Tag Archive for: cash management

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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Blockchain in Cashmanagement

| 15-07-2016 | Olivier Werlingshoff , treasuryXL |

blockchain

 

Blockchain, het gaat de gehele financiële sector veranderen. Administratie 3.0. Bijna iedereen heeft er wel iets over gehoord of gelezen, Blockchain is ‘trending’. Volgens de PaymentEye was Blockchain het gesprek van de dag op de Tech Open Air conference in Berlijn. Wij speurden het internet af naar een definitie en vroegen expert Olivier Werlingshoff naar Blockchain in zijn werkveld: Cashmanagement.

 

Blockchain – de Definitie

Dit is de definitie die Wikipedia geeft:
“Een blockchain (soms naar het Nederlands vertaald als blokketen) is een gedistribueerde database die een gestaag groeiende lijst bijhoudt van data-items die gehard zijn tegen manipulatie en vervalsing. Zelfs de beheerder van nodes kan deze gegevens niet vervalsen. Dit komt door het gedistribueerde systeem.”

Investopedia zegt het volgende:
“To use conventional banking as an analogy, the blockchain is like a full history of banking transactions. Bitcoin transactions are entered chronologically in a blockchain just the way bank transactions are. Blocks, meanwhile, are like individual bank statements.”

Blockchain – de Ontwikkeling

Blockchain werd in het begin onthaald met veel hoera-geroep, alles zou gaan veranderen binnen de financiële sector. Nog steeds is het een fenomeen dat veel interesse wekt maar toch verschijnen er hier en daar berichten waar pas op de plaats gemaakt wordt. Het zou nog te vroeg zijn om er je voordeel uit te halen, Blockchain is nog niet volgroeid.  (bron: rtlz.nl)

Blockchain in Cash Management

Olivier WerlingshoffOlivier Werlingshoff: Basis van blockchain is dat er een er een grote mate van transparantie ontstaat tussen de verschillende deelnemers. Op het vlak van Cash Management kan dit voordelen opleveren bij zaken waar veelvuldig gecontroleerd wordt, zoals bij overboekingen.

Door blockchain kunnen overboekingen sneller uitgevoerd worden en omdat er minder partijen betrokken hoeven te worden, zullen kosten dalen. Als je het breder trekt zou dit ook van invloed kunnen zijn op de check van gegoedheid van debiteuren en crediteuren.  Omdat de gegoedheid van deze door alle deelnemers bekend wordt geacht zal de zekerheid hiervan stijgen. Kortom op Cash Management vlak kan Block Chain zeker voordelen opleveren.

Zie hieronder het artikel dat de PaymentEye publiceerde over Blockchain op de Tech Open Air conference in Berlijn:

 

How can Cash Management influence the Cash Conversion Cycle?

| 27-06-2016 | Olivier Werlingshoff |

credit-card-851502_960_720

How 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).

In this article I will focus on the DSO. Strictly, the DSO is the time it takes for invoices to be paid. I prefer to enlarge this, to the moment you received the order from the customer till the moment the money is on your main bank account.

How can the “enlarged” DSO be shortened with cash management products?

Let’s look at the customer first, how would he prefer to pay?

Card payments:

In the retail sector 50% of the transactions are made by card (credit & debit cards). The other 50% of the transactions are still done by cash. Card transactions are a fast and easy way to receive the money on your bank account. With contactless cards you can even minimize the transaction time, if there is a bottle neck, you can increase your sales by accepting those cards!

The process with cash transactions is more extensive and expensive. You have to save and collect the cash before dropping it at your bank. After a few days the money will appear on your bank account.

Be aware that there are reasons why customers still prefer to make cash payments. Last year I set up a test of 6 weeks of not accepting cash in one retail shop. The total sales dropped with 15%!

Mail with payment link:

When you have the mail addresses from you customers you could consider to send the invoice the same day by mail with a link to the Ideal website. This will encourage your client to choose the payment method you prefer. Furthermore you will save postal costs and paper costs by not sending paper invoices.

Foreign countries:

If you have customers in foreign countries, be aware of the local habits. For example in the US, most of the payments are done by cheques. In the UK and in France cheques are still used as payment instrument. The problem with cheques is that when receiving them, they have to be send back to the original bank before the money will be transferred to your account.

