Published: November 01, 2009
Although Nutreco’s business units operate on a largely autonomous basis, treasury is one of the business activities that has been centralised into a centre of excellence. Group Treasury acts as an in-house bank to the local businesses, providing funding services, investing surplus cash, hedging FX exposures and managing all external banking activities. Since the introduction of IFRS, Group Treasury also deals with hedge accounting, which, together with the need to improve connectivity with business units, proved one of the primary drivers when deciding to select a new treasury management system (TMS).
We had successfully used an older TMS for a number of years, but it was relatively inflexible, so as our business needs had evolved, we could not achieve the enhancement and automation to our processes that we were seeking. For example, communication with business units was a manual process, which we wanted to automate using web-based connectivity. IFRS was another driver, as had we retained this system, we would have quite some challenges to support hedge accounting. On top of that, we believe that future development and support of the TMS is important in selecting a system solution. Our TMS was then acquired by another vendor, and we were concerned about its future support status.
As a result of these factors, we decided to evaluate alternative TMS options with a view to replacing our existing system. We were fortunate that we conducted the selection and implementation process prior to the financial crisis, so we had sufficient time to dedicate to the project. With hindsight, this proved very fortunate, as once the crisis struck, our treasury agenda changed significantly and we would not have had the resources available to complete the project.
We reviewed a number of systems that were appropriate to our needs, and talked to other companies with similar budgetary expectations to ourselves. In reality, the scope and volume of our transactions, and the budget we had set, meant that there were only a few potential systems. Consequently, we did not conduct an extensive request for proposal (RFP) process and relied primarily on informal selection stages, such as demonstrations and discussions with potential vendors and their reference clients.
As a result of this process, we made the decision to implement IT2. There were a variety of reasons for this. Firstly, their reference clients were positive about their experiences with the system, many of which had comparable business requirements to our own. The demonstrations of the system that we had seen were professional and the vendor was able to address our issues quickly, which encouraged confidence among the team. The look and feel of the system was intuitive and we had the impression that it was a high-quality solution. Although price was also an issue, it was not the cheapest solution that we considered. As with any system selection and implementation process, there were some challenges to be navigated. We wanted to be confident that the vendor’s shareholders and management were fully committed to develop and support the product, and we were concerned about having sufficient internal resources for the project. We decided that both of these issues were manageable and we were enthusiastic about the opportunities that the system presented.
Our project took around nine months from end to end. We made the decision for IT2 at the end of 2007, and decided to start the implementation in February once the end of year processes had been completed, although we were able to do some preparation in advance. Although we had aimed to go live before the summer, we ultimately started using the system for our live operations in August/September 2009.
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Our new TMS is a more modern and flexible tool than our previous system, which makes it easier to accommodate changes to our business. We have been able to replace the functionality we had implemented previously, and in addition, we have found the solution sufficiently scalable to extend the functionality quite easily. For example, we have implemented IT2 NET, which is the web-based communication tool for IT2, which is now used by over 100 users to retrieve intercompany statements. We decided to include this in the initial implementation of the project to encourage support for the new system both amongst Group Treasury and business unit users.
Our key business driver was the need to automate functions that had previously required manual / spreadsheet solution, including subsidiary-centre communications, inter-company dealing and hedge accounting. During the project, Nutreco decided to extend its scope by implementing additional cash forecasting functionality.
At the start of the project, we were all very enthusiastic and ambitious about what we could achieve, and the necessary timescales, but we found the reality was a little different. In particular, we faced internal resourcing challenges that proved critical to the project. It became apparent that it is essential to have the right mix of skills throughout the project, including technical, accounting, risk management, treasury strategy and operations. These different individuals need common objectives and priorities in order to implement a solution successfully. Initially, we were lacking project team members with certain skills, but we received assistance from IT2 and the treasury consultancy Zanders in this as well as in the project management.
In consequence, we had incurred more implementation cost than we had originally planned. However, the outcomes were also more positive than we had anticipated, with the first phase intended only to replace existing functionality and the second to build in additional capabilities. The overall cost/benefit performance is very positive.
As well as ensuring that the right resourcing is in place, there are a variety of related considerations when implementing a new solution. The parallel run, during which time front and back office staff need to work with both the legacy and new systems, is an intensive process requiring time and attention. If using external consultants, it is important to keep ownership of the project to ensure that people understand the decisions that have been about the way in which the system is implemented, and are sufficiently familiar with its use. During the project, it is easy to agree to ‘short cut fixes’, especially if it makes the solution easier to implement from a technical perspective, but these should be resisted to ensure the ongoing maintainability of the system.
As with any large, complex project, it is easy to underestimate the time and cost that will be required, so initial estimates need to include significant scope for contingency.
Not everything can be achieved upfront with a new systems implementation, and it will take time to develop the way in which we use the system, and how we leverage its functionality. For example, we have not yet implemented interactive dealing, although this functionality was already available when we first implemented.
In the future, we aim to have a single portal enabling two-way communication between Group Treasury and our business units, including both deal requests and reporting. We have already implemented cash management and FX, but we are looking to extend this capability into areas such as cash flow forecasting, outstanding guarantees, leases and local credit facilities. With regards to IFRS, business unit users currently have to input fair valuations into their ERP, but in the future, we intend to send files for automated upload.
IT2 now supports an extended range of treasury operations, on a well controlled and integrated technical platform. Overall, we have had a successful project that has achieved our major objectives, and which we look forward to developing further in the future.
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