Liquidity Benefits From Dynamic Discounting in Supply Chain Financing

10-05-2021 | treasuryXL | Kyriba |

It might not always be obvious where business can learn lessons from somewhere like yacht racing, particularly in more specialist fields like Supply Chain Finance and Dynamic Discounting. But there are often uncanny parallels from this sport and finance, when both seek to deploy serious sums of money and leading-edge technology to deliver the marginal gains that can mean the difference between winning and losing.

I thought this was particularly evident in the recent America’s Cup yacht racing challenges in New Zealand. Those AC75 mono-hull super yachts that raced around the bays off Auckland often travelled at a logic-defying 40-50 knots, twice as fast as the winds that powered them and seemingly in defiance of both gravity and conventional sailing speed barriers.

Liquidity Made Good

The key to having one AC75 go faster than an almost identical competitor is the ability to analyse masses of data points in real-time to make the required adjustments to sails, rudders, weights and foils in order to attack the optimum route to the finish at maximum speed. It’s a concept called Velocity Made Good, with VMG now the go-to acronym that defines winners in America’s Cup racing. Perfecting VMG was the reason the New Zealand boat successfully beat its global challengers – again.

I was particularly struck by how this VMG-led transformation of yacht racing, now cascading down from the pinnacle of the sport to the club level, is not dissimilar to how a focus on technology-led cash and liquidity management is liberating corporate balance sheets. We could even refer to it as Liquidity Made Good, where, by the way, velocity also matters.

New Level Playing Field

The deployment of more powerful technologies can improve decision-making, release resources from previously opaque silos and supply chains, and deliver new competitive advantage. Historically this was only available to those high-tech firms and financial institutions with deep pockets, just like the owners of America’s Cup yachts, because of the almost prohibitive cost of computing power, data storage and analytics.

But cloud-based software platforms, the blossoming of data analytics, ubiquitous access to near-unlimited data storage and the power of connectivity-as-a-service now ensures, like in yachting, that these benefits filter down from the elite to level the playing field.

Greater Flexibility, Visibility

In particular, the once sleepy backwaters of trade finance are now waking up to new opportunities to maximise cash resources in ways that not only strengthen supplier relationships, but also enhance Corporate Social Responsibility credentials. Early Payment Discounting has been around trade finance for many years. But persistent, ultra-low interest rates and expectations of greater flexibility now demand more creative solutions from Treasurers. Answers to which technology can now help to provide.

Dynamic Discounting

Within the broader field of Supply Chain Finance, firms can now use technology to transform early payment schemes into Dynamic Discounting. These can be deployed as an integral part of wider working capital management, where better visibility can optimise liquidity and improve profitability. It might seem just a simple method of paying invoices earlier, particularly for businesses with surplus cash that can benefit both parties involved. But how it is managed becomes critical to the outcome.

Win-Win Solution

For Dynamic Discounting to succeed, it needs to be sufficiently flexible (dynamic) as to how and when suppliers are paid, with payments made prior to due dates at a discount to original invoice values calculated on a sliding scale. This means that the earlier the buyer pays a supplier, the greater the discount. The discount is therefore “dynamic” in relation to the number of days until the invoice due date and avoids the previous “cliff edge” difference between simply either having a discount or not.

Most importantly, suppliers get continuously paid earlier, which improves their liquidity position and which could then allow them to pay their own suppliers earlier, invest more in their business or alternatively just do more business with the buyer.

Funding Flexibility

For a cash-rich buyer operating in a low interest environment, the benefit is obvious. Rather than leaving liquidity in a low-interest account, it can pay large invoices early to receive additional discounts and strengthen profitability. For instance, if a buyer receives a 2% discount for paying a 90-day-net invoice after 30 days, it can invest the amount for 60 days and receive a return. This is the equivalent of a just over 10% annual return on capital that would far outweigh any loss of interest.

The buyer is fully in control of how this program is run, determining how much funding capital to set aside and adjusting that capital as seasonal liquidity fluctuates. Any seasonal liquidity issues could then also be managed by pairing the dynamic discounting program with a traditional SCF program. This would also allow the flexibility for third-party funding to fill any gaps that emerged due to potential, or periodic, lower cash balances available for the original arrangement.

Besides earning a return on excess cash, Dynamic Discounting can also reduce supply chain risks (in that financially more stable suppliers mean reduced supplier risk) and then strengthen supplier relationships. Conversely, on the supplier side it improves cash flow and provides early payment options, both of which save time, puts cash into accounts sooner and increases liquidity visibility. Benefits everywhere!

CSR Benefits – Risk Free Returns

There’s no such thing as a free lunch, but there are other compensating benefits to offset the initial costs of implementing a modern Dynamic Discounting plan, not least of which can be a significant increase in ROI on otherwise dormant cash without increased risk. After all, you are only effectively paying existing suppliers early, who you have to pay anyway, free of any additional counterparty risk.

And, as I mentioned earlier, today’s much more keenly scrutinised CSR credentials can also be significantly burnished by the support provided to often much-smaller suppliers down the food chain. That can then be more widely communicated directly to CSR scoring tables which, in turn, recognise responsible buyers and suppliers.

So, to get the maximum benefit of the wind in your sails and the best performance from your assets, make sure you use the right technology to strengthen decision making. After that, understanding the challenge, minimising the risks and reaping the mutual rewards of Dynamic Discounting will enable much smoother sailing and help you optimise your liquidity!

 

Bank connectivity – why it is not a one-size-fits-all issue

04-05-2021 | Luca Crivellari | treasuryXL |

Corporate to bank communication is still a very pressing issue in cash management. There are several alternatives that allow corporates to interface and exchange data with banks, and most of the times it is complex for treasurers to identify the best choice. The consequence of not adopting the best setup might be to receive inadequate or old information, or the inability to have the right level of control over the issue of payments. The aim of the article is to assist treasurers in identifying all the relevant variables, and to take a decision that factors in all the possible impacts of each alternative.


