"E" Is Just Technology: The Core Treasury Role Continues. (Selected Topic)

Business Credit, October 2002 | Go to article overview

"E" Is Just Technology: The Core Treasury Role Continues. (Selected Topic)


ABN AMRO's Global Transaction Services

For forward-thinking corporates, e-commerce means transitional strategies integrating old and new ways to manage working capital.

When pronounced properly, the "e" in e-commerce should be almost silent. Not because activity in this vital business field has been affected by the recent economic downturn, but because e-commerce has been integrated so rapidly into the fabric of the best corporations it has almost ceased to be recognizable as a stand-alone activity.

For the modern corporation, e-commerce is not so much a fresh start, as just one more tool needed to achieve a total solution for the management of working capital. No wonder, then, that chief financial officers and treasurers are coming to see e-commerce as an evolutionary, rather than revolutionary process.

For the basic needs of treasurers have not changed and the core treasury role continues: e-commerce simply represents a quicker and more efficient way of achieving them. Treasurers want more control of their working capital, better real-time cash management functions and an end to repetitive or routine back-office functions. The objective is to see the finance function costing less than one percent of annual revenues, with centralized processing locations. The best performers should have inventory-to-cash cycles of 60 days.

For treasurers at these companies, e-commerce is synonymous with efficiency; it is a force for change and means new types of financial relationship. Efficiency means increased control over resources and expanding those real-time functions available to the treasurer. As a force for change, e-commerce exposes sub-optimal legacy systems and practices not just among corporates, but among banks too. And finally, e-commerce demands that the culture and practices of the corporate be adapted to the web-enabled world.

Certainly, e-commerce brings change, but experience has taught us that continuity of traditional business models is just as important. That is why most predictions that e-commerce would invade and overturn the world of business turned out to be wrong. Rather than being changed by e-commerce, business is now advancing into the field of e-commerce and changing it.

Despite the economic downturn, e-commerce is still a hugely powerful force. IT still accounts for almost 50 percent (i) of all business investment in the U.S., and represents 7 percent of U.S. GDP. Business spending on IT equipment fell only slightly in the first quarter of 2001 to a still healthy U.S.$700 billion (ii). Instead of putting the e-business initiatives on hold, companies continue to invest in the hardware, software and services needed to improve efficiency and communication.

Let us not forget that the market share enjoyed by electronic marketplaces and online exchanges is still quite small. Because people change their habits much more slowly than machines, traditional business methods will be around for years to come. Above all, using e-commerce as a tool to streamline the payments and collections process does not invalidate the cash management process. Treasury activity continues as the viral glue holding the corporation together.

Defining the Web-Enabled Corporation

Actual e-commerce usage continues to be quite low. A survey of large European corporates conducted by Greenwich Associates shows most treasurers would like to make use of a limited menu of functions available on bank web sites. Eighty-Seven respondents said the favored services are account information (66 percent), foreign exchange (58 percent), disbursement services (50 percent), money marker services (46 percent) and bill presentment/payment (46 percent). But the same survey also showed that only 13 percent of respondents were already making use of web-enabled bill presentment services.

For corporations intent on achieving full webenablement of their finance functions, an evaluation and review of existing processes is a necessary first step. …

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