Dana Holding Corp., an automotive manufacturer, adopted new technology in order to increase its visibility and improve its cash-flow forecasting.
Prior to this effort, Dana, with operations in 26 countries around the world, had an indirect cash forecasting process. "We were dependent on cash flow forecasts that were provided by various members of the FP&A functions throughout our entire financial organization at the business level," said Muriel Alvarez, assistant treasurer at Dana. "For long-term forecasts, that approach makes senses but short-term, it's not usually as accurate as a direct method."
The system provided weekly visibility into the company's cash, and given that it depended on employees going in to post balances, the accuracy "was not that great," Alvarez said.
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To remedy matters, Dana implemented a SunGard AvantGard Integrity treasury management system and connected to its banks using SWIFT via SunGard's service bureau. Rather than link to all of its banks with SWIFT, it used some of its key banks as consolidators, Alvarez said. "We had our individual banks send our bank files to them, and then they in aggregate passed them on to us via SunGard."
So Dana, which used to have weekly visibility, now has daily visibility to transactions and balances for every one of its banks. And while it still depends on the input from its businesses, "we're able to bump that up against direct cash flow forecasting, as well as event-driven direct forecasts that are made by our treasury organization," Alvarez said. "We combine the two inputs and we're able to end up with a much more accurate cash flow forecast."
The company also worked to rationalize its bank account structure as part of the process, and it uses the workstation to automate its cash concentration.
The implementation took about two years and was done by region, starting with North America and Europe, then Latin America and finally Asia.
"For us, what it really boiled down to was standardization and consistency—having a single tool to support the processes, the same tool deployed globally, which allows you to standardize your daily work processes and procedures," Alvarez said. "And having policies in place that define guiding principles at the onset, so it's clear what people are expected to do and the rules they should be following on a daily basis."
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Susan Kelly
Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.
