cash management - fei canada 13 treasury system - automation elimination of spreadsheets integrated...
TRANSCRIPT
www.efinancialsuite.com 2
Vision
Treasury organization
Treasury system
Cash forecasting
Key performance indicators
Independence
● Communication protocol
● File format
Governance
Working capital management
Questions and comment
www.efinancialsuite.com 4
Current challenges:
Do more with less
Add value at the enterprise level
Timeliness and responsiveness
Accountability
Vision
Corporate Objective
Implement the most efficient and effective treasury operations
Innovation and creativity as means to continuously improve performance
www.efinancialsuite.com 5
Outside consultant
Internal exercise
Benchmarking exercise
Europe vs North America
Best of breed
AFP research
Attend conference
Formal request for information (RFI)
followed by a request for proposal (RFP)
Vision – How to ?
Gather information:
Legend
Trend Best practice
www.efinancialsuite.com 6
Gain a good understanding of:
Banking industry product offerings
Market best practices
Comparative exercise
Challenge our current provider in terms of:
Pricing/innovation/services
Market penetration
Right platform to identify potential enhancements to cash management
operations
Undertake fully objective, robust, selection process
Vision - Why an RFP can help?
To issue an RFP for cash management services every 5 to 7 years
www.efinancialsuite.com 7
For basic services (i.e. lockbox, cheques, wires, EFT/ACH services, etc.) –
all banks offer the same basic services
Key differences between banks:
Market penetration
Consolidation of activities between regions
Specialized product offerings
Outsourcing of services (i.e. clearance of cheques and EFT, lockboxes
operations, etc.)
Support for/experience with SWIFT corporate access
IT investments mostly for regulatory requirements
More banks – less efficiencies, increase costs
Vision - Bank Offering
www.efinancialsuite.com 9
Structuring treasury operations properly to meet your company’s business needs
is critical:
Staffing
Expertise
Alignment of responsibilities
Do the right thing, focus on core treasury tasks
Treasury Organization
Improve business performance as an ongoing goal
www.efinancialsuite.com 12
Treasury System - Integration current challenges
Reduce the number of database/systems
Treasury system
Accounting
system
Banking
systems
IT
systems
Spreadsheets Treasurer
www.efinancialsuite.com 13
Treasury System - Automation
Elimination of spreadsheets Integrated Treasury Management System
with a strong forecasting tool
Long Term Debt
Operating and
Capital Leases
In-House Banking
Money Markets
• Investments
• Short Term Debt
• Commercial Paper
• Revolving Credit Facility
• Foreign Exchange
• Derivatives (IRS, CCIRS, FRA,
Treasury lock)
AR Securitization
Letters of Credit
Cash Forecasting
Banking
KPIs
www.efinancialsuite.com 14
Treasury System - Decision making
Cash forecasting – critical to guide funding
and investment decisions:
Timely
Accurate
By original currency (instead of functional)
Time horizon exceeding 12 months
Supported by:
• Structured processes
• Adequate banking architecture
www.efinancialsuite.com 16
Cash Forecasting
Strength:
Align with the corporate budget
Flexible
• Reporting
• Granularity
• Daily/monthly/annual
• Currency
• Subsidiary
Automated
Variance analysis
Fully integrated in ERP system
Scenario analysis
MODERN TMS
TO ENSURE COMPLIANCE
AND BEST PRACTICES
www.efinancialsuite.com 18
Key Performance Indicators
www.efinancialsuite.com 19
Key Performance Indicators
“You can not improve what you cannot measure”
Treasury must develop “Key performance indicators” to
demonstrate their value to the organization – main impact on
staffing level
Choosing the right KPIs relies upon a good understanding of what is important to the
organization.
www.efinancialsuite.com 20
Key Performance Indicators - Examples of KPIs
Bank fees compared to:
• Volume of transactions
• Total cash inflows and outflows
Cash sitting idle daily
Variance between cash forecast and actual results
Performance of money market operations
• Investment and borrowing portfolio - Compare the interest rate of each trade with proper
benchmark (CDOR, Libor rates etc.)
