US tech company nears completion of centralized treasury

Applied Materials in California will complete its year-long project of centralizing its Asian cash management activities this coming January.

Californian manufacturer of semi-conductor equipment Applied Materials is in the last stages of setting up a global treasury centre that incorporates its Asian operations. The project which was started in February this year is about 90% accomplished and should be completed next month. Applied Materials has spent 10 months consolidating banking relationships, tightening up approval processes, improving reporting and centralizing the responsibility for the company's balance sheet in Asia.

The process was started a year ago when the company's senior treasury manager, Robin Easton, decided it was time to get more control over the company's finances in the region. His impetus came from looking at other multinational companies that have successfully centralized their Asian treasury operations such as Bectel, Arco Gas and other tech companies like Cisco and Microsoft. A trend that has been driven by a need for greater visibility.

"Once we took a good look at our operations in Asia we realised that our structure was tired and out of date," says Easton. "We had no regular visibility or control over our Asian-based accounts and in most cases we were unaware of our position on any given day. We also had too many local bank accounts and we were not utilizing our relationship with Citibank as much as we could. We were leaving millions of dollars in banks that were rated lower than what is stipulated in our own corporate guidelines."

Easton says the first step was to eradicate local banking relationships in most markets, except those where it is still a requirement to hold a local bank account for some reason, such as China and Taiwan. "We have kept these accounts to comply with local requirements but they are funded on a daily basis and have negligible ongoing balances."

Banking activities in all other countries are handled by Citibank, building on a relationship that the company has had with the US bank for many years. Easton says he keeps an eye on what is happening in the region through Citibank's online banking platform, CitiDirect. "With this system we have set different access levels for our staff and we have centralized the handling of exceptional payments by requiring that any payments above $10,000 are approved by the head office in Santa Clara. We have our hands more firmly on the purse strings."

Easton is hesitant to estimate exactly how much money the centralized system is saving his company. He says bank charges, though more transparent, have remained static and there have been few savings on personnel, particularly because it now takes more people at head office to monitor and control the company's global liquidity position.

"Where we have experienced savings is in our investment returns. In the past we had a lot of money sitting in local bank accounts earning zero interest, but now we are able to use that capital more effectively."

All that is left to do to complete the global treasury centre process is to dismantle the old infrastructure, says Easton. "Every one of our Asian offices now has a Citibank-centric solution that has been implemented and tested. We are now tidying up the loose ends such as removing unnecessary signatures on old Citibank accounts. This should all be done within the next month."