Building a Treasury Function to Support Business Growth

by Suzanne Hosmans, Group Treasurer, Celio International

Since its incorporation in 1985, Celio has become a major international menswear brand. Celio has over 1,000 stores across 70 countries, with particular strength in France, which sell 35 million items across four collections of 800 designs per collection each year.

Celio has experienced impressive growth in recent years both through organic expansion and acquisition, leading to an increase in the complexity of its financial activities. In this article, Suzanne Hosmans, Group Treasurer explains how she established a new cash and treasury management function to support the company’s current and future international strategy.

Until I joined the company, most treasury processes at Celio were conducted manually, with little definition or separation between treasury and accounting. Payment processing was the major treasury task and we communicated with our banks via fax. This meant that tasks were labour-intensive and lacked security and control, while value-added activities such as managing cash and risk were not being undertaken.

Initiating the change

We were able to demonstrate convincingly to senior management that there were some immediate areas in which a treasury function could add value. For example, each store maintained its own bank account at a local bank, resulting in a large number of banking partners and major difficulties both in constructing a group-wide cash position and negotiating terms with banks. We identified a series of initial objectives:

• Firstly, to disconnect treasury from the accounting operation to form a distinct business function;
• Secondly, to implement a specialist, integrated treasury management system (TMS). We recognised that a robust platform was an essential foundation for a well-managed treasury, and would also enable us to develop a payments factory with an in-house bank.
• Thirdly, to put in place a secure and automated means of communicating with our banks. We realised that SWIFT was the best long-term solution, which would not only allow us to automate communications across multiple banks, but also streamline the approval process;
• Fourthly, to rationalise our banking partners to enable greater visibility and control over cash and better economies of scale. 

These were all substantial undertakings which were impossible to resource with only one person alongside the normal daily routine. Consequently, we appointed PricewaterhouseCoopers (PwC) to support the bank migration and system selection, and help us to implement industry best practices in our treasury policies and processes.

Treasury infrastructure

We reviewed a variety of TMS at a EuroFinance conference, and spent time with the different providers. We found that although there were a number of high quality systems available, we quickly identified the type of system that would meet our current and future needs, and the suppliers that we could work with successfully. We provided a shortlist to PwC who then issued a request for proposal (RFP). In addition to our functional requirements, the quality of the ongoing relationship with the supplier was an important criterion, such as implementation consultancy, helpdesk, and a high level of IT support. We also took references for our preferred systems.

Based on this process, we appointed IT2, recognising the quality of the product and the flexibility of the supplier in managing the relationship. This gave us the platform we needed to secure, control and automate our treasury and cash management processes, implement an in-house bank and streamline our banking communication with SWIFT.

Treasury transformation

We awarded our cash management business to the banks that provided financing to the company, which was a positive step in developing stronger banking relationships. We were able to rationalise our bank accounts, reduce banking costs and improve visibility and control over cash substantially. Cash is now centralised using cash pools, supported by a payments factory with an in-house bank to cater for the financing and transactional needs of our international network.[[[PAGE]]]

We have now expanded our treasury team which comprises three people at present. The team is supported by a robust, automated treasury platform, with SWIFT connectivity to our banks, which has proved very successful. We are therefore able to focus a relatively small team on managing our cash and hedging our financial risks more effectively as opposed to routine day-to-day tasks, which has benefited the organisation enormously.

Project implementation

Based on our experiences of building a treasury function, including introducing a TMS, the implementation stage is the most difficult. The project was particularly complex given the diversity of business objectives, the involvement of a large number of stakeholders, and the degree of transformation in business culture. Around 30 staff from Celio were involved, including treasury and finance executives, IT, legal and audit. In addition, we worked closely with our banks, IT2, SWIFT and PwC. It was vitally important to ensure all stakeholders remained fully informed of the objectives and benefits of the project, to leverage their expertise, and secure their support. While it was not too difficult to convince senior management of the merits of automating treasury and cash management processes, it was more challenging to convince users who had been accustomed to the previous way of working. However, once they had become familiar with a new system, more streamlined processes and an expanded reach of treasury’s activities, they became far more enthusiastic as they found not only that their roles were less manual, but also they became more interesting.

We had set ambitious timescales for the project, so it was essential to take a disciplined approach to project planning and monitoring. We implemented review processes to ensure that potential obstacles were identified and addressed quickly. Consequently, we were able to achieve our project objectives within the timescales we set.

Project outcomes

The project delivered tangible savings in both internal and external costs, and achieved a cost benefit within the second year of implementation. For example, we reduced our external cash management costs, such as account costs, by 26%. Our cash pool resulted in savings of 15%, and our trade finance costs fell by 14%.

The intangible benefits of the project should also not be underestimated. For example:

• Implementing IT2 has provided us with a robust and transparent control hub with secure workflow management, full cash and treasury management support and timely, dependable operational and management reporting. IT2 is integrated with SWIFTNet, automating the two-way flow of bank information.
• Our payments factory and in-house bank, which is also based on IT2, enables us to route all intercompany payments through a single channel. We have made substantial savings in bank fees by reducing the number of external flows, in particular cross-border transactions. Furthermore, the in-house bank has extended value-added treasury services to the whole Celio group, including cash management and intercompany financing, reducing the cost of borrowing and banking services for our internal business units.
• By effectively concentrating cash from across the group, we have been able to optimise our interest income/ expense performance, resulting in savings across the group. Float and value date losses have also been reduced.
• By implementing a centralised approach to cash management and payments processing, we concentrate our bank relationships to the banks that support us in our international growth. The new cash management and payments structure provides a scalable solution for the future, and maximises security, control and efficiency.

Future developments

The overall project to develop a treasury function, transform our activities and implement the associated technology infrastructure has taken around two and a half years so far, but the result is an international treasury that operates in accordance with industry best practices. One area in which we continue to focus is treasury and management reporting, which we continue to focus on. We are also looking to incorporate our commodities into the TMS and to prepare the accounting entries derived from treasury transactions to be uploaded into the accounting system. As we continue to expand our geographic footprint, we are enhancing our risk management capabilities. In the future, we hope also to integrate our trade finance activities more closely into treasury. With a robust infrastructure, best practice policies and procedures and a very strong team, we are now well equipped to manage our future cash and treasury management requirements as these evolve in the future.