Introduction – Why bank connectivity is still a hot topic?

In 1973, over 200 banks from 15 countries created a cooperative body with the aim of easing the communication among banks. This organization was born under the name of SWIFT, the Society for Worldwide Interbank Financial Telecommunication.

SWIFT enables its customers to automate and standardize the processing of financial transactions, thereby lowering costs, reducing operational risk and eliminating inefficiencies from their operations.

The rise in global trade was the main reason why financial institutions were pressed by defining a common standard for international payments and reporting, and the aim was to avoid lengthy conversions, useless charges and operational inefficiencies that might derive from the use of different standards.

Fast forward to today, SWIFT is the undisputed backbone of financial markets, with over 11,000 financial institutions and corporations in more than 200 countries, processing a record of 46,3 million messages in a single day on the FIN service. SWIFT messages are nowadays used for both bank-to-bank and corporate-to-bank communication, and the organization has developed dedicated categories for messages that are related to payments, cash management, foreign exchange, trade finance, treasury markets, and securities.

Overtime, several other organizations with a similar aim were created, at national or international level. It is worth to mention the CBI (Customer to Business Interaction, former Corporate Banking Interbancario) consortium in Italy, and the EBICS (Electronic Banking Internet Communication Standard) protocol in Germany.

We still live in a world of different standards and practices, where corporates often struggle in navigating among the different options they have when it comes to issue a payment or to receive a piece of account statement. This article is meant to be a guide for corporate treasurers on how to select the right connectivity setup, because there is no such a thing as a universal optimum, and every alternative has its own advantages and its own shortcomings.

From the experience I gathered during the last years of conversations with several corporates based throughout Europe, one of their most relevant priorities is to consolidate an accurate picture of the liquidity available in the company bank accounts, on a daily basis. Too many organizations, including some with a relevant experience in international business and with a very important turnover, are still relying on Excel files shared on a monthly basis, in order to get the information of the balance that is sitting in a certain bank. In a world where business is changing rapidly, this can be an issue.

Moreover, the ever-changing technology landscape is adding complexity to the issue. New trends as the API-based connectivity can definitely allow a more efficient exchange of information, shortening the gap to a real time treasury, while the migration from MT to MX messaging standard is going to heavily impact how payments are going to be settled in the near future.

In conclusion, bank connectivity is still a hot topic because it is yet perceived as being a complicated issue by many corporates, and there is a clear need for treasurers to figure out all the relevant variables before choosing the most valid option for their company.

The alternatives on the market

Years of innovation and progress in information technology and financial markets have developed a wide array of possible bank connectivity services. In order for a treasurer to take the most educated choice, it is essential to list and examine all the options available. The list goes from the simplest to the most complex.

  • E-banking or bank-proprietary platforms: the base scenario nowadays is for a company to exchange messages and documents over an e-banking platform. This kind of platforms are provided by most of the commercial banks, and they include a common range of functionalities such as the possibility to import payment files from the Enterprise Resource Provider, approve them and send them over to the bank for the execution of the transaction. On the informative side, banks can allow their clients to download account statement messages, and possibly to collect statements sent by other banks.

Additional features that an e-banking platform might have are, for example, the possibility to manage direct debit mandates, or to place FX dealing orders to the bank.

Most of the e-banking solution in the market are endowed with a scheduler function that allows to exchange files with external systems such as the Enterprise Resource Provider or the Treasury Management System.

Companies that are relying on an e-banking platform for bank communications should carefully examine the range of functionalities that are included in the solution, when looking for a bank to work with. Corporate e-banking platforms developed by international banks might be more adequate for companies with international business, while domestic banks might develop functionalities that are more fit to the domestic market.

Another variable to consider is the technology that runs behind the platform. Most banks are nowadays offering web-based solutions that are more flexible and easier to maintain than hosted solutions.

The main advantage of relying on e-banking connectivity is the fact that it requires virtually no effort for the channel to be available, especially if it is a web-based service.

Although it is a very practical solution, companies that have multiple banking relationship will need to activate multiple e-banking platform to issue transactions from these bank accounts. Another shortcoming is that the availability and the security of each e-banking platform relies on the systems of the bank who is providing the service, and this can be a potential risk if the financial institution is not disciplined enough to run a highly secure infrastructure.

  • Multibank platforms: one of the most annoying disadvantages of leveraging on e-banking connectivity is to maintain the access to multiple platforms, and to constantly need to switch from one to the other during the day. This shortfall can be bypassed by the adoption of a multibank platform. These solutions work just like an e-banking platform, but they give the possibility to manage bank accounts belonging to more banks via a single solution.

This possibility is often developed by multinational banking groups, that might allow to reach bank accounts within the same banking group via a single e-banking solution.

Alternatively, some banking communities have developed country-wide standards that allow the possibility to manage all the bank accounts that a company has in the country with a single e-banking channel. This is the case of Italy with the CBI service.

Technical advantages and disadvantages of this solution are essentially the same of the e-banking connectivity that was described in the previous point.

  • Host to host connectivity: some financial institutions allow their corporate clients to exchange files via a secured file transfer mechanism. This option is preferred when the company has a privileged relationship with a specific bank, and this is the case because the setup of a host-to-host connection can be a time consuming task both on the bank and on the corporate side.

It is important to bear in mind that a dedicated host to host connection can be a resource intensive solution to maintain, therefore it is key to agree with the partner bank who is responsible in the maintenance of the service, and which is the minimum uptime contractually agreed.

Having a host to host connection with a specific bank means that the company is clearly trusting the security protocol of the financial institution. Connections of this kind are normally secured by an encryption protocol, and this makes a host-to-host connection generally more secure than an e-banking connection.

  • SWIFT connection: most of the companies with a complex cash management infrastructure choose to connect directly to the SWIFT network.

Being part of the SWIFT network means for a company to be identified with a specific SWIFT code, the same identifier that is normally used by banks.

