Warning

 

Close

Confirm Action

Are you sure you wish to do this?

Confirm Cancel
Member Login
Site Notices
9/22/2017 12:11:25 AM
Posted: 3/5/2012 6:50:16 AM EDT
Anyone ever outsourced their cash/treasury management? I am losing one of my accountants who does this function and was looking into the possibility of outsourcing it to a bank/financial institution (i.e. Wells Fargo). Any recommendations on good companies?
Link Posted: 3/5/2012 7:48:35 PM EDT
[Last Edit: 3/5/2012 8:03:11 PM EDT by PeteCO]
Can you be more specific?

Is this just lockbox services and something like positive pay, or are you talking about outsourcing the management of the overall working capital of your company to someone?

Aside from the detailed mechanics of certain aspects of treasury management, cash and treasury management is working capital management. Working capital, sensible capex, and earnings = the cash your business generates. You would not outsource the management of your inventory levels, nor the purchasing of new inventory or the disposal of obsolete inventory. You would not, albeit to a lesser extent, abdicate your ability to manage payables. You would not, aside from collections, remove yourself from knowing your AR balances with customers. That leaves cash. If you have so much lying around that you don't know what to do with it, even having exhausted all your ideas for new capex, then you can afford a CFO.

If it is just a lockbox and stuff like that, don't forget that all those transactions still need to be entered into the GL, and lockboxes tend to be expensive. Before leaving WF due to a pissing contest detailed here on Arfcom, I was happy with their TM products. The CEO portal is nice but it's slow and the security can be a pain. ACH was painful. Positive pay was more trouble than it was worth. I liked wire transfer and lockbox. The remote deposit with a scanner at some of our offices was nice and saved us money and time. The merchant processing solution was ok but expensive compared to other banks. (Be especially wary of Amex fees - ouch!) Downloading reports into excel was nice but most banks have it now, although the CEO portal let me saved custom reports and I liked that.

While in the past we would do things like sweep money into Eurodollar accounts overnight, these days that kind of stuff isn't really worth it unless you have say $5MM or more lying around at a minimum.

What kind of business is this? What services are Wells offering?

Wells is pretty good for business stuff, but don't forget that they are a retail bank and you won't be their biggest customer. We switched to a bank where we are one of the bigger, but not the biggest customers, and our new bank is solely a commercial bank. I'm happy we switched.
Link Posted: 3/6/2012 5:26:26 AM EDT
Looking at outsourcing our working capital (receivables, payables, etc) as well as our excess funds management (about $3m average overnight balance). I have an accountant that will be gone soon who used to work in Wells Fargo's Treasury Management section, that's why I mentioned them. I just don't see the value in paying another accountant as much as we are to fulfill these functions. Any experience with Northern Trust? I liked what they had to say.
Link Posted: 3/6/2012 9:11:24 AM EDT
[Last Edit: 3/6/2012 9:16:24 AM EDT by PeteCO]
I think a lot depends on how complex your business is financially.

I am assuming that they use some method to maximize cash balances, probably by timing AP payments with AR inflows. If they then invest the cash for you in some kind of liquid asset like a money market account, there does seem to be a bit of a conflict of interest. They maximize cash for you, but at the same time use that cash somewhat to their benefit. Why do you care what your cash balance is? Does it make no difference to you other than a timing safety net between outflows and inflows? Start thinking there, and move on into what you need an external party to exactly do. Your existing staff may be able to take on these duties - depending on your company size, the "treasury management" function could wind up being quite minimal.

Is this a business that carries inventory?

For what purposes do you normally keep excess cash that the business generates? Do you hold on to it for future WC demands because your business is highly seasonal? Do you hold on to it for a rainy day? Do you plow large percentages of it into capital spend and sales promotion programs? Or do you just issue dividends?

What does your accounting staff look like now? If the business is small enough, typically your Controller would handle the treasury stuff and investment (capex) analysis, with AP and AP people handling those transactions. If you are large enough, a CFO will oversee treasury.

If you are in the middle ground, I've always been of the mind that a part-time CFO can be a valuable asset. But then again, I'm a CFO myself.

Link Posted: 3/6/2012 11:39:50 AM EDT
Originally Posted By PeteCO:
I think a lot depends on how complex your business is financially.

I am assuming that they use some method to maximize cash balances, probably by timing AP payments with AR inflows. If they then invest the cash for you in some kind of liquid asset like a money market account, there does seem to be a bit of a conflict of interest. They maximize cash for you, but at the same time use that cash somewhat to their benefit. Why do you care what your cash balance is? Does it make no difference to you other than a timing safety net between outflows and inflows? Start thinking there, and move on into what you need an external party to exactly do. Your existing staff may be able to take on these duties - depending on your company size, the "treasury management" function could wind up being quite minimal.

Is this a business that carries inventory?

For what purposes do you normally keep excess cash that the business generates? Do you hold on to it for future WC demands because your business is highly seasonal? Do you hold on to it for a rainy day? Do you plow large percentages of it into capital spend and sales promotion programs? Or do you just issue dividends?

What does your accounting staff look like now? If the business is small enough, typically your Controller would handle the treasury stuff and investment (capex) analysis, with AP and AP people handling those transactions. If you are large enough, a CFO will oversee treasury.

If you are in the middle ground, I've always been of the mind that a part-time CFO can be a valuable asset. But then again, I'm a CFO myself.



Looking at our business and talking to the people at Northern trust they recommended I hire a CFO. We are just to big and diversified to go without it. We ave operations and employees in fifteen countries at the moment spread over multiple types of business (though mainly in the US). Just found it hard to swallow shelling out 190+k again for a new CFO. I will have them working with Northern Trust though as I really liked what they had to say.
Top Top