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Technology Upgrades: A Smart Way to Invest Cash Reserves

  • By Andrew Deichler
  • Published: 8/19/2015
CashAccording to the latest AFP Corporate Cash Indicators ® (AFP CCI), underwritten by Capital One Bank, financial professionals’ business confidence may be waning, as they accumulated cash at a quicker pace in second quarter 2015. However, this may be only a temporary setback—U.S. businesses indicated that they shed some of their cash holdings in the three previous fiscal quarters.

According to a recent survey of 781 U.S. business owners and executives by BMO Harris Bank, nearly 60 percent of companies plan on making investments in their business this year. But where is that cash going? One key area where companies need to spend money liberally is on new technology.

Tom Schnieders, CFO of Gumdrop Books, a major distributor of books for school and public libraries, told AFP that his company held on to cash “very aggressively” throughout the financial downturn. “The economy since 2008 has been a struggle for the schools, which are funded primarily by real estate taxes,” he said. “So we had to constrain ourselves immensely.”

But now, with the economy improving, Gumdrop has undertaken a major initiative. All of the schools that purchase books from Gumdrop have different requirements for how they want information presented on the outside and interior of the books—how many numbers go on the label, whether the author’s name is fully spelled out, etc. Gumdrop is developing a database that is essentially a “one-stop shop” for all of this information. “We’ve invested over the last two years about 12,000 programming hours into this project,” Schnieders said.

The project will save Gumdrop a substantial amount of money; up until this point, the company had to go to other vendors for this service. This technology initiative has also led to Gumdrop hiring new employees across the globe. Bethany, Mo., which is where the company is headquartered, only has a few qualified librarians that can catalog the data in the system.  “We don’t have a lot of talent in that arena locally, so we had to broaden our perspective,” he said. “We now have Canadian and French catalogers working from home. So we are expanding that very rapidly and looking for tremendous growth in the fall.”  

In other cases, technology upgrades are happening due to more unfortunate circumstances, such as the uptick in cyberthreats. “In every transaction—whether you’re online, you’re calling a bank or you’re paying with a credit card at the point of sale—you’re exposed more and more to fraud,” said Leslie Anderson, senior vice president and head of treasury and payment solutions, business banking at BMO Harris Bank. “So there’s a need to invest in our own business systems to make sure we’re doing everything we possibly can to keep ourselves from becoming vulnerable targets.”

Businesses need to be proactive when it comes to cybersecurity, because more and more their customers expect them to be. “If fraud occurs for any of my customers, it’s not just the occurrence I have to worry about—it’s the reputational damage that happens after that,” Anderson said. “The Target breach shined a light on the issue. This is not a one-transaction, hand-the-customer-back-their-money issue. The question is, ‘Are you safe to do business with anymore?’”

A longer version of this article appears in the July/August edition of AFP Exchange.

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