Published: January 01, 2000
Campbell Soup Company has outsourced its day-to-day European treasury and cash management activities to an external provider for a number of years. Prompted by a change in our European cash management bank, we took the decision to review our outsourcing arrangements, resulting in a change of provider.
Although we use local banks in each country, we have had a pooling structure in place for the past seven years, working with an overlay bank to centralise cash derived from the company’s European operations into accounts in London and Belgium, where the European shared service centre is located. While this arrangement has served us reasonably well, the costs of an overlay structure, on top of local banking fees, were becoming prohibitive and we decided to pursue a more efficient European cash management structure.
We had the ability to access our data directly via the web which gave far greater visibility then we had had in the past.
Our overlay bank also provided treasury outsourcing services to manage Campbell’s European treasury and cash management activities. Our original intention was to retain the bank’s services for treasury outsourcing but issue a request for proposal (RFP) for European cash pooling. We sent the RFP to four banks and having reviewed the alternative solutions and pricing, we decided to select a new European cash management bank.
Having made this decision, we approached our outsourcing partner to discuss the changes which would need to be made to our outsourcing arrangement, including changing over bank accounts to our new European bank etc. They decided that as this would require some time and resource, it would be an opportunity to upgrade the system which they were using to manage our treasury activities.
Whilst visiting Dublin, we used the opportunity to meet with Bank of America, and described to them our treasury processing needs, including pooling, liquidity management and going forward, a cashless multilateral netting settled at the cash pooling level (avoiding physical transfer of funds). As we realised that the upgrade of the treasury management system would require a reasonable amount of work, we decided that it would be helpful to benchmark our existing outsourcing partner against alternative providers in the market.
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Having conducted an initial review of the available options, we decided to send an RFP to our existing provider and Bank of America. Based on the responses and follow up discussions with both banks, we decided to transfer our treasury outsourcing to Bank of America. There were a variety of reasons for this:
i) The business processes were more consistent with best practices and more automated than our existing outsourcing partner.
ii) Our existing outsourcing partner had an arrangement where one relationship manager was responsible for our business. This meant that if that person was on vacation, sick or left the company, there was a knowledge gap which took time to resolve and created some risk to our business. Bank of America had three-person teams as opposed to a single individual working on each account, so there was less risk of this knowledge gap occurring. So far, we have found this approach very helpful.
iii) The technology in place at Bank of America was proven and the team had a good relationship with the system vendor. We had the ability to access our data directly via the web which gave far greater visibility than we had had in the past. In contrast, the other bank’s demonstration of their upgraded technology was poor, with a lack of knowledge amongst the team and lots of questions remaining unanswered.
iv) There was greater flexibility when working with third-party banks.
v) We were impressed by the team and their implementation approach which was very structured with a lot of detail.
vi) The costs were competitive and as we received a three year fixed fee, we could budget based on known figures.
We completed the documentation which was ultimately not too difficult apart from a few inevitable issues for discussion, and soon moved into the implementation. The detailed approach which we had discussed during the sales process proved to be very effective and the treasury team in Brussels received very good training.
A structured approach to implementation is vital to ensuring that the implementation proceeds smoothly.
So far, we have had very positive feedback internally. The accounts have been in balance and any problems have been fixed quickly. A significant difference we have found in working with Bank of America is that the team is proactive in suggesting ideas and new approaches to managing our European treasury business. For example, we found our previous outsourcing provider very cautious in the solutions they put in place, and there were rarely recommendations or suggestions made, whereas we have been pleased that the Bank of America team have recommended new ideas and improvements to our treasury activities.
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While other companies considering outsourcing some of their treasury activities will have different business priorities, there are some recommendations we would make based on our experience with two different outsourcing providers:
i) Relationship. The relationship with the team is critical and the more proactive and collaborative the relationship between the outsourcing provider and the corporation, the more positive the experience of outsourcing is likely to be and the more valuable the outsourcing provider as a business partner. The way in which banks approach the relationship with the companies whose treasury activities they manage can be quite different. The treasurer still wants to be engaged in major decisions as well as wishing to benefit from the bank’s expertise, and balancing the relationship to achieve both of these is important.
ii) Reporting. The reporting which is available is critical. Weekly or monthly faxed or emailed reports may be sufficient for a very few companies but most would benefit from real-time access to information and a wide variety of information.
iii) Experience. The experience of the team, including knowledge of treasury-related topics, understanding of the systems they use to manage our business and expertise in areas that could affect our European cash management practices are critical. For example, Bank of America understands the legal and tax issues in the regions in which we do business which has been very valuable and we have developed a strong relationship of trust.
iv) Implementation. A structured approach to implementation is vital to ensuring that the implementation proceeds smoothly. There will always be issues but there should be mechanisms to ensure that these are addressed promptly. This is even more significant when a company is outsourcing for the first time, to ensure that all the existing business processes are fully understood before trying to transfer them to a third party.
v) Technology. The technology must be contemporary, and the provider must have sufficient expertise to use it appropriately and to automate business processes effectively.
Fundamentally, the right outsourcing provider for us is one which can be proactive and help us to run our treasury more effectively, a business partner rather than simply a repository of our routine functions. In our experience so far, Bank of America has fulfilled this requirement and we look forward to a positive relationship in the future.
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