It also means that a company can securely exchange files with several banking partners from a single channel, and for this reason a SWIFT connection is the preferred option for companies that have implemented a central payment factory.

Two separate services are used within the SWIFT network: the FIN service is used to exchange single MT messages to banks connected to the network. This service is normally used to receive account statements such as MT940/2.

The second service used is called FileAct, and it is the service used to exchange any kind of file to banks. This service is mostly used for bulk payment files such as XML.

Joining the SWIFT network as a mean to consolidate payment operations in the company headquarter or in a shared service center can definitely bring efficiencies, but at the same time it makes sense to go through this road only if the company has the necessary resources to maintain a SWIFT connection overtime, or if it is willing to outsource the maintenance of the connection to a service bureau.

  • API-based connection: with the sharp rise of open banking in Europe, driven by the PSD2 regulation, the adoption of APIs is becoming more and more common among banks, corporates, and software vendors. An API, or Application Programming Interface, is an interface that allows a secure exchange of information among several software applications. Through an API, the company and the bank can exchange information such as payment files or account statements, without the need to setup and maintain a resource-intensive host-to-host connection.

Although it is a very interesting concept, most of the players in the financial industry still have to develop an adequate IT infrastructure in order to get the benefits of this new protocol.

An important role can be played by software vendors that are offering Enterprise Resource Providers or Treasury Management Systems, since they have a strong incentive to differentiate their offer by develop APIs that would connect their solution to the largest possible number of banks.

Who should manage your SWIFT connection, and why should it be FIS?

Every company that wishes to connect to the SWIFT network should ask itself which configuration is the best for them. The main question to consider for a company is if it has the adequate resources to manage and run a SWIFT connection, or if they want to leverage on a service bureau.

Companies that wish to setup and maintain their SWIFT connection should plan the IT resources required to host the SWIFT software, and the personnel that will be dedicated to fulfill all the functional and technical duties required by SWIFT or by the banks.

Because of the effort that is required to setup and maintain a SWIFT connection, a company might decide to outsource those tasks. A SWIFT service bureau can help companies to establish and ensure the availability of the SWIFT network overtime.

Via the Managed Bank Connectivity service, FIS offers its capabilities as one of the largest SWIFT service bureaus in the world, being a key partner for more than 350 groups of banks and corporates, spread in over 35 countries. As part of the Service Level Agreement that FIS has with its clients, service availability is set for a minimum of 99,5%, although the average uptime for 2020 was 99,99%.

Companies that choose to leverage on a service bureau are either those with a very limited staff within the treasury department, or those that have a very complex cash management infrastructure.

The cost of connecting to the SWIFT network via a service bureau can be quite relevant, therefore companies that are evaluating this kind of solution should create a comprehensive and accurate business case that includes both direct and indirect expenses for both alternatives.

Which variables should be considered?

A company should consider several variables when evaluating which is the most adequate connectivity setup.

  • The size of the business: it might sound overkill for a small corporate to adopt a SWIFT connection, in fact most of the small business normally rely on e-banking portals. More complicated connectivity choices are normally more expensive, and it might not be sustainable for a modest company to adopt more complex solutions
  • The number of markets the company is operating: multinational companies normally need several banks in order to do business internationally, therefore a company that is active in several countries might want to adopt a SWIFT connection in order to collect the daily account statements and to orchestrate their payment flows.
  • The number of banking relationships: a company that is operating with several banks might find difficult to maintain access to several e-banking portals. In this case, a company of this kind might want to evaluate a SWIFT connection, unless a country wide multibank standard is available.
  • The company treasury policies: there are several reasons for a company to centralize their payments at headquarter level, or to keep them at country or at division level. The choice of connectivity should reflect the processes in place within a company: in corporate groups where every country is responsible to issue their own transactions, and banking relationships are limited in number, e-banking platforms can work just fine, while on the other hand an international payment factory will most probably require access to the SWIFT network.

Whatever process should the company have in place, it should anyway explore a way to consolidate the account statements of all the subsidiary at headquarter level, in order for the holding company to have complete information on the liquidity situation at group level, and to make sure that liquidity is used in the best possible way.

How to choose the best connectivity solution?

If there is one thing that I have learned by talking to corporate treasurers overtime, it is that no treasury is alike, and every treasury has its own peculiarities.

Given the vast array of bank connectivity options, I will define a few examples of treasury infrastructure, and I will pair them to my recommended choice of connectivity.


Case

 

 

Recommended solution

 

 

Company Alfa

 
Alfa is a company based in the UK, producing semi-finished goods for the food industry. The production is completely sold to English companies, and all its suppliers are based in the UK.

Alfa has two bank accounts, with two English cooperative banks.

 Through the e-banking portal of the two banking partner, Alfa will be able to perform all the necessary operations for its daily business.

 

Company Beta

 
Beta is the headquarter company of a large conglomerate of ventures, operating in several industries. Since the subsidiaries operate in very different markets, the group policy is for every subsidiary to manage their treasury separately, and to orchestrate their payments independently.

The group has relationships with around 30 banks, counting more than 600 bank accounts.

 Every subsidiary of the Beta group will choose its most efficient setup, but the holding company will need to setup a channel to collect efficiently the account statement of all the 600 bank accounts of the group. This will allow Beta group to closely monitor the transactions and to efficiently use its liquidity.

Given the large number of bank relationship, my advice would be to setup a SWIFT connection.

 

Company Gamma

 
Gamma is a group of companies providing consulting services. The group has grown dramatically in the last years, acquiring smaller ventures around the world, and the CFO just hired a group treasurer that has the task to rationalize the banking relationships, and to setup the most efficient treasury infrastructure.

Payments are quite limited in number.

 It would make sense for Gamma to look for a global bank with which to open bank accounts around the world.

By having one main bank, Gamma will easily orchestrate a cash pooling from its headquarter, and it will be easy for the group treasurer to control the payments that are performed by the local staff.

