Corporate Finance

Better Returns via the Web

Here comes an online tool designed to optimize cash management decisions.
Steve BergsmanFebruary 1, 2000

Here comes an online tool designed to optimize cash management decisions. ( heralds the computing and real-time analytical power of the Web, promising to increase investment returns or reduce borrowing costs.

Unveiled in October by SEI Investments Co., a $367 million investment services firm, gathers and analyzes real- time market information, providing recommendations while minimizing risk. Basically, the Web site’s analytical tool, called the Optimizer, scrutinizes an array of financial choices using a company’s short-term financial position, cash-flow forecasts, and risk guidelines. The Optimizer then generates a customized solution on the basis of the lowest-cost, best return for a specific time period.

“It’s essentially a super calculator,” says Dennis McGonigle, executive vice president of the Oaks, Pa.-based company. “This site will help financial professionals with daily investment and borrowing decisions. The system goes through a series of calculations to produce for the user the best financial answer on a given day.”

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Early last year, TreasuryPoint ran a data study using the financial and cash-flow spreadsheets of a midsized U.S. company. The recommendations generated by the Optimizer running on the company’s third quarter 1998 data produced a net return 4 percent, or 22 basis points, higher than the company’s actual return, amounting to a savings of $60,954 annualized, or $15,239 for the quarter. The higher cash return achieved by the Optimizer was due mainly to the fact that it invested almost all available cash in commercial paper and very little in money market funds. In contrast, the company actually kept a significant amount of cash in lower-return money market funds.

In a second study with the same company, TreasuryPoint removed the commercial-paper option in order to give the Optimizer roughly the same investment vehicles, and it still beat the company’s actual results by 3.8 percent, or 21 basis points.

One company considering the fee-based service is $1.3 billion W.L. Gore & Associates Inc., of Newark, Del., whose senior corporate financial officer, Doug Maughan, was on TreasuryPoint’s advisory committee. “ really gives you multiple looks at your options, and does that without a lot of fanfare and a lot of time,” he says.