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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.