The most efficient connectivity scenario is a host-to-host connection (or a connection via API if available), with the main banking partner, while payments from minor bank accounts will be done via the e-banking.

 

Company Delta

 
Delta is a telecommunication company operating at global level. Due to the nature of its business, the company sends and collects a vast amount of payments of any size from retail and business customers located in several countries.

The company needs to offer the widest range of payment options, therefore it needs to have relevant banking relationships in many countries.

 The best way to orchestrate payments and collections on such a complex company is to setup a connection to the SWIFT network.

Given the very complex cash management setup and the large number of banks involved, it will be essential to have the infrastructure served by a service bureau.

 

Company Epsilon

 
Epsilon is a company operating in the mining and trading industry, headquartered in Spain but with operations in other five countries.

The company needs to maintain a wide range of banking relationship due to the complex financing plans in place.

The treasury department employs a single person, and there is no plan for the company to hire more treasury staff.

 Due to the complex landscape of banking relationships, and the need for the company to control the incoming and outgoing information flows to the banks, my advice would be to implement a SWIFT connection.

As highlighted in the box, it would be extremely hard for a single person to handle the requirements coming from SWIFT and the banks, therefore my suggestion is to adopt a Service Bureau

 

Conclusion – a complex matter requires a complex answer

As I do with most of the complex questions I receive, when asked which is the ideal connectivity setup for my company, my natural answer is: “it depends”.

The aim of this article was to communicate how sophisticated it can be to identify the best possible way to connect a corporate to a bank, or to several banks. My wish is for every treasurer out there to carefully balance all the options, and to include all the relevant items into a specific business case, in order to have a functioning and sustainable infrastructure.

More about the author, who is Luca Crivellari?

Luca is based in Italy and he is a Sales Executive at FIS, specialized in Corporate Liquidity solutions. He has a solid experience in cash management and treasury, having matured experiences in banking and fintech.

Thank you for reading!

 

Treasury: the sad story about the ones that do not get it

28-04-2021 | treasuryXL | Pieter de Kiewit

The great Dutch philosopher Johan Cruijff said: “Je gaat het pas zien als je het door hebt”, roughly translated “you only see if you get it”. I recently thought about this when visiting and working with a mid-sized local company. Their treasury team was much bigger than the teams of companies in the same industry two or three times their revenue size. In this team, for example, they had two employees full-time entering manual payments. Data and instructions are gathered from a multitude of systems and typed into banking software. Time is lost, mistakes are made, staff demotivated and money lost. They refused to hire a qualified candidate who could help because his expected base salary was a few thousands of euros too high…..

Recently the Dutch regulatory body for financial markets, AFM, published this research that shows that companies would benefit from a more mature market in alternative funding. One of their observations is that new solutions, for instance in working capital, are accepted even though the rates that have to be paid are preposterous. They see the market grow, not enough focus on credit rating and doubt if the market will stabilize in a professional manner. A stronger regulatory framework is suggested. I am in doubt, who will do the audit?

Those who are in need for strong treasury seem to ignore the available expertise. Distrust? Lack of time? Afraid of treasury lingo?


Personally I hope that entrepreneurs and CFOs will train their critical thinking and only use what they understand. Cost that are hidden in the total price of their treasury solutions are regretfully accepted easier than a separate price for the right solution and one for the advice. That is regrettable because one of the effects is that companies get perhaps the cheapest but the wrong solutions.

We have a simple suggestion: digest what you know about treasury and ask the most obvious question you can think of. Ask the expert panel and pass our suggestion forward to anyone you might think have a proper question. It is a matter of time until we get it all. I am sure.

Take care, Pieter

 

 

Pieter de Kiewit

Owner at Treasurer Search

 

 

 

How to Prepare for a New Era of Real-time Banking and Payment Services

20-04-2021 | treasuryXL | Kyriba |

An active liquidity network allows companies to avoid multiple costs and delays by globally managing liquidity across their subsidiaries. With 500 banks involved and over 40,000 payment formats to use, this is already a reality for over 2,000 Kyriba clients.

I am often asked, what is an “Active Liquidity Network”? Actually it’s the very foundation of the Kyriba platform, but let me use a simple example to illustrate what it is and the difference it makes.

Technology is providing us with so many great options for everyday life activities. Take the humble takeaway. Not so long ago you’d call up, your order would be placed in a manual ordering system, food would be prepared and then it would be delivered. Today the takeaway experience can be very different. You will order on a mobile device or with a delivery service or by voice or Messenger. The delivery service tells the kitchen what food to prepare, conducts all the billing and organises the food to be couriered to you. While the cooking of the food is still manual, everything else is managed by cloud-based technologies, and you have lots of options, each with their own take on how to make your takeaway experience better, faster, cheaper.

The same thing is happening within businesses. SaaS technology enables your corporate teams to work more autonomously with a resource-planning package that is more bespoke to their task. The original ERP is being unbundled and focused on aggregating accounting entries from various other systems. These bring great benefits to your company’s ability to compete in the marketplace, making you better, faster and cheaper. But given that many of these tools are able to instruct or make payments, this introduces a hazardous landscape for currently accepted liquidity management and control practices.

The problem is further exaggerated by the global expansion that has taken place in the last 20 – 30 years. Technology isn’t just providing more options for how a corporate plans its resources. It’s also providing better, cheaper, faster options for how payments are made and received. Each approach has its own pros and cons. The upshot is that there are many more providers today conducting more payments in more innovative ways, but this innovation, while opening up new choices, also makes the payments landscape more complex.

All this hasn’t stopped an explosion in electronic payment volumes. This is an unstoppable trend that demands a more robust way of controlling and managing payments in and out of business of any size, just as a restaurant receiving 1,000 takeaway orders a night will need to move away from servicing orders on pen and paper. The risks, the costs, and the lack of speed and optimisation are all too great.