To fasten this process you could consider the possibilities of a local cheque lockbox. With a lockbox your client can send his cheque directly to a local address at a bank and the transactions can be processed immediately. The time that will be saved is the “post time” and the “process time” of the cheque.

International transfer:

If you prefer your customer to make an international transfer, it can be an option to open a local bank account. Depending on the number and the amount of transactions this could save you a lot of transfer costs. To get the money from your local bank account on your main account in The Netherlands there are a lot of cash pool instruments you can use. Jan Meulendijks has written an article last week about how to include foreign bank accounts into your cash pool.

SEPA:

In de SEPA region there are no differences in transfer costs between a national transfer and a transfer between SEPA countries. It is seen as one SEPA region without borders. You can mention your main IBAN number on your invoices and ask your customers to transfer the money direct to your main account.

But even with SEPA it could be an idea to hold a local bank account. In some countries customers still prefer to make transfers to a “national” bank account instead of an IBAN in another country. Some local governments even still oblige you to hold a local bank account for tax payment purposes!

As you can read,besides a good credit management system, there are a lot of cash management instruments that can be used to fasten the payments of your customers.

Olivier Werlingshoff - editor treasuryXL

 

Olivier Werlingshoff

Owner of WERFIAD

 

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!

There are a number of reasons why you maintain bank accounts in other countries (I will explain the advantages of that in my next paper), but once this is the case, you need to control them in the most efficient way and at minimum costs.

Dutch banks who offer international cash management solutions have several tools to achieve this:

1. International Balance Reporting

The banks where you hold your accounts report them daily automatically into your multi-bank internet banking tool (e.g. Access Online from ABN AMRO); balances as well as transactions. With this tool you can also initiate local or cross border payments from this account.

Most ERP-systems can reconcile this account information automatically into your general ledger.

2. Cross Border Zero Balancing (CBZB)

In case your foreign accounts are held with subsidiaries of your Dutch bank, the balances can be automatically swept (daily) to your central cash pooling account in The Netherlands or be supplied with funds in case of shortage.

3. Multi-Bank Cash Concentration (MBCC)

In case your accounts are held with foreign partner-banks of your Dutch bank the alternate MBCC system can be used to achieve the same effect.

Now, once you have the Balance Reporting part in place plus one or both options CBZB and MBCC, not only all account information is made available to you on a daily basis, but also the balances are swept automatically daily into your central cash pooling account in the Netherlands!

Results:

  • Automated reconciliation of account-information in your General ledger; no more loss of time/personnel processing data
  • Interest optimisation (your use of bank credit is reduced with the balances that otherwise are in your foreign accounts)
  • No manual handling

Setting up such an international cash management scheme involves some paper work and time (most of that at your bank’s side) but once it has been set up it is a major cost and trouble saver which you wish you had had 10 years sooner!

 

Jan Meulendijks

 

Jan Meulendijks

Cash management, transaction banking and trade professional

 

Innovation in Treasury Management: Vallstein’s walletsizing

31-05-2016 | Huub Wevers from Vallstein

On april 13th of this year the Fintech innovation awards took place. Vallstein won the innovation award in treasury management with their Walletsizing® system. We asked Huub Wevers from Vallstein to give us an update on this new system. What’s new about it and who will benefit from using Walletsizing®?

Congratulations on winning the award, can you tell us more about WalletSizing?

WalletSizing® is a system in the cloud focused on giving full transparency to corporates on their spending and profitability for banks. All their banks globally, regardless of the number of banks and the type of products, varying from Fx, Cash Management, bonds, lending or asset management. We take in all data a corporate has available on the products and invoices from the bank in an innovative easy way for the corporate where they do not need to do much with the data. We translate, map and upload it into the system after which the corporate has all insight in their banking landscape and can do easy analysis with all the features the system offers.

What distinguishes WalletSizing® from its competitors?

Firstly, WalletSizing® looks at the entire bank relationship, across all product areas, not just transaction services or credit, but everything that is being used from all banks that maintain a relationship with the client concerned. Secondly, we take an explicit view through the eyes of the bank on the relationship, taking all relevant Basel III /IV regulation into account. This kind of transparency is absolutely essential to identify the real room to negotiate and ensure terms and conditions that are truly fair for both sides of the table. Thirdly: technology. We provide analysis for clients maintaining multiple bank relationships across a multitude of countries with many different banking products, which is impossible to build and let alone maintain in spreadsheets.

