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W-143 ONLINE FILE W7.10 E-COMMERCE APPLICATIONS OF FINANCIAL TRANSACTIONS Companies doing e-commerce need to access financial data of customers (e.g., credit line), inventory levels, and manufacturing databases (to see available capacity, to place orders, etc.). Great Plains (bestsoftware.com) offers 50 modules to choose from, to meet the most common financial, project, distribution, manufacturing, and e-business needs. Diversified financial transactions also lend themselves to e-commerce applications, especially Web-based ones. In Chapter 5, we described e-banking, online securities trading, and more. Many of these can be done in a wireless environment (Chapter 6, and the Handlesbanken case in Chapter 2). Here we provide a few other examples. GLOBAL STOCK EXCHANGES According to Maxemchuk and Shur (2001), financial markets are moving toward global, 24-hour, distributed electronic stock exchanges that will use the Internet for both the transactions and multicasting of real-time stock prices. HANDLING MULTIPLE CURRENCIES Global trade involves financial transactions in different currencies. Conversion ratios of many of them change every minute. A Web-based system (from SAP AG) for example takes financial data from seven Asian countries and converts the currencies to dollars in seconds. Reports based on these data, which used to take weeks to generate, now take minutes. The system handles the multiplicity of languages as well. E-BONDS The World Bank is now using e-bonds, a system for marketing, distributing, and trading bonds over the Internet. The system expanded in 2003 to include electronic applications to currency and derivatives trading. For a description see gs.com. FACTORING ONLINE Factors are financial institutions that buy accounts receivable, usually at a discount. Factoring of receivables gives the selling company an immediate cash inflow. The factor takes on the risks and expenses of collecting the debts. Factoring on the Web is becoming very popular. For details see Salodof-MacNeil (2002). ELECTRONIC RE-PRESENTMENT OF CHECKS Companies face a problem of bad checks (insufficient funds). Paper checks that do not clear are usually re-presented (manually or electronically). Electronic representment can be organized as part of cash management information systems. Such systems consolidate checks from different banks and conduct a return analysis (analysis of why checks are not honored, who is likely to pass bad checks, etc.). ELECTRONIC BILL PRESENTMENT AND PAYMENTS One of the most successful areas of e-commerce is that of electronic presentment and payments. In its simplest form it is an electronic payment of bills. However, third-party companies provide a service in which they calculate, print, and electronically present the bills to customers (see Chapter 5 and Turban et. al., 2008). Virtual Close. Companies close their books (accounting records) quarterly, mainly to meet regulatory requirements. Some companies want to be able to close their books any time, on short notice. Called a virtual close, the ability to close the books quickly may give almost real-time information on the financial health of a company (see Moore, 2005). With an advanced IT program developed by Cisco (IT at Work W7.10.1) it will soon be possible, even for a large multinational corporation, to close the books in a matter of hours. W-144 IT at Work W7.10.1 Cisco’s Virtual Close Cisco Systems, the company that supplies the vast networks that connect computers to the Internet, is using technology to develop a product, Virtual Close, with which a company can close its accounting records (its “books”) more quickly. This will be done by connecting the accounting and financial records of an entire company, even one with operations in dozens of countries, via an intranet. Cisco’s infrastructure will permit information sharing almost instantly. Cisco is implementing such a system for itself. Closing the quarterly accounts used to take up to 10 days. Within 4 years, the chief financial officer worked the close down to 2 days (and significantly cut its cost). Cisco is able to close its books with one hour’s notice, on any day in the quarter. Virtual Close has been implemented with the help of KPMG Consulting. For more details, see kci-cisco.com. The advantages for Cisco and any other company that uses Virtual Close are: would otherwise have remained unseen for months can be quickly addressed and their damage minimized. • New opportunities can be detected early, allowing compa- nies to exploit them quickly. • Virtual Close will enable quick “drill-down” analysis, which locates the causes of either poor or excellent performance. • It will bring huge productivity gains related to corporate financial reporting. Implementing Virtual Close in a large company is a lengthy process that may end in failure due to the project’s complexity. However, not implementing it might result in a competitive disadvantage. Sources: Compiled from McClenahen (2002), Beiser (1999), and cisco.com (2002). • It provides strategic advantage to corporations, enabling them to make better decisions. • Companies can become proactive, spotting problems at any time, instead of just once a quarter. Problems that For Further Exploration: What are the advantages of a virtual close? How can Cisco benefit, as a vendor, from marketing this concept? Is this EC? Why or why not? Integration of Financial Transactions with E-Commerce Applications. ACCPAC International (accpaconline.com) integrated its financial accounting software with e-business solutions (software, system building, consulting, and integration) to help global traders. The e-commerce module (eTransact) is tightly integrated with ACCPAC for Windows, offering a single, unifying financial and business management system. References for Online File W7.10 Beiser, D., “Cisco Chief Pushes ‘Virtual Close’: Intranets Allow Up-toMinute Look at Books,” USA Today, October 12, 1999. Cicso.com, “Cisco Success Story Customer Profile: Procter & Gamble,” 2002, cisco.com /warp/public/779/ibs/solutions/supply/pgcasestudy1. pdf (accessed July 2006). Cisco-KPMG Consulting, Virtual Close: Financial Management Solution. Mountain View, CA: KPMG Consulting, Solution Brief, 2001. McClenahen, J., “The Book on the One-Day Close,” Industryweek, April 2002, pp. 31–33. Maxemchuk, N. F., and D. H. Shur, “An Internet Multicast System for the Stock Market,” ACM Transactions on Computer Systems, August 2001. Moore, G., Dealing with Darwin. New York: Penguin Group, 2005. Salodof-MacNeil, J., “The Factoring Factor,” Inc., February 1, 2002. Turban, E. et al., Electronic Commerce 2008. Upper Saddle River, NJ: Prentice Hall, 2008.