The challenge you face

Now, let’s look at a corporate example to illustrate the challenge. Let’s assume a multinational group has a subsidiary in Birmingham, in the UK, which needs to make payments for goods and services to suppliers in Romania and Turkey. The subsidiary has its operating bank account with TSB and is using the bank’s SMB portal to manage cash and make payments. Its ERP system is connected with the bank’s portal for automatic payment file upload. At the same time, the company has subsidiaries in Romania and Turkey that also have a similar setup with their local banks. It all looks good and well-automated everywhere.

But to actually make a payment to a Turkish or Romanian supplier, the Birmingham-based subsidiary’s treasurer has to go through the following steps: approve a foreign currency payment; agree to the exchange rate offered by the bank, which is given without reference to a spread of interbank rates; wait for one or two days for the other FX rate to settle; wait one or two days more for the payment to be cleared by TSB via Swift and the corresponding bank network; wait some more until the supplier confirms they have received the funds and made a shipment; and finally reconcile it all manually with the ERP system.

As a result, the subsidiary incurs the FX spread, swap rates on every payment up to 100 basis points, and interbank transfer fees for every payment of £20. There are also three further delays before the funds reach the beneficiary accounts and manual reconciliation of the ERP. And that happens with every payment for every subsidiary every day!

It’s a pity that the Birmingham-based company doesn’t know that group company subsidiaries in Romania and Turkey have plenty of lei and lire in their local bank accounts. Or that they are connected to their domestic clearing systems providing same day or in real-time clearing and automating confirmation, or no fee at all. Or that there was a better, faster, cheaper payment option the corporate could easily connect to.

How an Active Liquidity Network works?

Let’s look at a different way of doing this. Imagine that the group chooses Kyriba and gets on board the Kyriba global SaaS platform. All of its subsidiaries – including those in the UK, Romania and Turkey as well as headquarters – and all of those subsidiaries’ ERP systems – are then connected to Kyriba for payment, invoicing, and cash flow upload as well as for GL entry reconciliation. Over 2,000 customers and 65,000 legal entities are live today. Kyriba offers automated bank connectivity via secure SFTP and now bank API with more than 500 banks worldwide and growing. And our bank format libraries have more than 40,000 formats and variances supporting payment originations from more than 100 countries in payment delivery to more than 130 countries. Using Kyriba, the payments submitted by the UK subsidiary will be automatically converted to the relevant domestic clearing formats and submitted to those banks the same day.

What difference does that make? With the Kyriba platform the group can internalise and optimise its payment flows. It can see cash balances and cash forecasts across all currencies and bank accounts in real time. A treasury team using Kyriba Cash Forecasting and Kyriba In-house Banking Module can net the outflows by currency and use the market to square off or net the currency positions. As soon as the payments are acknowledged by the banks in real-time or (worst case) next morning, the confirmations and automated dual entries can be imported into the UK subsidiary’s ERP for automated reconciliation.

Better still, the company can use offers like Kyriba Pay, powered by partners like NatWest, that offer competitive and transparent FX spreads with no hidden fees attached. They can choose to use the liquidity they have in lei, lire or other currencies to make the payments without FX conversions at all. That means no interbank fees, globally optimising the effects of exposures and costs, and making same-day payments to 130 countries with automatic dual reconciliation.

That’s what we mean by an Active Liquidity Network. Ours is already the largest in the world, and growing by about 30% annually. It is the foundation of the Kyriba platform that enables our Treasury payment factory risk management and supply chain finance applications, as well as many other value-added services. We are already processing 17 million transactions on behalf of our customers on an average day. We will continue to innovate our existing propositions.

The world’s connectivity is moving to open API. We are pursuing that in three ways.

First, Bank API Connectivity: we have completed pilots with two global banks already, and will be delivering many more in 2021. Secondly, ERP API Connectivity, leading to ERP connect on marketplace, and thirdly Kyriba Open API, to turn the Kyriba active liquidity network into an open API platform for customers, partners and fintechs. This is what we call the Kyriba Active Liquidity Network.

It is here right now and you have a choice to make. Deal on your own with the growing size and complexity of managing liquidity at global scale on time, with speed, accuracy and efficiency . . . or join the 2,000 corporations who are doing it by leveraging the Kyriba platform, and really drive the value of your business.

 

Partner Interview Series: Padraig Brosnan, CEO and Founder of Treasury Delta, a corporate treasury RFP platform

| 08-04-2021 | treasuryXL | Treasury Delta | treasuryXL are delighted to share the interview with CEO and Founder of Treasury Delta, Padraig Brosnan.

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Webinar Recording: The importance of cash management during the crisis | the impact of the pandemic

| 31-03-2021 | treasuryXL | Cashforce |ACT

Rewatch ACT’s session ‘The importance of Cash management during the crisis: the impact of the Pandemic’ with David Shinkins (Barclays), James Marshall (Virgin Media), Hailey Laverty Hotels & Resorts) & Nicolas Christiaen from our Partner Cashforce.

 

 

 

Centralising Payments and Fraud Management with Kyriba – Şişecam

30-03-2021 | treasuryXL | Kyriba |

Şişecam is a Turkey-based, multi-national glass manufacturer that wanted to centralise payments, get better visibility of the group’s accounts and reduce the potential for fraud. Kyriba helped them achieved all this – and more.

Barış Gokalp, Head of Treasury at Şişecam explains the background to the project: “when I joined Şişecam, it was very decentralised, with each company managing its own banking operation. We had too many banks, over 60 companies and multiple ERP systems. After 2013 we did a lot of M&A so there were various different ERPs. There was also a lots of connection types, including SFTP, fax and email, with no standardisation. Each payment operation had its own route, which made it hard to manage.”

“We realised that first we had to solve the connectivity issue with the banks. We figured out that we were spending a lot of time answering how much money do we have and also on the banking operations for our payments.”

