Cash & Liquidity Management

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Payments and Collections Factories A popular workshop at BNP Paribas’ 7th Cash Management University looked at best practices in setting up a payments factory, and explored the possibilities that exist for driving similar efficiencies on the collections side.

Payments and Collections Factories

Payments and Collections Factories

by Ben Poole, Ben Poole Editorial Services

A popular workshop on the opening day of BNP Paribas’ 7th Cash Management University looked at best practices in setting up a payments factory, and also explored the possibilities that exist for driving similar efficiencies on the collections side. The workshop included two corporate case studies from Uwe Boesl, general manager at Novartis Investment, and Bertrand Janssens, treasurer at Nexans. They were joined on the panel by George Stein, product marketing director with ACE, and Filipe Simao, Head of Client Advisory, BNP Paribas Cash Management.

Payment Factories

Corporate Case Study: Novartis

Novartis, a healthcare company based in Basel, Switzerland, began implementing a treasury and finance transformation programme in 2012. Uwe Boesl explained that one of the key objectives of this programme was to have full control and visibility of both the financial risk and liquidity of the group, to maintain global cash pool structures wherever appropriate and to concentrate cash management with a select number of core banks. The programme also aimed to develop and streamline the organisation’s payment infrastructure in order to route payment in the most cost efficient way.

To meet the objectives of the transformation programme, Novartis had to move away from the local approach to cash & payment management it previously had. Boesl said that before the project, the company had a local country approach to manage short-term cash and funding and that this had created multiple banking partners - 56 for euro accounts alone.. Another benefit was to establish central controls for cash management and payments. To get to grips with this, the transformation programme centralised the management of affiliates’ cash and liquidity to an in-house bank set up in Luxembourg. Through centralisation, the company was able to reduce its core cash managing banking partners  to just three for Europe.

Group treasury at Novartis now manages an in-house bank (IHB) and a payment factory. These communicate with three banking partners via SWIFT.  With the use of SAP Cash Management Module the internal communication to and from affiliates worldwide has been ensured. Boesl explained that Novartis uses SAP modules to standardise, simplify and automate the interactions between the company’s accounting organisations and the IHB and payment factory. For example, invoice processing occurs at the accounting organisation and the payment files are then sent to the IHB/payment factory. The IHB/payment factory manages areas such as cash pooling, and is also able to establish the optimal payment routing thanks to its SWIFT connectivity with the company’s core banks. The IHB and payment factory send statement files back to the finance service centres, where reconciliation on a high automated level occurs.

As well as the reduction to just three core ‘cash’ banks in Europe, Boesl said that a number of the real benefits of the project have been around the company’s processes. For example, the standard processes for payments have established a higher grade of automation, while the short-term cash forecast is now delivered within a much shorter timeframe than previously. Beside that the reconciliation process of A/P in affiliates has been standardised and automated. Overall, Boesl said that the group treasury now has a much better transparency over its cash and payments across the organisation.

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