How to cope with the interconnectivity trap part II

| 16-08-2016 | Hans de Vries |

Erphansdevries (1)

 

Electronic Banking has been here for more than thirty years now. And it certainly had a big impact on the way the corporates and banks communicate. Nevertheless, ever since the introduction Treasurers have been struggling to incorporate this feature into their IT ERP environment. They get stuck in the middle. You can read more about that in part I of this article. Today I will show you my “way out”.

A bank and ERP (and TMS) system agnostic solution to upgrade the Treasury function

The SaaS solution described in this article is particularly interesting for Treasurers because of the very limited implementation efforts that are needed to set-up the system at the corporate side. All the platform needs, is a connector that takes care of the automatic upload of files from the ERP environment to the platform. The platform takes care of the conversion of transaction files to the file format needed by the specific banks for processing and performs a validation on the contents of the files to ensure Straight Through Processing at the bank.

So there is no need for changing the output at the current ERP system. This is extremely handy in situations where the corporate landscape consists of various ERP systems, or various versions of an ERP system. The same goes for the download of statement files. After collection of the bank statements, the platform takes care of the conversion into the needed file formats and delivers them into the ERP (and TMS) environment for automatic reconciliation purposes. By using the (SaaS) bank agnostic platform the Treasurer is immediately freed from all usual IT concerns with regard to the bank connections. Most systems also provide the Treasurer with a Dashboard Function to monitor the actual total balances at all banks and the cashflows (End of day and Intraday) that enables them to perform bank (automated) independent cash balancing transactions if needed.

Streamlining the authorization processes to get full control

In most multibank situations the treasurer is faced with one bank only authorization schemes that in most cases use unique bank authorization codes tokens and procedures. This wide variety of tokens, passwords etc. makes life for a Treasurer far from easy especially from a compliancy perspective.

Routing all outgoing transaction files via the SaaS platform, provides the Treasurer with the unique opportunity to streamline the authorization process. He now gets the opportunity to fully control and maintain the granted functionalities / authorization levels per user that are applicable on all bank accounts. Especially in the upcoming times of real-time 24/7 processing by the banks, using this sole gateway to the banks will provide the Treasurer with maximum control of all outgoing transactions and therefore avoiding fraude to the max. Since these systems also provide all necessary audit trails, the Treasurer can take full accountability for the banking processes.

Saving substantial money

Depending on the platform and the number of banks that need to get connected, the costs of the implementation and annual subscription fee will vary per provider. However, the benefits of such an investment are not only measured by the upgrading of the internal cash management processes.

Implementing the platform will also directly lower the operational costs:

  • Experts estimate costs of € 15,000 per year per e-banking solution (maintenance, license fees, software updates, system administration, system tests, database configuration etc.)
  • Elimination of expenses for manual liquidity tracking, manual administration of bank accounts and bank master data as well as the bank-specific administration of signatory authorizations.
  • Reduced banking fees as a result of higher transparency, easier comparability as well as the maximized flexibility towards banks: daily choice of transaction bank(s) per currency/ transaction type.
  • Saving operational costs due to the elimination of manual intervention for the collection and upload of bank statements to the ERP system. In the perfect set-up the reconciliation process can be fully automated and finalized in the early hours of the day providing a head start to the credit management department.

In most cases, these savings pay back the investment in the bank agnostic platform within a year. The introduction of this relatively new cash management service will free the treasurer from the interconnectivity trap, upgrade the internal organization, provide a uniform authorization scheme on all banks while at the same time reducing the operational costs. This solution is also future proof due to its capacity to adopt quickly to new standards, formats etc. All in all, a perfect perspective on upgrading the cash management function within the treasury. For more information, check: PowertoPay.com.

