Higher Education

Caltech’s Innovative Spirit Fuels an All-Digital Treasury Optimization Project for the Future 


With higher education facing significant financial and structural challenges in the wake of COVID-19, Caltech’s two-year plan to modernize its revenue operation represents an operating model for the future.

Even before the COVID-19 pandemic shut down university campuses across the country, many public and private college finance officers faced increasing pressure from static or heavily discounted tuition, higher operating costs and steady or downward trends in enrollment.

At the California Institute of Technology (Caltech) one of the leading science and engineering schools in the world, these fast-changing circumstances convinced its finance operation to evaluate its entire revenue operation. With no known changes in banking providers in history and cash and treasury operations still reliant on paper processes, Caltech turned to J.P. Morgan’s Higher Education Banking team for an optimization plan that would:

  • Implement process improvement and efficiencies
  • Strengthen functionality within Caltech’s enterprise resource planning (ERP) system
  • Minimize bank costs
  • Ensure safety of funds and data security

Over a two-year period, Caltech was able to approve the share of electronic payments from 58% to 89% of total payment, approaching a best-in-class industry benchmark of 90%.

A return on investment analysis for check print outsourcing alone estimated cost savings of over $65,000 annually.

 

Getting There

Caltech identified ten essential steps for making its treasury optimization project a success:

  1. Drive change through executive sponsorship
  2. Assess the “hard truth” regarding current processes
  3. Distill user feedback into themes and trends
  4. Collaborate across departments, including IT and functional groups
  5. Be open and flexible to change and new ideas
  6. Consider new and readily available technology
  7. Create an ambitious but realistic plan
  8. Rank deliverables by time and effort
  9. Phase the implementation with project leads
  10. Establish a cadence for communication and updates

 

Improving Receivables

Caltech, like many universities, had a decentralized receivables process resulting in manual, improvised and time-consuming processes. Among them: walking checks and cash deposits across campus and sending multiple emails to identify incoming electronic payments.

J.P. Morgan worked with Caltech to improve its entire receivables function, including the following pain points:

  • Identifying e-payments deposited to a single concentration account: Many universities share the problem of easily identifying incoming electronic payments where multiple departments are depositing to one concentration account. Caltech was able to improve that process by leveraging virtual reference numbers (VRNs) associated with specific departments in making those e-deposits.
  • Recognizing remitters associated with incoming grant payments: J.P. Morgan’s Payer Data Management solution enabled Caltech to create a remitter record including grant numbers and other helpful notes in a secure bank portal, allowing both check and electronic payments to be identified immediately through their MICR or DDA/ABA information for immediate match to their specific remitter record.

 

Improving Payables

  • Giving digital natives what they want: From Gen Y to Gen Z, students and staff are challenging traditional payment practices. They want their universities to adopt the same mobile financial experience they are used to in their personal finances. By enabling e-payments to email addresses and cellphone numbers, Caltech benefited from transaction speed that does not depend on bank account numbers. The university has put e-payments in place for student refunds, athletic per diems and expense reimbursement for graduate student clubs. For the future, it’s evaluating e-payments for study abroad stipends, research subject payments and honoraria.
  • Showing cash and check-based transactions the door: Caltech worked with J.P. Morgan to shift payment methods to be more electronic. The $65,000 approximated return on investment above would be the result of savings from supplies, equipment and FTE time as Caltech reduces its annual issuance of 30,000 checks.

 

Staying nimble going forward

Systems calcify and add cost without regular review. Caltech has committed to ongoing self-evaluation for the treasury operation it’s built in order to continually assess opportunities for enhancement. As one of the most efficient among modern universities, Caltech understands there’s always more learning to be done.

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