At the same time, the fact that payment processes were not standardized companywide increased the cost of the payables function. Large teams were needed to manage manual payments in some locales, and each group company required its own external banking partners and bank communications channels, leading to high bank fees.

Hitachi leadership tasked the treasury group with centralizing payments companywide and standardizing on processes that built operational efficiency and control. “Management asked us to enhance our visibility into working capital and cash,” Mikami reports. “Our objective was to develop a well-planned, centralized, and scalable payment strategy, and to use a methodical implementation approach to roll out that strategy.”

Mikami and her colleagues launched a pilot program in which a few Hitachi entities would debut the new process, providing experience and insights that other group companies could learn from in their own transitions. Their intention was to minimize risks to the organization through this phased implementation.

To get the ball rolling, Hitachi deployed SAP Advanced Payment Management and the SAP In-House Cash solution and engaged Deloitte Advisory to assist with implementation and configuration. “We were familiar with SAP, and we found that what we wanted to do across several areas—not limited to payments, but also treasury risk management, FX [foreign exchange], cash pooling, and bank account management—was available in the In-House Cash module,” Mikami says. “Then, as we were designing our solution, the Advanced Payment Management module was released. It was very sophisticated and had some additional functionality that we want to direct toward our payment processes in the future. So we decided to implement Advanced Payment Management as well.”

The solutions integrate with one another and with Hitachi’s SAP treasury management system. Hitachi was one of the early adopters of the payment-on-behalf-of (POBO) functionality within SAP Advanced Payment Management, so the project team had access to SAP product experts during implementation to improve certain system functions.

The solution that Hitachi and Deloitte came up with integrates payments across multiple source systems, including Hitachi’s existing SAP and Oracle enterprise resource planning (ERP) systems. SAP Advanced Payment Management absorbs and processes different types of payment files and payment-request files, using converters that map data to the treasury management system. A payment-management dashboard captures a holistic view of the company’s transactions, enabling high-level monitoring, detailed analysis, and an audit trail for all payments throughout Hitachi.

Advanced Payment Management also centralizes payment approvals. Internal routing processes incorporate the in-house cash function into the treasury management system for accounting and reporting of intercompany asset/liability positions and reporting back to group companies. And the overall process integrates with Hitachi’s general ledger for accounting and automated reconciliation. The solution brings to the attention of Hitachi staff any exceptions that arise as payments are requested, executed, or reconciled—along with automatically generated recommendations on next steps. Hitachi also worked on cleaning up the vendor master data stored in its payment source systems, in order to provide a single source of truth companywide for this information.

All these changes improve control and reduce payment risks, as do the data enrichment and validation checks that Hitachi and Deloitte built into the new payment processes. Advanced Payment Management considers which currencies are involved in a payment, which purpose code the transaction is tied to, whether the length of the bank account number is correct, and more. These checks align with Hitachi’s specific needs—for example, a “value date” custom enhancement aligns the due date of each payment, as per Hitachi-defined payment cycles. If a field doesn’t make sense, the system will offer the user requesting payment a chance to correct the issue.

At the same time, the solution allows for flexible payment routing scenarios, so Hitachi can dynamically determine the appropriate external account and method of payment for each transaction. Hitachi has been able to reduce the frequency of high-cost cross-border wire transfers, replacing them with low-cost local payments.

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See also:

• How One of the World’s Largest Conglomerates Brought FX Under Control

The SAP treasury management system’s Bank Communication Management module monitors the payment workflow internally. When a payment is fully approved, the module routes it to one of Hitachi’s external banking partners as a standard Pain.001 payment file via host-to-host connectivity.

“Now, for group companies using the POBO process, users will initiate a payment in their ERP system,” Mikami explains. “The ERP system will send a file to our treasury management system, which will perform verifications and route the payment request for approvals. Then the treasury management system will decide which account the payment should be paid from and will generate a payment file on behalf of the originating company. All the accounting for that will happen automatically and will be passed to our various source systems.”

She adds, “After the payment, the bank sends us an acknowledgment that the payment was executed, and the treasury management system tracks that as well. This system gives us excellent visibility into Hitachi payments. Throughout the entire payment process, if anyone touches a payment, that triggers approvals or a controls process. Governance is very important to us, and this new system has greatly improved governance throughout our payment processes.”

The new processes have also greatly improved efficiency in Hitachi payments. The POBO capabilities have boosted payments’ cost-efficiency, and automation has reduced manual intervention throughout. Moreover, the centralization of payments companywide has substantially reduced the FX and bank fees Hitachi pays.

By streamlining payment processes and aligning them with corporate growth drivers—digitalization, innovation, and sustainability—this initiative brought global payments up to the standard of operational efficiency that Hitachi prides itself on. “We are the treasury group, and we emphasize ongoing learning,” Mikami says. “We keep updating ourselves so that we can optimally support the global company. Payments are very important, of course, but they are just the method to close business. Through this project, we have let Hitachi business groups know they can rely on us and utilize us.”