In quiet ways, treasuries are using technology to transform operations. Craig Jeffery, managing partner at consultancy Strategic Treasurer in Atlanta, reports that leading companies are deploying flexible treasury technology architecture that allows them to react rapidly to the unexpected threats that seem to emerge every month. “This analytic-oriented architecture represents the most dramatic response from treasury that has occurred in modern time,” he says.
Amway, for one, is taking a big step in this direction. With more than $9 billion in annual revenue, the direct seller of consumer products has a large footprint that includes 50 affiliates across the globe. Managing cash flow takes approximately 1,300 accounts at 200 banks, so visibility is a challenge. Until last year, in North America that visibility came from a server-based installation of Treasury Manager, but by 2010, the software, developed by Selkirk, was a product with a long past and a dubious future. Outside of North America, affiliates reported cash positions on spreadsheets, explains Amanda B. Pilipovic, Amway’s manager of global treasury.
Now Amway, based in Ada, Mich., is wrapping up the first phase of its installation of a Web-based Kyriba workstation that spans the company’s global reach and plans to complete the project in the second quarter.
“This global connectivity gives us real-time visibility of our cash and will be an important gauge of counterparty risk,” Pilipovic says. “We’re empowered to make more informed decisions about cash, which makes us more competitive and supports our global banking strategy.”
The move to Kyriba has also made treasury more efficient. “What we were doing was very manual,” she says. “Now we’re much more automated, which frees us up to do other things.”
Amway started its tech makeover with a request for proposals. It considered bank offerings as well as treasury software vendors. “We narrowed the field down to three for on-site demos,” Pilipovic says, then down to two, and finally to Kyriba.
Moving to a Web-based solution opened the door to access by Amway’s 50 global affiliates and to standardized, streamlined reporting, she explains. Affiliates now report directly through Kyriba using standardized templates, and the company’s global cash position is immediately visible, which provides the foundation for more accurate and timely cash forecasts, Pilipovic says.
The first phase of the installation focused on cash position and forecasts. “We can now do a true consolidated global cash forecast in real time, which is critical to our business objectives,” Pilipovic says, noting that “real time” means prior-day balances and activity in most cases, with some same-day reporting. A second phase will bring in debt and investment activity, she says.
“The payoff is better information that is available sooner, which means that we can make better, faster decisions,” Pilipovic says. “Before, we tried to forecast cash based on 50 separate spreadsheet reports. Now they all use standardized templates that we developed. We have forecast information at our fingertips, which makes forecasting much easier.” She says the solution is robust for corporate treasury and simple for affiliates.
With such a far-flung banking network, SWIFT is a critical part of attaining global visibility, Pilipovic notes. “We use host-to-host communication with a few larger banks, but most of the data comes through SWIFT,” she explains. “We have our own SWIFT address that we use as our preferred way to receive the daily bank statements, but for banks that can’t report directly, we use a service bureau through our partnership with Kyriba.” She estimates that 70% of Amway’s 200 banks, which account for 60% of its overnight cash, now report into Kyriba.
With Kyriba users at all 50 affiliates, training was an important part of the project. “We had to travel around the world and train users in every country where we have a presence,” Pilipovic reports.
“Amway moved off unsupported client-server architecture to a continually developing system that grows in capabilities and value each year,” observes Strategic Treasurer’s Jeffery. “Investing in a SaaS model ensures that a company stays current with technology as upgrades are rolled out.”
Omnicom Group faced similar challenges with its globally dispersed advertising and public relations agencies. In 2009, it had more than 3,500 accounts at more than 150 banks across six continents. It now has complete daily visibility of all bank balances across the group and by the end of 2011 had closed 750 accounts, saving over $1 million in bank fees and reducing borrowing by over $50 million through better cash deployment, reports Conor Leyden, managing director for financial services. The project won a 2011 Alexander Hamilton Award for cash management.
Omnicom was already capturing and mobilizing its main balances through the pool and sweep mechanisms of its regional in-house banking structures. However, balances outside these core banking structures were only visible at period ends.
By developing a global cash control system (GCCS), Omnicom is able to fully capture these balances. GCCS, a database of detailed information on every account, uses Citigroup’s TreasuryVision for daily balance reporting via SWIFT MT940s and 950s, and provides automated workflows and reporting that include efficient online bank account approval, verification and quarterly confirmations, Leyden reports.
“With such complete visibility, we spotted a large number of accounts that could be closed,” he says. “We could spot inefficiencies in our liquidity management and move cash to where it could be most beneficially deployed.
“We had better control over our accounts and could avoid banks with unsatisfactory ratings, an important benefit in light of the economic uncertainty in Europe,” Leyden adds. “We can fully monitor accounts and balances of Greek and Italian banks and others exposed to sovereign debt risk, and it means we can take immediate action to avoid or mitigate such risk. Our cash forecasting and targeting also improved noticeably.
“As a result of GCCS, we now have total control of all of our cash—every cent, everywhere, every day,” Leyden says.
“Automation and visibility lead to better analysis,” Jeffery notes. “Better analysis leads to greater efficiency and improved financial performance if executed properly. Omnicom didn’t stop at automation alone. They performed the analysis and executed on that analysis and realized significant benefits. This represents a good game plan carried out fully and with success.”
For a look at how Amtrak collects data on factors that affect its cash flow and their correlation, see Working on the Cash Train.
And for a discussion of the increasing use of software-as-a-service technology by corporate treasuries, read The Cloud Invasion.