 

Uitgelicht: Blockchain, een bedreiging?

| 12-08-2016 | Herman van Hazendonk |

blockchainCredit Suisse bracht een aantal dagen geleden het rapport ‘Blockchain; The Trust Disrupter’ uit. Hierin stelden zij dat Bitcoin en onderliggende technologie Blockchain geen grote bedreiging vormen voor het traditionele bankwezen. Swift (Society for Worldwide Interbank Financial Telecommunication) zal echter wel moeten oppassen. In het onderzoek wordt Swift als langzaam, ouderwets en duur beschreven.(bron: finextra.com) Wij vroegen expert Herman van Hazendonk of hij Blockchain als een bedreiging ziet.

“Blockchain kan op termijn zeker een bedreiging vormen voor SWIFT, maar niet alleen voor SWIFT. Op termijn kan het ook een bedreiging worden voor reguliere banken, creditcardmaatschappijen en onder andere notarissen.

De Nederlandse technologie website Tweakers.net heeft eind 2014 een gedetailleerd artikel gewijd aan Blockchain en de mogelijkheden daarvan.

Veel banken (onder andere ING, zoals ze hebben laten zien tijdens het 20 jarige lustrum van de DACT) zien veel mogelijkheden in het gebruiken van Blockchain en proberen hier op in te spelen. Het grote probleem op dit moment is echter dat de technologie nog in de kinderschoenen staat en geplaagd wordt door fouten en kwetsbaarheden in de code. Recentelijk bleek dat maar weer bij bedrijven zoals Ethereum en BitFinex. Meer details over wat er precies mis is gegaan bij Ehtereum is hier in begrijpelijke taal terug te lezen.

Blockchain heeft zeker veel toepassingsmogelijkheden in de (nabije) toekomst, er moeten echter wel eerst een aantal kinderziektes opgelost worden zodat het vertrouwen in de techniek hersteld wordt. ”

hermanvanhazendonk1Herman Hazendonk – Treasury Manager

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Uitgelicht: De medewerker als medeaandeelhouder

| 11-08-2016 | Udo Rademakers, Simon Knappstein |

crowd

 

Deze week verscheen er een opiniestuk in het Financieele Dagblad waarin gesteld wordt dat medewerkersparticipatie een belangrijke bijdrage kan leveren aan de verkleining van de tegenstelling tussen arbeid en kapitaal. Door de medewerker in de rol van medeaandeelhouder te plaatsen zullen de belangen van aandeelhouders, onderneming en medewerkers meer op één lijn komen, aldus de schrijver van het artikel. Wij vroegen experts Udo Rademakers en Simon Knappstein naar hun mening.

 

udorondUdo Rademakers – Treasury Consultant

“Het laten participeren van medewerkers in de onderneming kan zorgen voor enerzijds meer betrokkenheid door de medewerkers en anderzijds bind je ze langer aan de onderneming (wegens clausules dat bij ontslag je participaties vervallen). Door een grotere groep mensen te laten participeren, is de kans op „gemotiveerde“ medewerkers“ die naar hetzelfde doel toe werken groter.

Er zijn de laatste jaren excessen geweest waar het top-management van bedrijven enorme geldsommen hebben ‘gecashed’ en de „normale medewerker“ met lege handen is blijven staan (of zelfs de baan verloren heeft). Het verschil in macht, maar door de participatiestructuur in dit soort gevallen, ook een duidelijk verschil in doelstelling, maakt de financiële kloof tussen arm en rijk alleen maar groter en is vanuit mijn optiek lastig te verdedigen.

Door participaties als een salaris component te integreren, maak je de medewerkers meer “entrepreneurs” en uiteraard zijn er mensen die liever kiezen voor vastigheid. Afhankelijk van de doelstelling van het bedrijf en de strategie, zou je hierdoor verschillende typen mensen aan je bedrijf kunnen binden.”

 

simonknappsteinrondSimon Knappstein – Owner of FX Prospect

“Het artikel stelt dat medewerkersparticipatie (personeelsaandelen) de tegenstelling tussen arbeid en kapitaal bij door private equity gefinancierde bedrijven kan verkleinen. Dat lijkt me theoretisch misschien mogelijk, maar praktisch gezien een onrealistisch idee.

