Corporate Finance

Cash Management - the Heart of Treasury Robin Page introduces our latest Corporate Treasury in Germany supplement, and provides an oversight of the contents within.

Cash Management – the Heart of Treasury

by Robin Page, Chief Executive, TMI

The effects of the global financial crisis are still, alas, being felt by companies of all sizes across the globe, and it has become clear that it was not just a one-off event but an episode forming part of a long period of change and transformation of the treasury landscape.  However, Germany’s Mittelstand – the small- and mid-sized companies that are the backbone of its economy – helped the country recover from the crisis faster than most other countries of the Eurozone, and are fuelling a measure of export-led growth. One paradox is that many corporations have  significant amounts of ‘spare’ cash, and treasurers are having to re-think their cash investment policies . Of course others have very different problems involving for example cash flow timing, but investors across the board have had to become, as Britta Hion of BlackRock Investment Management points out in her article, “more nimble in their approach, more adaptive in their thinking, and more flexible in their search for opportunities”. The articles in this Guide to Corporate Treasury in Germany will certainly provide some signposts to help treasurers navigate a constantly shifting landscape.

Britta Hion’s article is primarily concerned with money market funds (MMFs) and the particular effects on them of the credit crunch, especially changes in the role and importance of Credit Rating Agencies (CRAs). Investing in the short-term markets has become particularly challenging, she notes: “... it has never been harder to invest cash whilst aiming to achieve flat or positive yields”. She examines regulatory changes both in force and pending, and the way MMFs are run operationally, and proffers a useful and practical summary of just what investors should be aware of in the current climate.

Of all the regulatory changes preoccupying treasurers today SEPA is one of the most pressing, and the mandatory move from national payments and collections instruments to Single Euro Payments Area instruments on 1 February 2014 is approaching fast. Beate Murray and Ad van der Poel of Bank of America Merrill Lynch give an admirably clear and focused exposition of just what those companies who have not yet prepared for SEPA should be doing; they note that “relatively few companies in Germany have embraced SEPA to date,” and also identify the “huge opportunity” that it offers to German corporations and multinationals based in Germany. Andrej Ankerst of BNPP echoes the importance of preparedness for SEPA, with the example of how the company Einhell set about the task of migration. Another company that has embarked on its SEPA implementation is UNION TANK Eckstein GmbH & Co KG, the subject of an article by Thomas Wolpert of that company and Jürgen Krieger of Commerzbank. UNION TANK is already reaping the benefits of adopting SEPA B2B Direct Debits, and the authors give wise advice to companies just beginning their SEPA migration.

Knowing just where your cash is at any given moment is obviously vitally important, and several aspects of this are addressed in the Guide. Jim Fuell of J.P. Morgan Asset Management describes the key features of separately managed accounts which can offer “an attractive alternative for treasurers looking to generate higher yields on their excess cash than are available from money market funds”. Stephan Benkendorf of Hanse Orga, in his article ‘From Manual to Automatic’, shows how specialised SAP-embedded cash management solutions “allow organisations to retrieve cash management information at any point in time”, giving as an example a case study of how Krones AG, the world’s leading manufacturer of lines for filling beverages in bottles or cans, revolutionised its cash forecasting and liquidity planning with its implementation of Hanse Orga’s SAP-integrated cash management solution.

Another case study by Andreas Müller and Atul Malhotra of Georg Fischer Automotive explains how their company solved the working capital problems caused by the timing mismatch between customer collections and supplier payments. The solution was provided by implementation of a supply chain finance programme with UniCredit, and their article gives details of how suppliers were onboarded and the benefits to both them and to the company.

Andreas Sowa and Martina Schade of Celesio AG provide a third study with their description of how Celesio decided to move on from its accounting software “which was coming towards the end of its life” in 2008, and treasury management software which did not support the ever-growing number of reporting requirements such as IFRS7. They chose an integrated SAP solution, bdf Cash Cockpit, and later added XBAM, Bank Communication Manager and SWIFT: the success of the whole exercise allows the company to make better decisions based on better information.

Bank fee controlling is the topic addressed by Hubert Rappold of the consulting firm Schwabe, Ley & Greiner, who paints an all-too familiar picture of “a new colleague or an intern” fighting their way through stacks of paper and spreadsheets to interpret bank fee statements. Transparency is absolutely vital, says Rappold, and to achieve it automation is the answer. Once your bank has furnished you with electronic bank fee statements you can control them automatically in various ways outlined in the article, with the concomitant benefits of savings of between 5% and 10% of your banking fees. What’s not to like, as they say?

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