ROS Calculation 2

 

Who will benefit from using this system?

CFO’s and Treasurers will benefit by having full transparency in the bank relationships and as a result they will have more meaningful bank reviews, RFP’s and Negotiations. Depending on the objectives a corporate has, it will allow them to be fair in their distribution of business towards banks, limit the number of banks used globally or keep banks costs in line with market practice as will be indicated by the system’s benchmarking capabilities. Where cost saving was an objective, corporates saved 26% on their bank costs on average, across the entire relationship, all products.

Vallstein won the Fintech innovation Award 2016, what is innovative about your system?

We take away the need for extensive data gathering, translating and analysis by taking this responsibility upon us and we create full transparency using all data and the latest Basel III rules in a matter of days. Comparing banks like for like. Next to this we have extended the functionalities last year by having a edition focused on Bank Fee Analysis as well. The system verifies automatically after upload of new invoices if the prices paid are as agreed earlier with the banks. A simple and somewhat more operational step.

Can you give some examples of companies and employees that are using Walletsizing®?

Examples of Companies that are currently using WalletSizing® are SaudiAramco, Salzgitter, Vimpelcom and many more. Typically, the Treasury Control department works with the system on a day to day basis and depending who is having the bank reviews the Treasurer or CFO will be using the reporting.

 

Picture_HWHuub Wevers is responsible for Corporate Solutions at Vallstein, the leading Bank Relationship Management specialist. Before joining Vallstein he has had eighteen years of experience in Banking at ABN AMRO and RBS, notably Transaction Banking. His responsibilities included Product Management, Account Management, Implementation and Operations, whereby his last role was the leadership of all Service & Operations in EMEA for RBS. At Vallstein Huub is responsible for building out the software solutions that Vallstein offers for corporates. Solutions that automate bank relationship management in order to assess the profitability that a corporate has for their banks, using all banking products and Basel III.

Cash flow forecasting (CFFC)

23-05-2016 | by Udo Rademakers |

In recent years and months, we have seen quite a few companies coming into liquidity problems, leading in worst case scenario to insolvencies. This brings us to the question: how important is cash flow forecasting? How to anticipate adequately and to avoid facing “surprises” at the last moment and how should you implement it?
The Cash flow forecast (CFFC) estimates the timing and amounts of cash in- and outflows over a specific period and in different time buckets (day, week, month, year). It provides you with an actual overview of the cash position and with a forecast.

Why is a cash flow forecast important?

  • based on the CFFC you can assure the timely payment to your suppliers, employees and finance providers (at all times as you want to avoid liquidity problems!)
  • it can act as a management tool and “early warning system”
  • the analysis of actuals versus forecast helps you to identify possible problems  (e.g. delay in invoicing to customers, late payments to suppliers)
  • the analysis of forecasts versus forecast helps you to identify the trend and to understand the business much better
  • the aggregated information shows if you are able to cover your financial obligations towards finance institutions/investors in the longer term and if your cash flow could meet the covenant targets or whether there will be a breach of credit facility limits. In case of a “cash rich” position it helps you to decide how much money and for which period you could invest it
  • A CFFC helps to identify foreign exchange exposures and it supports hedging decisions.

How to implement a CFFC?

Depending on the turnover, leverage, growth, systems, number of employees, internationality and currencies, the approach (and time effort) should fit the size of the organisation.

Cash flow forecasting often doesn’t have priority within organisations. However, as a treasurer, we realize the added value and need of it but also do realize that making a good CFFC could cost a lot of (time) effort. So how could we get a timely and reliable CFFC process in place without using all precious time of the finance managers?

  1. automate where possible: use either sophisticated spreadsheets, but even better, a sophisticated web based application or use the functionalities of your Treasury Management System (and fine-tune it)
  2. import centrally (via MT940) the actual banking balances where possible
  3. use your (invoice payment due dates) AP/AR data for the short term FC
  4. let fill out the “gaps” by finance managers based on their business knowledge
  5. make sure everyone reports the latest data in time with an explanation of high impact changes and actual versus realisation differences
  6. undertake actions where needed
  7. consolidate the data, analyse the information and report the highlights to the senior management on a regular basis.

