Cash & Liquidity Management

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Cash Management Goes Global A web-based system allows treasurers to implement the load-balanced treasury principle – a group-wide distribution of treasury tasks – to everyone’s benefit.

BELLINCash Management Goes Global

by Martin Bellin, Managing Director, BELLIN GmbH

Ten years ago, it was still a great innovation. Today, almost all companies have one – a system for cash management. It helps obtain bank statements automatically, plan current account balances, and manage all payments orders on a unified system – in short, it is the basis for electronic banking. Long gone are the days of monstrous Excel spreadsheets and paper-based payment orders. Today, such a solution is a basic necessity and many corporate headquarters have optimised their cash management. What is the next step?

Innovations hailed as revolutionary ten years ago have become standard functionality today. Everyone knows it, everyone has it. Cash management is the bread-and-butter business of any organisation. Internationalisation and growing complexity in this field have led to increasing professionalism in treasury. Almost every company has implemented a system supporting and facilitating cash management processes and tasks. Has the time come to sit back? No, now is the time to make processes more efficient group-wide. Now is the time to ask, “What’s next?”

The answer is actually quite simple, but complex to implement: Cash Management Goes Global. As the number of subsidiaries worldwide increases, so does the complexity of data which needs to be managed in the system. Soon, managing data for the group companies in Excel or on paper becomes highly complex and difficult to handle. Even if subsidiaries use systems to make their data available electronically, the variety of individual solutions implemented by each company can be nearly impossible to harmonise on the group level. Therefore, it is necessary for group headquarters to gain an overview of all local cash management solutions throughout the enterprise.

Integrating all group companies on one platform

To control cash management on a global scale, organisations need a holistic approach that goes beyond just a central treasury – one that brings together all group companies on an efficient treasury platform. Every company, no matter how small, has to send payment orders to a bank and needs to obtain account information. This is the foundation for the idea to unify all data in one system. All cash management processes have to be integrated globally – from signature authorisations to bank account balances to an overview of group-wide planning data.

Once the integration process has begun, cash management gradually grows from the nucleus of local implementations into a global solution. As soon as all companies in a group have been united on a single platform, cash flows throughout the entire group become always accessible and transparent for authorised users. Group-wide cash management knows about all financial inflows and outflows and the financial planning of every organisational unit. This applies equally to fully controlled subsidiaries in the cash pool and to independent companies in FX-controlled countries such as China or Brazil. Ideally, the organisation connects the platform to all of its banks, enabling group companies to process both domestic and cross-border payments for each country in the system.

Many advantages of integrated bank communications are obvious: No standalone solutions in the subsidiaries, no unnecessary emails to headquarters, no time offset in reporting – instead, signature authorisations, existing accounts and individual banking relationships become transparent. Headquarters may even no longer have to collect electronic account statements from subsidiaries. In addition, complicated bank-specific payment approval processes on national and international levels no longer apply. Now, corporate treasury enjoys access to all data in real time, full group-wide transparency, and the ability to intervene in any process – without having to centralise.

A new era of co-operation

Unified cash management paves the way for a completely new way of intercompany cooperation and holds potential for additional improvements. How about multilateral netting between all group companies – since they are already integrated – to gain additional efficiency? How about significant interest rate advantages for the group when raising capital?

If group companies have reciprocal receivables and payables, let us hope that they offset them and only transfer netted amounts. By involving additional companies in an intercompany settlement process, a simple bilateral transaction can become a complex multilateral process – group-wide netting on a global scale.

Extended global intercompany reconciliation

Netting throughout an organisation has numerous advantages: Payment transaction fees can be reduced, particularly if the group has a large number of companies in different countries. Refinancing via intercompany sources opens up completely new opportunities for raising capital. Netting has a beneficial effect on intragroup currency risk as well, eliminating or at least substantially mitigating such risk, or allowing the organisation to limit it to a qualified organisational unit. And finally, it saves time and effort! Even groups of companies with a relatively low business volume benefit from optimising their intercompany reconciliation processes. All this is true especially if group companies already use a common treasury platform for cash management. Globalised cash management can be the driving force behind further improvement of treasury processes in the organisation – multilateral group-wide netting is just an example.

A treasury network based on the web

If treasury is to be a global process, it needs to be supported by an appropriate system. Therefore, a treasury network based on the web is key. Again, technology deemed a great innovation ten years ago has become commonplace today. Recently, a journalist was surprised to hear that web-based and mobile treasury systems have been on the market for many years, even before the invention of iPads and iPhones. His astonishment was founded in the popular misconception that web-based systems are merely a means for mobile data access. Often, people overlook the extensive opportunities networked solutions offer to organise processes across group companies and national boundaries.

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