Bij beursgenoteerde ondernemingen met personeelsaandelen- en optieplannen is de zeggenschap van het personeel op die manier de facto ook nul. Ik verwacht niet dat zoiets bij private equity opeens anders zal zijn. Om het extreem te stellen, het beetje koerswinst op je personeelsaandeel gaat niet compenseren voor het verlies van je baan wanneer door overmatige schuldfinanciering het bedrijf moet gaan reorganiseren.”

Zal medewerkersparticipatie de tegenstelling tussen arbeid en kapitaal bij , door private equity gefinancierde, bedrijven verkleinen? Laat ons jouw mening weten en laat hieronder een reactie achter.

treasuryXL: summer holiday reading material

| 10-08-2016 | treasuryXL |

Time flies, it is August already. And, for most people, August means holiday time and taking time to read. Have you got your summer holiday reading list sorted yet? The perfect moment to provide you with some summer holiday reading material. These are the top 5 best read articles of treasuryXL from the start. Have a great summer!

 

1 | How can Cash Management influence the Cash Conversion Cycle?

| 27-06-2016 | Olivier Werlingshoff |

credit-card-851502_960_720How can the Cash Conversion Cycle (CCC) be optimized? The CCC measures the time the money is tied up in the sales and the production process before it’s converted into a cash in from customers. When translated in a formula this will be the DSO + DIO – DPO (Day’s Sales Outstanding + Day’s Inventory Outstanding – Day’s Payables Outstanding). Read the full article

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2 | Business case – Funding strategy : how Fastned uses Nxchange

| 09-05-2016 | interview with Claire Tange from Fastned |

logoFastnedFastned’s growing and they’re giving investors the chance to directly buy and trade in certificates of shares via Nxchange. We’ve asked Fastned’s CFO Claire Tange to explain this type of financing. Read the full article [separator type=”” size=”small” icon=””]

3 | Treasury ABC – part I

| 08-07-2016 | Jan Doosje |

S059QDGBOGFor many people Treasury is, as they think, something that is not concerning. Because there are many items that could be mentioned and listed here, I chose to mention the items that have effect on our daily lives, even if we are not aware of the existence of the described item. I’ll call it the Treasury ABC for normal citizens. Read the full article

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4 | 8 Career Hurdles in a Transfer from Banking to Corporate Treasury

| 07-07-2016 | Pieter de Kiewit |

careerAn increasing number of bankers come to my recruitment desk wanting to make a transfer to corporate treasury. This transfer can be made successfully but there are a number of things to take into account. Below the 8 career hurdles, I hear most about, in a transfer from banking to corporate treasury. Read the full article

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5 | Foreign bank accounts, how to include them in your cash pool

| 21-06-2016 | Jan Meulendijks |

janmeulendijksSignificant balances on your foreign bank accounts which are really of better use in the country where your operation is? Include them in an automated cash pooling scheme so that all your funds are available in The Netherlands and no more unnecessary interest is paid! Read the full article

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How to cope with the interconnectivity trap?

| 09-08-2016 | Hans de Vries |

Erphansdevries (1)

 

Electronic Banking has been here for more than thirty years now. And it certainly had a big impact on the way the corporates and banks communicate. Nevertheless, ever since the introduction Treasurers have been struggling to incorporate this feature into their IT ERP environment.

This struggle has proven to be a tough one, due to the ever changing internal ERP environment as a result of various versions of the same ERP system or even various ERP systems within the company due to take-overs/ mergers. And of course there was quite some turmoil in the banking industry itself: the introduction of the Euro, then SEPA with all new transaction formats and regulations, meanwhile a banking crisis etc. Moreover, the ever growing demands on security and compliance pose further pressure on the interconnectivity. As a result, it has become more and more difficult to keep all connections in place and up-to-date. Especially since most corporates are forced to spread their cash management business amongst multiple banks from a risk mitigating perspective. On top of that the Treasurer is facing a radically changed attitude towards data processing operations, from management but also business environment perspective. We now live in an internet world that does not allow for slacking reactions and inefficient procedures. Action is reaction and efficient reconciliation processes are the key for survival.