Levent Coskuner, Managing Partner of ELC Strategy which advised Şişecam, explains the approach taken: “we knew the internal culture and structure of financing at Şişecam, so we were looking for the best global solution. Between his arrival at Şişecam and the end of 2018, Barış and I visited various countries to understand the different options. It was very important that the solution was very scalable and secure – security was one of the main issues. And given that they have multiple ERPs, we needed a standardised approach. Kyriba has the number one SaaS solution.”

The project had several key elements. “The focus was on enabling payments for ERP systems, centralising and securing them,” says Nik Romano, Head of Emerging Markets at Kyriba. “But they also wanted to gain visibility into the group’s bank accounts. Şişecam selected us as much on the capability of our technology from an application perspective as on the capability to enable connections across so many banks and so many jurisdictions.”

When the Şişecam team looked at Kyriba’s references they realised that a lot of companies have worries about transactions, and that was one of the key points in their decision.

“The number of transactions is not important to us, rather the variety of those transactions. We saw that our geographic reach – Kyriba’s and Şişecam’s – matched, and when we visited Kyriba clients to get references the feedback was marvellous!” says Gokalp.

Tackling supply chain finance was not on the initial agenda, but when the Şişecam team visited a Kyriba client in France they realised that they could also use the treasury management system for other parts of their treasury activities. So although they began with account visibility and payment operations, they realised that they could also include supply chain finance, FX management, cash flow management and cash flow forecasting.

“As the treasury director I saw that we could manage all our treasury activities on one platform with many banks, many countries and many companies. Perfect!” says Gokalp.

“We began to go live with the various countries within the Şişecam group, and by the end of 2021 we will have finished that. All the connections will be established and all the payments will be done via Kyriba. We have also begun to sort out the supply chain finance issues and we will plug the banks into our supply chain finance because we know that a company’s strength comes from its suppliers. In addition, we know that we can manage our FX position via Kyriba. So we will look at that and, if we can manage to finalise things, we will also use Kyriba’s cash flow management module by the end of next year,” says Gokalp.

Gokalp agrees that fraud was the key motivation for the group’s top management. “As all treasurers know, we need to do the checks before the money leaves,” he says. “You should establish in your workflow rules, so that if there is some ‘noise’ around a payment, you can stop it. We have begun to follow where the money is going and when it will reach us. I hope that by the end of the next year we will be fully digitalised, which is one of the objectives of our organisation. The payment file will come from the ERP and no one will be able to touch it, it goes directly via Kyriba.”

Full digitisation means that when a file is created it goes directly and securely to Kyriba, through the approval process and on to the bank. The ERP and the accountants can see in a couple of minutes what has happened to the payment and, if there is a rejection or some other problem that is also reflected back to the ERP system. This is a fully integrated process.

As with so many clients, the Covid crisis showed Şişecam just what their new system could do.

Gokalp explains: “When the pandemic hit we were initially using Kyriba with five companies in Turkey, but in two days all the companies were able to use Kyriba for payments. So the need for the people to come into the office for the signatures and approvals – that was all removed. That was a big credibility boost for the project as well. Before, it was very hard to make a payment. You sent it to the bank and then it arrived, or, if it didn’t you just sent it again. But now all this is done in 10 minutes max.”

“At first some people internally were worried about this project, but when they understood what the project entailed, they too wanted to be part of it.”

About Şişecam

Şişecam is one of the biggest glass manufacturers in the world, based in Turkey but with operations in the Eurozone, Russia, India and Egypt. The group manufactures all sorts of glass – table glass, glass packaging, flat glass and automotive glass – and also produces the chemicals used to produce glass. It has 20 companies worldwide and is working with approximately 60 banks.

Xe-pert Webinar | What could happen to USD and GBP in 2021?

26-03-2021 | treasuryXL | XE |

Given the new US presidential administration and the development of COVID-19 vaccinations, market participants are wondering what’s in store for the USD in 2021.

In the latest free 45-minute webinar bought to you by Xe and BritishAmerican Business, our experts will discuss:

  • Recent performance of USD and GBP
  • Risk-aversion trading theme versus market fundamentals
  • How the China / US relationship is heading and how this could impact USDCNY throughout 2021
  • What we could expect throughout the remainder of 2021 and different scenarios that could have a positive or negative impact on USD and GBP
  • A summary of the type of solutions you can look to implement to protect your business from further impact

Join the currency experts from Xe as they share their thoughts on the current market outlook and how businesses that have a commercial exposure to the currency markets can look to protect their bottom line from further impacts and protect against uncertainty.

Register now and submit your questions, and our experts will also look to answer the common challenges during the live session. We may not have all of the answers, but we can look to provide some support to issues regarding currency exposure.

Date and Time

April 22nd 2021, 5:00-5:45 PM CEST

Register Here

About Xe for Business

Xe provides comprehensive international money transfer and currency risk management (hedging) solutions. Our team of foreign exchange specialists work with UK businesses of all sizes to improve their FX outcomes.

How to get started

Signing up for an Xe Business account is completely free, and will take just a few minutes. Interested in learning what the process entails? Contact our expert Maurits Houthoff for quick and transparant information.

 

Can Trading in Corporate Treasury be Outsourced? About our Invitation-only Round Table

25-03-2020 | treasuryXL | Pieter de Kiewit

Efficiency, lack of expertise, stability and other reasons are all perfectly fine to consider outsourcing in general. Based upon input about outsourcing of trading in an asset management environments we decided to ask prominent corporate treasurers if they think this might work in their company. This is my, very personal, report about the meeting.


Recap Round Table

Being a treasury recruiter I hear interesting stories about the professional lives of clients, candidates and others. Not too long ago I spoke with Dmitry Zamkovoy of Milliman. He told me about their outsourcing services for financial institutions, not only middle and back office functions but also trading operations. Together we wondered if this would work for corporates. See also his article ‘Outsourced trading, is it time to make the switch? Nine factors to consider’

Most of my clients are corporate treasuries with teams with up to dozens of staff members dealing with large banks who employ thousands of specialists. Corporate treasurers have to know a lot about various topics, have important responsibilities and vacation or sickness can be a problem. So my hypothesis is that outsourcing might offer stability and expertise, perhaps efficiency.

