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Treasury tasks still bog down larger businesses Print E-mail
Thursday, 22 October 2009

By John Goff

Corporations have spent a great deal of time and effort on reducing the cost of their finance operations. Executives at large businesses have been particularly keen on streamlining their finance departments, which are often seen as money pits.

But new research shows that this big push for smaller back offices has not necessarily led to huge gains in efficiency. According to a 2009 study conducted by the Association of Finance Professionals and IBM, small companies are generally just as fast at completing treasury tasks as larger ones.

An example: the typical business puts together a short-term cash flow forecast in four hours. Larger companies (those with annual revenues between $6 and $10 billion) take around five hours to complete the task. Smaller companies (annual revenues between $500 million and $999 million) develop a short-term cash flow forecast in three hours.

Moreover, companies with world-class treasury operations perform the task in just two hours.

The explanation? Obviously, larger businesses have to crunch a heck of a lot more data than smaller outfits - and that larger universe of data can slow the creation of short-term forecasts. Nevertheless, larger companies generally deploy three automated treasury systems; small-to-medium sized businesses usually use two.

Such systems don't necessarily help with cash-flow forecasts, however. More than 80 percent of the surveyed companies indicated they create cash-flow forecasts manually or with spreadsheets. Only about one in ten use ERP software or treasury workstations to perform the task.

AFP also found that the average company needs two hours to concentrate, or physically pool, cash to establish the daily position. Smaller companies tend to pool their cash in about an hour.

Other cycle times were roughly the same for large and small companies. The typical outfit produces a treasury accounting entry in an hour and takes three days to resolve bank account discrepancies. Of note, transportation/warehousing businesses take a whopping 10 days to resolve the discrepancies.

Most companies, regardless of size, process an internal fund transfer in an hour. Companies need two hours to fully process a borrowing decision. AFP found that businesses spend about the same amount of time processing investment elections.

Of course, world-class companies handle the task in about twenty minutes.

Something to shoot for, anyway.

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