Published: July 01, 2009
The expansion of Volkswagen’s global presence over the last few decades has led to increased financial and liquidity related risks. Consequently, Volkswagen was seeking a comprehensive solution to manage financial transactions, global cash flows and financial risks more accurately. In 2005, Volkswagen AG decided to replace its legacy in-house cash, payment and treasury management solutions with an integrated platform based on SAP, referred to as the ‘Global Treasury Platform’. In summary, the Global Treasury Platform provided the following capabilities and objectives:
Until the end of 2008, the Volkwagen business unit Audi maintained a separate treasury function from Group Treasury. However, Audi has now finalised the replacement of its financial management systems, and transferred its treasury, cash and risk management operations to the Global Treasury Platform. This was an important milestone in the overall migration project, enhancing operational efficiency and visibility of information without affecting the in-house services and expertise which Audi’s treasury function provides.
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From a group perspective, the establishment of a Global Treasury Platform has various objectives to which are attached measurable performance indicators:
During turbulent economic times in particular, and in an economic environment affected by the ongoing financial crisis, an effective reporting and liquidity management is vital more than ever.
It has been possible to reduce both the number of external bank accounts and the banking communication channels.
The Global Treasury Platform at the Volkswagen Group provides the foundation for an integrated payment factory and in-house banking solution, as well as for an efficient treasury management function. As part of the corporate’s global strategy, the Volkswagen Group shares common services and resources in the finance and treasury area using a single platform. The shared service centre (SSC) approach meets the demand for a more effective transaction handling and delivers operational excellence.
Group Treasury acts as a specialist business unit for payments, financial transactions and securities, limit management etc. and provides these services to other Group companies which are connected to the platform. By standardising transaction execution and improving support services, costs can be reduced at the same time as enhancing automation and control.
However, within the Volkswagen Group, Audi’s treasury function is also a ‘competence centre’ providing expertise to its subsidiaries and assisting them in all finance and treasury related questions and procedures. In order to continue leveraging these skills and in-house relationships, the existing reporting and communication channels remain unchanged, so that cascaded knowledge transfer and advisory services operate concurrently with centralised technology. For example, Audi’s payments are now routed via the central payments factory (both credit transfers and direct debits) through corporate bank accounts ‘on behalf of Audi’.
In addition to the operational benefits of centralising payments, it has also been possible to reduce both the number of external bank accounts and the banking communication channels. Furthermore, cost savings can be realised as the number of cross-border payments is decreased. Intercompany payments are settled via the in-house bank thus reducing the amount of manual reconcilation resulting from intercompany differences at month end.
Rationalisation of banking connectivity has been accompanied by a reduction in the number of file formats. By using the Global Treasury Platform as a single communication channel to the group’s financial institutions, all bank account statements are received centrally in a standardised format and distributed to the financial accounting systems of the connected entities. Retrieving bank account statements in a standardised format (SWIFT MT940s) enables greater automation and reconciliation. Data is aggregated within the payments factory and pushed through to the treasury management system (TMS) enabling straight through processing (STP) of information and a more accurate view of the cash position. [[[PAGE]]]
When it comes to liquidity management, there have also been considerable advantages in having a single platform. A single, integrated system, which is interfaced with the relevant accounting systems facilitates a comprehensive and consistent view over group cash and provides accurate data on real-time basis. This is enhanced further by groupwide cash concentration in most currencies.
At the beginning of 2008, Audi started to analyse its current business processes and design future processes following central specifications and requirements. Some other entities of the Audi sub-group such as Auto Union GmbH, quattro GmbH, etc. have been connected to the Global Treasury Platform before, so there was already existing experience of going through this process. After the new business process blueprints had been approved, the team started to implement the new solution. Due to the integrated approach of the Global Treasury Platform, and its connections with other applications, associated financial processes, such as general and sub-ledger accounting have also been affected as well. Therefore, the impact on various systems such as accounts payable and accounts receivable was taken into consideration.
An extensive test phase was accompanied by several training sessions for end users. In order to ensure a smooth go-live for critical processes, the team decided to run the integration tests under real conditions using actual data such as open vendor and customer items.
The standardisation and harmonisation of existing finance and treasury procedures as well as the re-assignment of operational responsibilities had also an impact on the operational and organisational structure. Therefore, a disciplined approach to change management was essential during the entire transition. [[[PAGE]]]
In addition to the existing capabilities supported by the Global Treasury Platform, such as reporting, liquidity management (forecasting and analysing liquidity needs), transaction processing, risk management and payments, there are a variety of objectives for the near future. For example, Volkswagen will be migrating to SEPA payments and implementing SWIFT Corporate Access in order to reduce the cost and increase the automation and STP for payment transactions. There are also further opportunities to centralise financial activities in the future such as liquidity planning, consolidation and reporting, and the potential to expand the range of financial products which the solution supports.
Overall, the Global Treasury Platform has delivered substantial benefits to Volkswagen, by facilitating centralised processing and data management, while still levaraging the expertise and decision-making capabilities in parts of the business such as Audi. The centralised platform provides a basid for greater efficiency and is preparing Volkswagen to meet future requirements and challenges.
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