Published: May 01, 2008
USG’s treasury has seen significant changes since I first joined the business 19 years ago. Until recently, our operations were primarily domestic but the international aspects of the business are now becoming increasingly important. Although USG is still a relatively small player globally, things change rapidly which is why we have taken action to centralize our treasury management, implement a new treasury management system (SunGard’s AvantGard Integrity) and provide a firm foundation for the growth of our business.
The international aspects of the business are now becoming increasingly important.
We had a number of challenges we sought to address when centralizing our treasury operations and systems infrastructure. Most of these related to the number of manual processes which we had in place. We had separate connections to eight banks, each of which we had to log into and then input the data manually. These manual tasks, such as the re-keying of data, created operational risk and lacked control. In addition, because of the time taken to complete these daily tasks, we were not able to see a complete cash position until 11 a.m. each day, which made it difficult to optimize the return on any surplus short-term cash or secure better borrowing rates.
One of the outcomes of this was that we were only able to post to the ledger once a month. Subsidiary businesses too could only reconcile their financial activities monthly. These difficulties have been exacerbated whenever we have acquired a new company, as it has been a challenge to integrate their banks and systems into our infrastructure.
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Consequently, we decided to embark on a project to implement a centralized Treasury Management System. We aimed to improve our operational efficiency by reducing the amount of manual processing we were doing and thereby increase our levels of control in order to comply with Sarbanes-Oxley. We wanted to gain real-time visibility over our bank accounts and create our cash position earlier in the day so we could conduct our financial transactions on a more timely basis and post to the ledger daily. Furthermore, we wanted to provide a better service to subsidiaries and their locations by providing balance information which they could reconcile more frequently. We used a consultant to help us in the selection process and issued requests for proposal (RFPs) to six companies. Three of these we eliminated quite quickly as it became apparent that the solutions would not fit our needs. We needed a solution which would satisfy our cash management, debt, investment and international needs and only a few systems had the necessary functional breadth. Another issue in some cases was not the technology, but we wanted to work with a vendor with a proven track record and high quality customer base and to be assured of their future stability and financial security. In summary, as our business continues to expand both in the US and internationally, we sought a solution which would accommodate our future needs as well as support our current operations.
Fundamentally, a new system had to be easy to use. This was a potential challenge when selecting a system as we had not used a treasury management system before and therefore we thought it might be difficult to identify what the necessary or desirable characteristics of a system would be. However, in reality, we found that having dealt with eight banking systems with their own log-on processes, screens and characteristics, we recognized the features which would make a system easy to use. Having reviewed the available alternatives, we decided to implement SunGard’s AvantGard Integrity. We preferred SunGard as a vendor based on its financial stability and track record with comparable customers. Staff were knowledgeable and gave us credible and well-informed answers to our questions. We were also impressed by the professionalism and experience of the customer service and implementation teams which was important to ensure that we continued to gain value from the system in the future.
We sought a solution which would accommodate our future needs as well as support our current operations.
As a solution, we found AvantGard Integrity easy to use and highly secure, and provided the necessary controls which were critical for us to comply with Sarbanes-Oxley. Furthermore, it had the functional breadth we needed not only to support our current requirements in treasury, cash, risk, debt and investment, but more importantly, it gave us the ability to expand in the future. The system supported multiple types of communication and allowed us to make bank account information available to our subsidiaries more easily. System maintenance, such as adding new bank accounts, was quite straightforward so we were confident that we would be able to use the system effectively.
One important change for USG’s treasury was that the IT department became a very important relationship for us which had been less so in the past. This was an outcome of the process which has worked well for us and we have derived significant value from a closer relationship.
We made the decision for AvantGard Integrity in March 2007 and started the implementation in June with an estimated five-month implementation. Before we started, SunGard consultants helped us work out a detailed project plan with all the tasks which would be required. Based on their advice, we also informed our banks of our implementation plans and sourced BAI information and identified technical connectivity requirements. SunGard has been great to work with and very patient, particularly bearing in mind we had no experience with treasury management systems. We had a weekly project management call to make sure everyone knew where we were in the project plan and to ensure that everything was on track.
We found that some banks were further ahead than others in terms of their ability to deliver the necessary technical information for integrating with our treasury management system; one in particular had significant difficulties delivering the necessary BAI file format, which surprised us bearing in mind it was one of the largest banks; ultimately, together with our SunGard consultants and our IT team, we delivered the project exactly on time. [[[PAGE]]]
Since we started using the system in a live environment, we have been able update our cash position whenever we need to. We can reconcile our cash balances and post to the G/L on a daily basis which we were never able to do before. We have improved the timeliness of our investment decisions and can report our cash positions promptly to senior management. Now that we have debt, which we did not have a year ago, we need to look more closely at our cash and look for opportunities to pay it down. Although we still deal only with our original eight banks, we are constantly adding new accounts, which is now a straightforward process. Getting information to our subsidiaries, such as reporting, is far easier, although this is an area we want to develop further.
We are now positioned to take a greater role in working capital optimization.
Overall, the implementation has proved a ‘win/win’ - management have more timely information, treasury has better visibility over cashflow, controls, decision-making capabilities and automation, and internal audit is far more comfortable with the systems and cash management processes which are in place.
Since implementing our treasury management system, we have made plans to expand our use of the AvantGard solutions further. We are looking to create new reports for our subsidiaries to help them with their reconciliation, such as receivables, and more transaction reports (wires, lockbox totals, deposits) for depository accounts. As our operations expand internationally, we are looking to incorporate our international business into AvantGard Integrity and we are considering using SWIFT for our balance and transaction information in Europe, Asia and South America. We have substantial business operations in Canada and Mexico which we intend to centralize these into AvantGard Integrity in 2008. Furthermore, as the geographical scope of our business continues to grow, we intend to use AvantGard Risk to support our growing foreign exchange needs.
As treasury has professionalized its IT infrastructure, controls and processes, we are now positioned to take a greater role in working capital optimization. Consequently, we have recently acquired AvantGard Receivables to enhance visibility and control over credit and collections which we will be implementing in the coming months.
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