Cash & Liquidity Management

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Implementing a Best-Practice Treasury Infrastructure A. Schulman had been using spreadsheets to manage its treasury and cash management requirements across its three treasury centres in Ohio, Mexico and Belgium. Following a detailed selection process, A. Schulman selected IT/2 based on functional support of its global requirements, including cash concentration and in-house banking in Europe, vendor reputation and auditability. The system has now been implemented successfully and the company has a best-practice treasury infrastructure to support its current and future treasury cash management requirements.

Implementing a Best-Practice Treasury Infrastructure

by Kurt Loeffler, Manager of Corporate Finance and Acquisition Strategy, A. Schulman, Inc. and Andy Johnson, President, Drewcorp, Inc.

In March 2009 (edition 174) we published a case study by Kurt Loeffler, Treasury Manager of A. Schulman Inc. on the selection of a treasury management system (TMS). Now that the implementation of the system is complete, this article recaps on the objectives and selection process that the company undertook, and discusses the implementation experience.

Technology needs at A. Schulman

Visibility and auditability

A. Schulman’s treasury function is a small, highly focused team with two people at the corporate headquarters in Ohio, two in Belgium, managing the European treasury and cash management requirements, and two people in Mexico, responsible for domestic cash management. Until 2009, we were using spreadsheets to manage all aspects of our global treasury activities. However, with an increasing focus on cash visibility across the business, and greater management attention on issues such as liquidity and risk, we recognised that spreadsheets did not provide the level of control which we were seeking over our cash flow, including visibility and auditability.

Banking requirements

Historically, we have accessed our bank statements on a daily basis using each bank’s proprietary system and downloading the relevant information. While this has not caused any particular issues in the US where we have relatively few banking relationships, it is more time-consuming and inefficient in Europe where we work with around 16 banks. To address this, we have been using Isabel, which provides Belgian-based multi-bank ebanking capabilities. However, we needed a new system to integrate with Isabel to allow us to integrate our cash position with our transaction processing.

Internal connectivity

A Schulman has a largely decentralised approach to technology and business processes, so data on which treasury relies for forecasting and exposure management is sourced from various places. Trying to combine this information in a consistent way using spreadsheets can pose challenges so we wanted a new system which we could integrate with our ERP more easily with less fragmentation of information and scope for error.

Cash centralisation

We have implemented a treasury shared services centre (SSC) in Belgium which includes a cash concentration arrangement with BNP Paribas Fortis and an in-house bank. We therefore required more sophisticated transaction management, accounting and internal current account maintenance functionality than a spreadsheet can deliver. In the future, we intend to extend our cash pooling arrangement to include other countries and non-euro currencies, so it is important to have the right technology in place to support this.

Technology decision

Based on these issues, we decided to invest in a specialist treasury management system to cover our external transaction processing, including FX, debt and investment, in-house banking, treasury accounting and internal and external connectivity. We issued a detailed Request for Proposal to potential vendors, and shortlisted four solutions to review in greater detail. Consequent to this process, we selected IT/2 based on the solution’s support of our requirements globally, particularly in Europe where we have the greatest complexity. The solution provided strong visibility, control and automation of transaction processing so it had particular appeal from an internal audit perspective. Furthermore, we were attracted by the vendor’s strong reputation and the ability to host the system externally.

The implementation experience

We started the implementation in March 2009 and successfully completed it by the end of the year. Initially, we had anticipated implementing each treasury centre as separate project phases; however, we decided to accelerate our SSC implementation and cash concentration project, so we needed IT/2 in place to manage these new requirements. We have now migrated the majority of our treasury accounts onto the system, with only a few foreign accounts to be added. In addition to managing treasury and cash management requirements, we have implemented an MT940 (account statement) upload from our banks into IT/2, with a similar arrangement for our US statements.

Our treasury team found the TMS very intuitive once they had been trained, and combined with the support we had from our banks to provide the necessary information and files, the transfer from our previous processes to the new system was very straightforward. A project of this scope and complexity inevitably brings some challenges. For example, while we had the core system up and running almost immediately, it was more time-consuming to import bank statements in the proper formats, etc. Another challenge was organising training across a multi-site treasury organisation. It was not cost-effective to arrange training sessions in both Belgium and the US, so as IT/2 is a Europe-based supplier, we held group training via webex, which was accessed by users in the US and Europe. At times, it would have been useful for the US treasury centre to have had more personal contact with IT/2, but in reality we achieved our objectives, even though the project was conducted remotely.

We required very little internal IT resources, as we outsourced the hardware management to RackSpace, IT/2’s hosting partner based in the UK; we connect from our treasury centres in the US, Mexico and Belgium. While we have had occasional performance issues from the US, overall this arrangement has proved very successful. As a result, we are also now working with RackSpace on other projects outside of treasury, which has been an interesting additional dimension that we were not expecting.

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