In order to find out if my assumptions are right, we decided to organize an invitation-only round table, hosted by Treasurer Search and treasuryXL with the content expertise of Milliman. The 12 participants all have leadership roles in large or very large treasuries, managing front offices. We had group treasurers of Dutch listed companies with up to €10 billion revenue stream and directors of risk working with companies even substantially larger.

In our introduction it became quickly clear we had the right group of people to discuss the hypothesis. Relevant and related topics like regulatory affairs, cost savings, relationship with external parties, cybersecurity and also HR effects were discussed. Also, it did not take long to find out that the hypothesis was met with a lot of scepticism. Various reasons were mentioned.

  • The actual trading task within corporates does not take that much time of treasurers, so what is the win in efficiency?
  • Trading is one little element in the whole risk mitigation strategy of companies. The risk process starts within the operational business and all agreed business-related tasks cannot be outsourced;
  • With increased transparency in the market and a decreased risk appetite in investments of corporates, the complexity of the actual trade is not that high anymore;
  • Some feared that the relation with their brokers and banks would suffer under outsourcing;
  • I sensed that many participants, and their staff, enjoy doing the actual trade and do not look forward to losing that part of their job;
  • Also the statement “if you outsource a process, you can also automate it” did not work in favour of outsourcing.

Conclusion and what about your thoughts?

Dmitry and I raised a question and got our answer. Perhaps outsourcing is possible but not appealing. I am just a treasury recruiter with no stake in the business case but for me, some nagging questions remain:

  • “is the focus only on trading too narrow?”,
  • “what would be the answer if we would ask CFOs or IT experts?”,
  • “there a few examples of outsourced corporate treasury I know about. What works, what doesn’t?”.

Expertise, stability and efficiency are the results of outsourcing of other functions. Does treasury have such a unique position?

Join the discussion

I look forward to your opinion in this, the discussion takes place at the LinkedIn page of treasuryXL.

Thanks for reading!

 

Hoe kunnen bedrijven hun bedrijfsresultaten beschermen tegen de valutamarkten? (Dutch item)

25-03-2021 | treasuryXL | XE |

Komt uw bedrijf in aanraking met vreemde valuta? Wybe Schutte legt in onderstaand interview uit hoe bedrijven de complexiteit van FX kunnen aanpakken.

Maak kennis met…

Wybe Schutte is Head of Business Development Europe bij Xe. Wybe’s carrière is altijd gericht geweest op internationale bedrijfsontwikkeling en het beheren van relaties. Binnen XE spelen beiden een belangrijke rol, aangezien Xe wereldwijd de vertrouwde partner zijn van veel bedrijven en hun helpen bij het beheren en verminderen van het risico die gepaard gaan met internationaal zakendoen en valuta’s.

INTERVIEW

1. Kun je iets vertellen over Xe en haar missie?

Bij Xe draait alles om valuta’s. De meeste mensen kennen Xe van de “Currency Converter”, maar we bieden al meer dan 25 jaar internationale betalingsverkeer diensten aan voor bedrijven. Xe’s Business Solutions ondersteunt bedrijven die in aanraking komen met vreemde valuta door hun te ondersteunen bij het beschermen van de winstmarges, en het verbeteren van de cashflow. Dit onder andere door het valutarisico waarmee ze worden geconfronteerd te kwantificeren en door strategieën te implementeren om dit te beperken. Zodat onze klanten zich kunnen concentreren op hun corebusiness en zich geen zorgen hoeven te maken over hun FX.

2. Welke soorten valutarisico’s zijn er en hoe gaat XE ermee om?

Binnen elk bedrijf kijken we waar de valutarisico’s zitten en hoe we deze risico’s kunnen beperken. Waarbij er verschillende opties zijn voor bedrijven om bescherming te bieden tegen het risico, zoals termijncontracten. Valutarisico kan worden onderverdeeld in drie soorten: 1) Transactie risico, wanneer een bedrijf zaken doet in een land dat verschilt van de basisvaluta; 2) Translational risico, wanneer een bedrijf een activa of passiva in een vreemde valuta op de balans heeft staan, en 3) Economisch risico waarbij een verandering in de wisselkoers een bedrijf een concurrentievoordeel kan geven in de markt.

3. Hoe kan je de verschillende soorten valutarisico’s meten?

FX-risico kan een negatieve of positieve invloed hebben op de bedrijfsresultaten. Als je terugkijkt op de afgelopen 10 jaar, valt er te zien wat de potentiële impact zou kunnen zijn in de meest extreme, minst extreme en gemiddelde scenario’s op een gegeven tijdlijn.
Dit kan worden gedaan door te kijken naar de hoogte- en dieptepunten van de markt en de valutapositie van een bedrijf. Deze stap helpt bedrijven te begrijpen wat de impact op het bedrijfsresultaat kan zijn.

4. Wat zijn de meest voorkomende kritieke FX-problemen die bedrijven hebben?

Bedrijven die een transactionele risico hebben, kunnen een onderscheid maken tussen gecommitteerde of verwachte blootstelling aan valuta risico. Een gecommitteerde blootstelling is wanneer de prijs voor goederen of diensten in een vreemde valuta bekend en gecontracteerd zijn. Hierdoor heeft elke wisselkoersschommeling een directe impact op hun winst of kosten, tenzij ze worden afgedekt. Een verwachte blootstelling is wanneer een bedrijf een inschatting maakt om te zien wat hun vereisten kunnen zijn. De betrouwbaarheidsniveaus in de voorspelde perioden kunnen sterk variëren en het is normaal gesproken zo dat hoe groter de periode, hoe lager de betrouwbaarheidsniveaus.

