by Franziska Kinzinger, Head of Accounting, and Uwe Hagen, Head of SEPA Project, CarGarantie
Leading international specialist car warranty company CG Car-Garantie Versicherungs-AG (CarGarantie) has substantial operations across Europe, including both euro and non-euro countries. In 2011, treasury recognised the substantial cost savings that SEPA (Single Euro Payments Area) offered to CarGarantie as an international business with a high volume of cross-border flows. As Franziska Kinzinger and Uwe Hagen explain however, CarGarantie has also been able to leverage the SEPA migration project to rationalise cash management banking relationships, simplify electronic banking and enhance cash and liquidity management across the region. By establishing a close, pragmatic relationship with UniCredit, the company has been able to fulfil its cash and treasury management objectives within the mandatory SEPA timescales.
Treasury challenges and opportunities
We have a highly centralised finance and treasury function at CarGarantie based in Freiburg, while in-country operations are dedicated solely to sales and services. Until recently, when we embarked on our SEPA migration project, we worked with a variety of banking partners, leading to fragmentation in the way that we managed our cash. For example, we accessed account information through a variety of electronic banking systems, each of which had a different security mechanism. This offered us the opportunity to further optimise our processes and reduce complexity.
As CarGarantie operates in multiple European countries with a large volume of cross-border business, SEPA presented considerable opportunity to reduce our transaction costs and standardise payment and collection methods. In addition, we recognised that SEPA would enable us to rationalise our cash management banks, locate all of our Euro accounts in Germany and simplify cash management and electronic banking.[[[PAGE]]]
Appointing a banking partner
We issued a request for proposal (RFP) in 2011 to 10 banks and received 6 responses. We had a range of criteria, some quantitative, such as costs, and some qualitative, including continuity of service, skills and expertise and the ability to access the bank through a single point of contact. At that time, we had a relatively limited relationship with UniCredit, so we originally chose an alternative bank. However, changes in the incumbent bank’s technical processes meant that these no longer fitted with our internal processes, so we approached UniCredit. Not only did the bank fulfil the RFP criteria we had defined, but the bank also had extensive experience and reach in Central & Eastern Europe. This would allow us to establish a partnership that extended beyond the initial scope of our SEPA project, and support our business in the countries where we anticipate future growth. We were also attracted to UniCredit’s electronic banking solution (UC eBanking prime) which was user-friendly and could be implemented easily. We quickly realised that we had made the right decision in appointing UniCredit. The relationship was open and pragmatic from day one, and we were able to switch our accounts remarkably quickly, including opening a significant number of accounts within one week.
Project progress
We divided the SEPA migration project into two phases for SEPA Credit Transfers (SCT) and SEPA Direct Debits (SDD) respectively, each of which took around twelve months. As a complex project, we encountered some challenges. For example, one of our key project tasks was to create a central, consistent database of bank account information including IBAN and BIC.
Migrating to SDD was also complex as it was not simply a finance-related project. Instead, we needed to roll out new processes across the company, which involved building awareness amongst the relevant departments and collaborating to develop processes that would support the new instrument. This relied significantly on senior management support for the project, which facilitated easier communication across the business. We scheduled regular, fortnightly project meetings to keep the project on track. These project calls were also useful to keep informed of changes to SEPA instruments and formats, and discuss any developments in our requirements.
Benefits and outcomes
Since late 2013, we have been doing almost all of our payments (both Euro and non-Euro) with UniCredit, including payroll. We have the majority of our Euro accounts with UniCredit in Germany, with some additional banking partners for counterparty risk purposes. In addition, we need to maintain some local Euro accounts for tax payments but we hope that this will change in the future, allowing us to rationalise our account structure further. We access most of our accounts, both euro and non-euro, through UniCredit’s UC eBanking prime combined with the EuropeanGate service from UniCredit. This is a major benefit as we could reduce the number of electronic banking systems and ultimately, it will enable us to set up a pan-European payments factory.
As a result of migrating to SEPA and streamlining cash management with UniCredit, we have far greater visibility over cash, particularly as a result of using a single electronic banking system for most of our cash management business. By working with a primary banking partner, cash management is also more straightforward. Our costs have reduced, and as we are able to leverage higher quality, more consistent data, we can automate our financial processes more fully.[[[PAGE]]]
Future plans
Looking forward, there is still a great deal happening in the evolution of SEPA instruments so we will need to keep on top of these developments. There are still different standards in each country (for example, it is not possible to make a payment in Italy using German standards) so we are looking forward to greater consistency across the Eurozone. We are also looking to optimise our cash management across our euro accounts.
The project was ultimately successful as a result of the considerable effort put in by the combined CarGarantie and UniCredit team who worked closely together with common objectives. Bearing in mind the diversity of business functions affected by the project, particularly for SDD, it was essential to have senior management support to help align priorities across the business.