Focus on Bank Account Management

A workshop during the Cash Management University organised by BNP Paribas examined how to optimise bank account management. This included two case studies from treasurers whose departments are at different stages of projects designed to bring efficiencies to their bank account management processes.

Getting to grips with bank relationships

The first case study came from Open Travel Service (OTS), an organisation that provides touristic services to travel companies. The company was founded in 1995, but the treasury department was only set up in February 2012. The fledgling department quickly realised that the organisation as a whole worked with 35 banks and held over 300 accounts in 15 countries.

There were number of challenges concerning bank account management that the treasury faced at this stage. The primary issue was that the decentralised way in which the company had been acquiring banking partners and accounts meant that there was no reliable overview covering global bank accounts. Payment processing and the processing of account statements into the ERP system lacked automation. The company was faced with high costs and complexity due to either bank or country specific payment methods and connectivity that had been allowed to develop over time. The different bank accounts were also managed by a wide range of different software solutions and online tools, so the documentation and audit processes could not be managed easily.

Faced with these issues, the OTS treasury outlined a number of targets for its bank account management project. These included:

To achieve these targets, OTS has taken a number of initial steps, beginning with the founding of the central treasury department in Switzerland in February 2012. One of the first actions of the new department was to define a treasury policy. This covers areas such as bank relationship management, account opening, payment processes and internal control. The treasury has already fully migrated to the Single Euro Payments Area (SEPA) instruments. They are also identifying the small number of core banks that they wish to work with. Following this decision, they plan to discuss how they will connect with these banks. OTS is also discussing payment file formats, and plans to set up a process landscape on a country-by-country basis. On the technology side, the treasury set out to find a central bank account management and bank transfer tool that can provide them with a very clear and in-depth overview of their bank account portfolio.

The next steps

While the OTS presentation showed a company at the beginning of a bank account management process, the other case study in the workshop illustrated how important this process remains, no matter how long you have been working at it. A large multinational treasury shared its experiences of bank account management, why it can be a headache for a multinational group treasurer, and its approach to managing this important issue.

The group treasurer of a multinational with entities operating in a variety of countries and regulatory zones faces a number of bank account management issues. The first issue, simple as it may sound, is who the company is actually banking with. There can be a large number of involved parties with the potential to open bank relationships. The breadth of the banking network can include local banks and global banks. There can also be a number of reasons for banking relationships, including transaction banking needs, investment, financing, access to the markets, trade finance, and many more. These should all be considered when treasury is rationalising banking relationships. The treasurer also needs to decide on who has the authority to open and close bank accounts in the organisation.[[[PAGE]]]

It is worth remembering why bank account management is so critical for treasury. It is an important management tool, allowing the treasurer to disseminate standard settlement instructions within the company and also assess market share of various banking groups. It is also vital for business control and reporting requirements. The bank account management process is the starting point for activities such as internal audit, while it also allows for better understanding counterparty risks and allows the optimisation of treasury management. In addition, with increasing regulatory requirements, an efficient bank account management process helps the treasury to meet traditional audit requirements as well as newer regulations such as the Report of Foreign Bank and Financial Accounts (FBAR) and Sarbanes-Oxley (SOX).

This presentation outlined a three-point approach to bank account management:

1: Define policies

As bank account management is a critical element of the overall banking relationship policy, it should be run by the treasurer, and perhaps delegated to some extent at regional level. New bank relationships should be formally validated at group level as they change the organisation’s banking relationship landscape. Opening new bank accounts within an existing relationship can be delegated to a lower level.

2. List your bank accounts

Treasury should maintain a permanent and up-to-date database of global bank accounts. New accounts, once opened, should immediately be registered on this database. Information easily available should include account details, owners and powers. Such a database can quickly highlight any issues with accounts, while it can also act as a control point for intercompany transactions.

3. Optimise administrative management

The objective of this bank account management project is to homogenise the bank documentation, with a specific focus on documentation signatory management. This is sometimes not obvious, due to sizable differences in documentation requirements between different banks or jurisdictions.

This workshop demonstrated that it doesn’t matter whether your treasury department is relatively new or has decades of experience: bank account management is a topic that has to be high on the agenda for any treasurer who wants to simplify his or her operations and reap the rewards that such efficiencies offer.