 

 

 

Udo Rademakers

Treasury Consultant

Basisprincipes van interne beheersing op het gebied van Treasury – deel I

| 06-05-2016 | by Jan Doosje |

treasuryHoe vaak komt het nog voor dat een externe adviseur of een nieuw aangetreden functionaris moet constateren dat de financiële functie op het deelgebied Treasury qua opzet bij een bepaalde organisatie niet goed ingericht is ? Naar mijn idee te vaak, vooral waar het bedrijven en organisaties uit het midden- en kleinbedrijf betreft. En dit terwijl control op het gebied van de Treasuryfunctie vrij snel en vrij simpel te verkrijgen is!

Voor de ‘niet financiële’ lezer zal wellicht niet goed duidelijk zijn wat de Treasury functie inhoudt. Als tweede vraag komt op: “Wat is goed ingericht?”.

Ik zal daarom beginnen met deze vragen te beantwoorden.

De Treasury functie houdt zich bezig met beheren van de financiële waarden en verplichtingen van een organisatie met als doelstelling om op zowel lange als korte termijn voldoende liquide middelen te hebben voor het voldoen aan (toekomstige) verplichtingen. Een tweede belangrijk element is dat dit tegen marktconforme tarieven dient te gebeuren (hier worden ook de geldende rentepercentages bij inbegrepen). Het laatste, en vooral gezien ervaringen bij diverse organisatie, zeker niet het meest onbelangrijke element is, dat dit dient te geschieden tegen voor de organisatie acceptabele en te dragen risico’s.

Treasury houdt zich bezig met:

  • Kasgelden
  • Banksaldi en optimalisatie hiervan (cash management)
  • Leningen opgenomen
  • Leningen uitgegeven
  • Rentebeheersing
  • Valutarisico’s
  • Optimalisering van rentebaten of rentekosten
  • Goede voorwaarden met de bank(en)

Kort gezegd dient de Treasury functie er zorg voor te dragen dat er altijd voldoende geld in kas (lees: banksaldo) is en dat hiervoor niet teveel betaald wordt en er geen, of vrijwel geen risico’s aan verbonden zijn. In deel twee van dit artikel zal ik verder ingaan op de inrichting van de Treasury functie.

Jan Doosje

Jan Doosje – Owner of Fimterim Advies & Consultancy

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Improving your working capital by using L/C’s

Euros26-04-2016 | by Jan Meulendijks |

Afraid of Letters of Credit because they are a fuss?? Don’t be!! Next to being a term of payment which gives you a lot of payment certainty, they can also be used as a source of financing your company.

Of course you need to be careful in preparing the required documents for your export-L/C’s, but that is mostly a matter of reading the text and consulting with your bank. We can go into that in a future paper.

Having said this, how can you use a L/C for your own financing purposes?

Most L/C’s stipulate a certain form of buyers’ credit, e.g. the date of payment is 90 days after the date of the invoice or shipping document. Immediately after shipping you present the complete set of required documents to your bank who, after approving them, will claim the invoiced amount with the L/C-opening bank and pay it to you after 90 days (in this example); minus charges of course.

In case you are short of liquidity/funds you can request your bank to advance the L/C-amount to you immediately. Your bank has no obligation to do so, but will be willing in case the L/C-opening bank has a favourable reputation and/or your bank has confirmed the L/C (in which case they have a payment obligation anyway…).

Example

Transaction amount: EUR 100.000,–

L/C has been confirmed by your bank; handling charges EUR 500,–; confirmation charges 400,–.

Payment date: 90 days after date of shipping document.

Interest rate 2.5% (based on 3-month Euribor + surcharge based on your credit rating); discount factor against 2.439% for 90 days is EUR 609,75.

After presenting the documents, your bank checks them on complying with the L/C-terms. Upon approval, your bank will credit your account for an amount of EUR 98.490,25 (100.000 minus 500 minus 400 minus 609,75).

The interest rate/discount factor will often be lower than the rate you pay for using your regular credit facility, because this transaction is indivdually funded in the money market on the currently very low Euribor-basis.

In practice the number of days will be slightly different because you will need a few days to complete your documents and present them to your bank, but don’t let that hold you back…

Jan Meulendijks Jan Meulendijks – Cash management, transaction banking and trade professional

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