and often have adjustments to them. So, the Holy Grail may have a few cracks in it at first, but Smith expects continuous improvements.

As for the third-party payment firms and their payment-delaying practices, Carlile is looking at a few third-party options of its own that use electronic systems and EDI to manage the payment and exception process with these companies. The goal is to limit disputes and mitigate settlement delays.

"It pays to spend five or six cents an item to find out when a payment is coming or if it is disputed. That costs less than using a minute of staff resource to check on them every day for a status update and planning," Smith explains. "We are seeing more Fortune 500 companies move to these third-party paying providers. It will benefit us long term to define our business strategy to easily share information with them in the coming years."

Carlile also works with other transportation companies to handle different segments of its customers' complex supply chains, which puts Carlile in the role of a logistics coordinator or broker that involves other carriers to move freight in segments of the process. This additional role means that while shipping customers may receive one invoice and make one payment, they are paying numerous multi-modal transportation service providers, Smith explains, leaving Carlile to make the appropriate payments to its partners.

Carlile takes an asset-based approach to financing much of its growth in its capital intensive line of business. It owns or leases about 350 trucks, 1,700 trailer units and 150 other pieces of operating equipment spread over 10 terminals, two warehouses and three yards. Equipment leasing plays a big role in financing all this equipment. The company has an operating line of credit with Key that it is expanding to a small group of national bank lenders. With an expanded bank group, Carlile will rely on the online platforms most top-tier banks provide to scale up and connect electronically to those banks, regardless of geography, Smith says.

Streamlining treasury and moving from paper to electronic delivery is a work in progress at Carlile, as it is in most treasury shops. The company's goal of moving 40% of its invoicing and vendor settlements to electronic delivery in the next 12 months is a start. Carlile's size and customer base require using the most sophisticated treasury products and services available, Smith says. "These products and services help keep our brick-and-mortar costs down and allow us to keep pace with our most sophisticated customers in how information is shared and delivered."

Timing Is Right for Big Projects at Columbia Sportswear

Columbia Sportswear is a middle-market company, with $1.3 billion in annual revenue, but it has global sales, substantial foreign exchange trading activity, and global payments and receipts, as well as a significant short-term investment portfolio to manage. It adds up to a significant amount of trading, tracking, reconciling and forecasting, much of it done manually back in 2008.

Now John Bailey, the director of finance, who is responsible for global treasury operations, is in the process of implementing new technology–a global investment portal, an ASP-hosted treasury workstation and an electronic FX trading platform–that will streamline operations, provide better visibility and controls, improve investment returns and eliminate some fees.

"We've found the pieces and many of them are working now," Bailey says. "The challenge is to hook them all together so that they work seamlessly. Then, probably in another six months, we'll know just what we've accomplished.

"The biggest payoff will be in the transparency we achieve and the control we gain," he adds, "but there will be a financial savings payoff as we use cash more efficiently and get better FX rates."

Bailey launched three projects (one related to investments, one FX and one a pan-European treasury workstation that could deliver global cash reporting) because he recognized that automation technology was improving and that it was also becoming scalable and affordable for companies like Columbia.

"The funds support the investment portal costs, so they're always free to investors like us. The same is true for the electronic FX trading platforms. Getting a treasury workstation that is hosted means that you don't have to make a large up-front capital expenditure, and it also means that you need very little in IT resources to implement it and none to maintain it," Bailey notes. "These automated solutions are now within the reach of middle-sized companies."
–Richard Gamble