Foreign exchange
• Compare the FX conversion rate of each individual spot purchase with the average foreign
exchange rate for the day as published by Bank of Canada
• Calculate the weighted average FX conversion rate of the spots performed for a specific period of
time and compare it the average exchange published by Bank of Canada for that same period
• Demonstrate that the total amount of spot trades (US $ to Cdn $) is within the total forecasted
amount of US$ that needs to be converted on an annual basis, and cover entire fx exposure
www.efinancialsuite.com 22
Independence
Derived benefits: Straight-through processing Eliminate use of electronic banking systems for the
purposes of exchanging files and making payments Lower costs
SWIFT technology to support
all communications with banks
Standardization
of file format
Bank agnostic
connectivity
www.efinancialsuite.com 23
Work with several Internet platforms:
Administrative burden (administrators,
setup accounts, services, order security
device etc)
Need to develop in-house expertise
Operational issues
Independence - Business case for implementing SWIFT
Significant need for an integrated solution
www.efinancialsuite.com 24
Independence - Business case for implementing SWIFT
Speak one language with banks
www.efinancialsuite.com 25
Independence - Business case for implementing SWIFT
Existing Interfaces
Banks
Accounting system
Other
system
Treasury system
Sub ledger # 1
ED
I
GXS
Klein Schmidt
FTP Server
Expedite
Sub ledger # 2
www.efinancialsuite.com 26
Independence - Business case for implementing SWIFT
A single standardised gateway
Banks
TMS
Connected to
SWIFT
Network
Accounting system
Internal
Systems
www.efinancialsuite.com 27
Independence
Format Harmonization
Apply CGI standards for payment files
Reconciliation done through bank statements, intra day statements and
additional debit/credit notifications
New formats to be adopted by the Canadian Payment Association
Note : The goal of CGI is to simplify implementation for corporate users and, thereby, to promote wider
acceptance of ISO 20022 as the common XML standard used between corporates and banks.
www.efinancialsuite.com 29
Governance – Treasury Policies
General Operational Banking
Investment guidelines
Define priority list of
preferred method of
payments:
Incoming
Outgoing
Opening & closing bank
accounts
Foreign exchange
(NAP, NIH)
Negotiation of banking
services RFP (formal
bidding process)
Derivatives Use of credit cards :
A/R
A/P
Mandate T&E
Signing authority
Leasing negotiation Wire transfers
Fraud protection
Reconciliation of bank
accounts
Rigorous controls
MODERN TMS
TO ENSURE COMPLIANCE
AND BEST PRACTICES
www.efinancialsuite.com 30
Working Capital Management
www.efinancialsuite.com 31
Working Capital Management - Collection
Reduce payment methods / eliminate paper
Alternatives
Pre-authorized debits
Single:
• CCIN
• ACH CTX
Multiple:
• EDI payments
• ACH CCD+
Electronic fund transfer
Wire
Image cash letter
Credit/debit cards
Collection - Past Lockbox #1
Lockbox #2
Lockbox #3
Lockbox #4
Lockbox #5
Lockbox #6
Lockbox #7
Lockbox #8
Collection - Future
www.efinancialsuite.com 32
Working Capital Management - Disbursement
Disbursements - Past Disbursements - Future
Alternatives
Credit cards:
• Bank to performed a credit
card analysis
Pre-authorized debits
Electronic fund transfer
ACH CCD +
ACH CTX
EDI payments
Wires
Costly
Fraud - Positive pay services
Manage images/date cashed/storing
Float
Controlled disbursement accounts
Full reconciliation services
Consolidate payments / reduce payment methods eliminate paper / centralize disbursements
www.efinancialsuite.com 33
Working Capital Management - Paying Suppliers
Extend payment terms
• From 30 to 90 days
After invoice approval date
• Rather than invoice date or date goods delivered/service rendered)
Implement a Supply Chain Financing solution
• Advance payment in exchange of a discount