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Cash & Liquidity Management
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Optimising Payments and Cash Management with SAP and SWIFT

by Palle Dedenroth, Director, Assistant Treasurer – Treasury Operations, Danfoss

Danfoss has a commitment to excellence across all of its business operations, so in late 2008 we embarked on an initial study of potential improvements that could be made to our treasury management infrastructure. While our treasury already demonstrated industry best practices in many of our activities, we recognised that there were some areas of potential improvement. For example, we identified that payments processes could be improved and automated through a payments factory and in-house bank, supported with enhanced bank connectivity. We also wanted to replace our legacy treasury management system (TMS) and improve our cash flow forecasting processes.

Our business case for the in-house bank and bank connectivity was based on improved efficiency and control in our payments process, and lower internal and external costs by increasing automation and replacing external payments between Danfoss business units with internal payments via the in-house bank. Our management committee approved project expenditure in late 2009 at which point we selected appropriate business partners, and we started the project in January 2010.

Project elements

The project comprised four phases: implementation of the in-house bank; bank connectivity; TMS installation, and cash and liquidity management. We identified bank connectivity as being the longest project phase, so this has continued throughout the TMS implementation. The project included extending our SAP installation to the In-House Cash module which would enable us to optimise our intercompany payments. We have an internal policy within Danfoss that we should use SAP whenever it provides the required capabilities. We explored SAP’s treasury functionality in detail, and benchmarked it against alternative solutions. On the basis of this evaluation, we made the decision to implement SAP. We also decided to connect SAP to our banks via SWIFT for both external payments and retrieval of bank statements. Before embarking on the evaluation project, we were not familiar with SWIFT. However, having attended conferences, spoken with our banks and consulted the treasury media, we recognised that SWIFT would provide the resilience, security and multi-bank connectivity that we were seeking.