by Hans van den Bosch, Global Sector Head Consumer Brands, Retail and Healthcare, Global Liquidity and Cash Management, HSBC
An increasing number of corporate treasuries in the Consumer Brands, Retail and Healthcare (CBRH) sector have already centralised and automated their liquidity management and payables. Now they are considering taking the next logical step: doing the same for receivables. As Hans van den Bosch, Global Sector Head CBRH at HSBC explains, while the opportunity in terms of cost savings and efficiencies is very substantial, there are a number of key factors critical to success.
Companies in the CBRH sector have typically placed a heavy emphasis on liquidity management and working capital, with many of them implementing a variety of cash pool and other structures in order to optimise their cash. Once they have that in place, many of them then move on to focus on their supply chain. Since companies in CBRH typically have significant leverage over their suppliers, they have been able to improve working capital (DPO) and streamline payments to suppliers with the aid of suitable technology and finance solutions. When seeking payment term extensions, CBRH corporates have often sought to ameliorate the impact on their suppliers through the use of supply chain financing solutions provided by their partner banks.
Another motivation for CBRH companies to tackle payables has been the number of market infrastructure initiatives that facilitate the process. The emergence of standardised formats such as ISO20222 and the evolution of SWIFT into a platform that corporates could access were key to the emergence of payment factories and payments on behalf of structures. (POBO).