Treasurer gets stuck in the middle

To optimize this situation, the Treasurer usually finds himself squeezed between the limited IT budgets for optimizing the connections with his back office environment on the one end and his banks on the other with their multiple banking solutions. While SEPA was presented as a unifying power to align all European banks, in practice there still appears to be a great variety in approaches per bank. So therefore in practice, the Treasurers dreams of a flawless interconnectivity often proved to become nightmares and he most of the time winds up somewhere in the middle of an endless implementation process.

Is there a way out?

The answer is negative as long as the Treasurer remains dependent on the internal IT departments and the offered bank solutions. However, if the Treasurer wants to actively take control of this situation there are now options available that will provide the Treasurer with all the connections and security/ compliance checks he needs for his day to day cash management operations. Instead of using the internal systems, the Treasurer can have his back-office systems (ERP and TMS) connect to the banks via a bank independent (SaaS) platform that will take care of conversion and validation of the uploaded files, the authorization according to the internal compliance guidelines and the routing towards all corporate banks. At the same time the electronic bank statements will be collected and forwarded to the back-office systems for automatic reconciliation in the ERP (and TMS) environment. Apart from the authorization of the transactions, no manual intervention is needed.

Next week Hans will introduce you to his ‘way out’: the SaaS platform.

Who is our treasury guru?

| 08-08-2016 | Pieter de Kiewit |

At the end of this year Theo van der Nat will retire. He is professor, working for the Amsterdam based Vrije Universiteit, for the (Dutch) Register Treasurer post graduate education and other organisations. If there was ever one, he is/was the guru of the Dutch treasury community. He deserves his “emeritaat” and brings me to the question: “Who is our treasury guru?”.

Other fields of expertise have obvious ones. In recruitment, the other profession I am following, Dr. John Sullivan is quite prominent. He publishes on a regular basis, introduces new topics and is not afraid to be thought provoking. In marketing, guys like Porter and Ansoff dominated, in self-help Covey was king. In line with Sullivan you heard from them on a regular basis, they were innovative and had a scientific connection (PhD or professor).

In corporate treasury in the Netherlands, there are quite a few very knowledgeable experts. Especially the leaders of the two biggest treasury consultancy organisations know a lot and know how to broadcast on a regular basis. It is obvious they like you to hire their organizations, which prevents them from reaching the guru status. If the DACT organizes its Masterclass, I do not see a treasury expert. If Het Financieele Dagblad publishes about Fintech, FX, interest or hedge accounting, I do not recognize the names.

It is my opinion that corporate treasury deserves a more prominent place in business. A comprehensive strategic vision from a recognizable guru with a long term consistent story would help. I do not pretend to have an overview over the market as a whole. So I ask you: who is your candidate treasury guru?

I look forward to your input,

Pieter de Kiewit

Pieter de Kiewit

 

 

Pieter de Kiewit
Owner Treasurer Search

 

How to avoid payment fraud?

| 05-08-2016 | Udo Rademakers |

Generally speaking, most of the fraud cases don’t make it into the paper because companies are so embarrassed that they choose to keep the affair quiet instead. In some cases however, amounts are too substantial to hide and corporates (need to) publish. One case has been published some months ago by Accell, a Dutch listed company. This triggers us again and brings us to the question: how can we control / “treasure” corporate cash the best and avoid possible fraud?

Fraud case

January 2016:
Press release Accell: Accell Group confronted with theft in Taiwan

Financieele Dagblad (Dutch newspaper): Fabrikant Accell voor miljoenen bestolen door Taiwanees

Accell had to publish a fraud case: according to the Annual Report “an employee could circumvent and misuse the availability of certain payment facilities by misappropriation of systems, processes and trust”. It led to a possible loss of EUR 4 million.

