Published: May 01, 2010
TechnoAlpin is the global market leader in providing and supporting snowmaking technology worldwide, and has built up a strong reputation for its innovation, engineering precision and industry expertise. We have 25 locations managed through five subsidiaries in Europe, one covering US and Canada, and one in Australia, with 940 customers across 41 countries, including many Winter Olympic, World and European Cup venues. TechnoAlpin has grown very rapidly over our 20-year history, achieving consolidated net revenues of over EUR100m in 2009. All our production takes place in Italy, and we distribute to customers directly from our production facility. Therefore, our subsidiary companies, which typically employ ten to twelve people, are primarily engaged in sales, order management, client relationships and after-sales support.
TechnoAlpin is headquartered in Bolzano, northern Italy which has historical connections with Austrian Tyrol. This means that the region benefits from a unique mix of German and Italian language and culture that has strongly influenced the company’s ability to deliver solutions that combine creativity and engineering precision.
When I joined TechnoAlpin in 2006, our subsidiary companies, other than the Australian business, were already established. Most customer-facing activities, including invoicing and collections, were decentralised, which continues to be the case today. We had an arrangement in which head office invoiced the subsidiary company for fulfilled customer orders, and the subsidiary in turn invoiced the customer. The difficulty arose when head office was chasing the subsidiary for payment, but the subsidiary was still waiting for payment from the customer.
As a business, our primary driver at TechnoAlpin is customer satisfaction. If customers are satisfied, they will place repeat business, pay invoices in a timely fashion and act as ambassadors for the company. Spending time addressing internal issues between subsidiaries and head office is counterproductive to our customer satisfaction objective, and detracts from our customer focus. Consequently, we were keen to find a solution to our internal invoicing processes to centralise cash flow while ensuring that business unit staff spent less time communicating with head office on outstanding invoices, and more time on customer-facing activities.
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We have relationships with five banks, each of which presented its solution. Although we are headquartered in Italy, we wanted to appoint a cash management bank that had coverage across the key markets in which we do business. Following our evaluation process, we decided to appoint UniCredit as our overlay bank. There were various reasons for this:
i) We already had a relationship with UniCredit, so we were confident that their products, services and approach to relationship management would support our objectives.
ii) The bank had a strong presence in the countries that were most important to TechnoAlpin.
iii) UniCredit’s technology platform provided the visibility over our cash flows and balances that we were looking for.
If customers are satisfied, they will place repeat business, pay invoices in a timely fashion and act as ambassadors for the company.
Our plan was to implement a zero-balancing cash pooling structure with UniCredit, so cash would be automatically centralised in our master account in Italy, and subsidiary accounts automatically funded when required. As we would be able to earn a higher level of interest on the master account, this would be applied to subsidiaries every three months. In addition, we decided to implement a single system, Microsoft Navision, that would be used across all business units, to enable central visibility of the customer invoicing process.
We knew from previous experience that it was important to adopt a step-by-step approach to ensure the success of the project; therefore we decided to embark on a pilot project with our business unit in Austria. Having completed this pilot project, it was clear that we had made the right decision in our choice of banking partner, cash management structure and technology.
Since then, we have rolled out the project across five subsidiaries in Austria, France, Germany, Slovakia and Switzerland. Each of these subsidiaries now accesses the same invoicing system, so head office can now see the status of customer invoices. We have real-time visibility of all cash movements on these subsidiaries’ accounts, so we know when customers have paid, and therefore when the amount can be credited to head office.
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Benefits of liquidity centralisation and cash visibilityThis solution has already delivered a range of benefits to TechnoAlpin, both at head office and business unit level:
Head office
We have access to group cash at a head office level, enabling us to leverage surplus balances to reduce the need for financing. Although cash pooling has a cost, we have considerable financial benefits that offset these costs. For example, funds are not left idle in subsidiary accounts so we are able to earn a higher rate of interest at group level. We can reduce our overall borrowing levels, and avoid local borrowing, by netting off surplus and deficit balances.
Subsidiaries
Subsidiaries benefit from higher rates of interest and lower borrowing rates from head office than they would be able to obtain locally. Employees also need to spend less time and administrative effort on making payments to head office, which is now a head office accounting process.
The final stage of our cash centralisation project is to include our Australia and US business units in our cash pool, which should be completed by the end of the fiscal year 2010 in April 2011. This will be achieved by opening USD and AUD master accounts, and subsidiary balances held with our local banking partners will be swept into these accounts on a target balance basis, as we do today with CHF balances. The extension of our liquidity management structure in this way across time zones means that UniCredit will be providing both intra-day and end of day statements through UniCredit. By centralising not only cash flow, but also our foreign currency exposures, we will be in a better position to manage foreign exchange risk at a group level.
Our cash centralisation project has been a major success for TechnoAlpin and allows us to focus more time on activities that directly benefit our customers whilst reducing risk, enhancing our cash investment opportunity and minimising group debt.
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