5. Hoe kunnen bedrijven hun bedrijfsresultaten beschermen tegen de valutamarkten?

Er zijn een aantal belangrijke stappen die een bedrijf kan volgen om de FX-volatiliteit te verminderen. De eerste is het type risico te identificeren om daarna de risico-elementen te kwalificeren en vervolgens een strategie te ontwikkelen en deze tijdens het implementatieproces te implementeren. In deze fases kunt u beslissen welke producten het meest geschikt zijn, zodat u vervolgens over kunt gaan op markttiming en uitvoering. Ten slotte moet u uw aanpak regelmatig analyseren, herzien en aanpassen. Het is belangrijk om te onthouden dat het niet om marktspeculatie gaat, maar om het beperken van uw risico.

6. Wat is volgens jou het grootste voordeel van een werkende FX strategie?

Gezien de altijd onzekere wereld waarin we momenteel leven, kunnen financiële afdelingen en treasury teams op zoek zijn naar een strategie om met deze valutaschommelingen om te gaan. Een strategie die na verloop van tijd een aanzienlijke invloed kunnen hebben op de bedrijfsresultaten van een bedrijf. Een gestructureerde benadering van valutarisico’s kan een bedrijf in staat stellen om strategische beslissingen te nemen, in plaats van te proberen in te spelen op de dagelijkse ontwikkelingen in de markt.

7. Ervaar je verschillen in FX vóór COVID19 en de tijd waarin we nu leven? Wat zijn de verschillen?

Er hebben zich aanzienlijke bewegingen voorgedaan op de valutamarkten tijdens de Covid19-periode en er zijn nog steeds veel factoren die de dagkoersen beïnvloeden. In deze onzekere tijden zijn onze opdrachtgevers op zoek naar zekerheid en stabiliteit. En hoewel prijs altijd belangrijk is, werden andere sleutelfactoren zoals veiligheid en geloofwaardigheid belangrijker. Uiteraard was de impact op onze klanten heel verschillend en we hebben met hun samengewerkt om de oplossingen en flexibiliteit te bieden die ze nodig hadden. We hebben veel nieuwe klanten verwelkomd uit nieuwe industrieën terwijl ze groeiden, en we ondersteunen nieuwe en bestaande klanten die groeiden, het lastig hadden, of hun bedrijfsmodellen aanpasten aan de veranderende markt.

8. De markt verandert voortdurend, hoe blijft XE op de hoogte van de laatste ontwikkelingen in de valutawereld?

We werken nauw samen met onze klanten om hun behoeften continu te begrijpen en hierop aan te passen. Onze deskundige dealers houden de markt nauwlettend in de gaten. Inzicht in de bewegingen, weerstandsniveaus en belangrijke economische en politieke updates die de markt kunnen beïnvloeden zijn erg belangrijk, en we houden die in de gaten zodat onze klanten zich daar geen zorgen over hoeven te maken. Xe werkt ook nauw samen met onze zusterbedrijven en moederbedrijf Euronet Worldwide.

9. Hoe ziet de toekomst van FX er in jouw perspectief uit?

De nabije toekomst zou het hoofd kunnen bieden aan buitengewone niveaus van balansuitbreiding en recessie, wat mogelijk zou kunnen leiden tot een langer stimulerend/ expansief monetair beleid dat op zijn beurt de valutakoersen van de landen die ze dragen, zou kunnen drukken. De gevolgen hiervan op de korte tot middellange termijn zouden een gebrek aan grote economische expansie kunnen zijn, aangezien het kapitaalrendement vaak negatief is wanneer de inflatie wordt meegerekend. Dit kan betekenen dat we een herschikking van de FX-sterkte zien naar op commodity based valuta’s (CAD / AUD / NZD) en alternatieve veilige havens (CHF). We zouden deze verschuiving echter op langere termijn kunnen zien, aangezien met name de overheidsschuld houdbaarder en aantrekkelijker wordt tegen zulke lage rentetarieven en bredere investeringen zou kunnen uitnodigen voor landen en tot op zekere hoogte de particuliere industrie.

We zijn getuige geweest van een grote volatiliteit in de FX-markt door een grotere afhankelijkheid van een smallere data kern. Inflatie en rentetarieven, maar ook verhalen over de overheidsschuld en de uitbreiding van de balans hebben de meeste invloed op de renteschommelingen.

10. Wat is tot nu toe jouw beste ervaring ooit in de wereld van valuta’s?

Een scale-up ondersteunen met hun complexe FX-vereisten en hen in staat stellen hun bedrijf in een korte tijd te laten groeien door het FX-risico te elimineren en gaandeweg aanzienlijke kostenbesparingen te realiseren.

 

Meer over XE

Bij XE draait alles om Valuta. We bieden een uitgebreid portfolio van valutadiensten en -producten aan, waaronder onze valutacalculator, marktanalyses, valutagegevens-API en snelle, gemakkelijke en veilig betalingsverkeer voor consumenten en bedrijven.

XE faciliteert wereldwijd meer dan 13.000 bedrijven per jaar bij het beheren van hun vreemde valuta en het vooruit plannen om de risico’s van valutaschommelingen te beperken.

XE is onderdeel van Euronet Worldwide (EWI), een aan Nasdaq genoteerde wereldwijde aanbieder van elektronische en transactie verwerkingsoplossingen met een marktkapitalisatie van ongeveer 7,5 miljard dollar.

XE Business Services

Internationale betalingen en beheer van valutarisico’s van ‘s werelds vertrouwde autoriteit op valutagebied. De concurrentie voorblijven is al moeilijk genoeg zonder de complexiteit van vreemde valuta. XE kan u helpen tijd en geld te besparen, zodat u kunt blijven doen waar u goed in bent: uw bedrijf runnen. Onze oplossingen bieden u zekerheid in een onzekere wereld en stellen uw bedrijf in staat om de juiste beslissingen te nemen.

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