In my work as Treasury Consultant, I have seen more cases where in- and external fraud (almost) took place. All cases have been settled “internally”, however, the learnings out of it were huge.

How can your company avoid losing cash by fraud, or more generally, also avoid human errors?

Without going into too much detail, avoiding fraud or mistakes is avoidable by defining clear Accounting and Internal Control Systematics and sticking to those rules. A fraud is almost never 100% avoidable, but the aim should be to find a balance between the risk on fraud, possible impact and costs (or keeping procedures still “workable”).

Define a “Static” Supplier Data process

  • Separate the Master Data responsibility from the Finance area (Segregation of Duties) with clear defined restrictions
  • Request supplier for original documents/data, verify and capture them
  • Capturing of data should be done by a limited number of employees and with segregation of duties (4 eyes principle)
  • Data should be protected and only be possible to amend via a standardized process (by limited number of employees)
  • Documentation

Define a Payment process (stand-alone banking system)

  • Create standardized payment templates (and make sure this cannot be amended)
  • Reduce the number of banks / bank accounts (less systems, less procedures, etc.)
  • No ad-hoc payments should be allowed (or only with additional secured processes)
  • Define limits according to authorization matrices (per person, department, per day, etc.)
  • Define clear segregations of duties
  • Documentation
  • Transparency

If HQ prefers having full cash control, one way could be to let payments only be released by the treasury department. Another way is to define certain limits on local level and higher limits at HQ. Still the 4 eyes principle (or 6 eyes) should be in place for accepting payments content-wise.

Define a Payment process (interfaced out of your ERP system)

  • Make sure the interface from the ERP system to Payment system is secured where data cannot be amended while being stored on a server or in the payment system itself)
  • Automate the process, no manual intervention should be required

Control cash outflow by comparing it to your Cash Flow Forecast

(see as well my posting of May 2016)

  • Automated reporting of cash balances (MT940/MT942) to Group Treasury
  • Analyze daily variations and link it to the forecast
  • Link the annual budget to the annual CFFC (and analyze the delta regularly)
  • Review on a weekly or monthly base your cash variations and analyze it

In case of any questions, business cases or other questions, please do not hesitate to contact me.

Udo Rademakers

Udo Rademakers

Treasury consultant

 

Uitgelicht: Financiering binnen de keten

03-08-2016 | Kasja Reinders, Jan de Kroon |

calendarAfgelopen week verscheen op CFO.nl het artikel ‘Financiering binnen de keten’ waarin wordt gesteld dat het Nederlandse bedrijfsleven nog altijd kampt met een te lange betalingstermijn. Gemiddeld duurt het nu 40,7 dagen voor een factuur wordt betaald terwijl hier wettelijk 30 dagen voor staan. Wat zou het betekenen wanneer alle bedrijven zich aan de wettelijke termijn zou houden? Wij vroegen experts Kasja Reinders en Jan de Kroon om een reactie.


kasjarondKasja Reinders – Treasury/Cash manager

Als alle bedrijven zich aan de betaaldatum houden dan zouden de bedrijven ook beter draaien.
Het feit dat men zeker is van wanneer de facturen betaald worden kan op deze manier ook een betere Cash Flow Forecast gemaakt worden. Een goede Cash Flow Forecast is belangrijk om de liquiditeiten te waarborgen en het bedrijf zo optimaal mogelijk te financieren. Door een 6 maands Cash Flow Forecast op te stellen weet het bedrijf waar hij in de toekomst financieel aan toe is. Dit houdt in dat je AR ook veel beter kan gaan inschatten wat tot op heden nog steeds een groot probleem is voor bedrijven om dit getal juist in te schatten.

jandekroonrondJan de Kroon – Owner & Managing Partner of Improfin Groep 

Op zich is het bewondering waard dat grote ondernemingen initiatieven ontplooien om kleinere toeleveranciers in een betere werkkapitaal positie te brengen. Logisch is het ook dat andere partijen hier wel een rol bij willen spelen. Het vrijspelen van 2,5 miljard euro in vijf jaar lijkt daarbij een mooi streven. Toch is enige relativering gewenst.

Als 26 grote spelers samen aan de gang gaan met die 2,5 miljard dan kan dat m.i zelfs in een jaar. Grofweg betekent dat immers circa 100 miljoen per jaar. De ‘grote’ jongens kunnen dat lenen tegen een fractie van hetgeen de gemiddelde MKB-ondernemer aan rente betaalt. Laat staan wat het sommetje is als veel meer grote partijen er aan mee zouden werken.

Een tegenwerping kan zijn dat het administratief te complex is om sneller te kunnen ‘inlopen’.

Gelet op de purchase to pay-processen en de automatisering die je bij grote ondernemingen mag verwachten, is ook dat niet echt de beperkende factor. Zeker met ERP systemen, E-invoicing, FSSC’s en goed werkende interne supply chains, moet het makkelijk veel sneller kunnen dan die 40 dagen. Op dit punt; prachtige en gewaardeerde intentie. Maar het kan strakker.

Een relativering past ook bij de aanwending door het MKB dat plots ruimer in de jas komt te zitten. Op de eerste plaats is dat de veronderstelling dat de MKB-ondernemer ermee gaat investeren. Gelet op de economische vooruitzichten is dat nog maar de vraag. Groter is de kans dat de huisbank constateert dat de eerder verstrekte werkkapitaalfinanciering wat aan de ruime kant is. Om twee redenen zal er sprake zijn van een inperking van de limiet. Op de eerste plaats het streven van banken naar een kortere balans; immers gedreven door kapitaaleisen van de toezichthouder. Op de tweede plaats betekent een kleinere debiteurenpositie ook een relatief kleinere zekerheidspositie en daarmee een ander kredietrisico. Daardoor zal de prijs een hogere worden als limieten in stand blijven.

Overall dus een prima initiatief dat in veel supply chains tot voordelen zal kunnen leiden door een betere cash conversion cycle en het reduceren van ‘float’. De doelstellingen en de aanpak mogen wat mij betreft concreter en realistischer. Of een creditcardmaatschappij daar een rol in heeft is voor mij dan nog even de vraag.

 

USD/TRY, where to after the failed coup?

02-08-2016 | Simon Knappstein |

TRY

 

In my July consensus FX forecasts report USD/TRY was expected to rise to 3.11 in 12 months’ time. These forecasts were given prior to the attempted coup. 

 

 

USD TRY

Now, two weeks further, the domestic situation in Turkey is clearly stabilising and it is a fine moment to take a look at the opinions of ING and Rabo on the outlook for USD/TRY. Rabo is currently expecting that USD/TRY will move to 2.90 in 1 year and ING is looking for USD/TRY to rise to 3.35 in 1 year’s time.

Rabo holds a relatively constructive view on the Lira based on a fairly strong economic growth and a high carry that tempts investors looking for yield. At the same time it sees the fact that Moody’s may downgrade Turkey’s credit rating to below investment grade as a clear risk. Such a downgrade, based on the post-coup political situation of increased concentrated political powers in the hands of President Erdogan that might lack the necessary rule of law and checks and balances, might trigger another wave of capital outflows from Turkish bonds and weaken the TRY significantly.
ING focuses on the easing cycle and also on the risk of a downgrade, both factors that would clearly keep the TRY under pressure. Furthermore it still sees idiosyncratic risks like the current account deficit, the large currency risk carried by the corporate sector and geopolitical risks all pointing to a weaker TRY.

My take away from this for the near term is that in the current benign market conditions the high carry may be the most important factor supporting the TRY and drive USD/TRY lower. A major risk is that Turkey’s credit rating may be downgraded to junk, maybe already within the next couple of days, which would seriously weaken the TYR.

Simon Knappstein - editor treasuryXL

Simon Knappstein

Owner of FX Prospect