Develop a Roadmap to Achieve Your Vision for Treasury Operations

Transcription

1 Develop a Roadmap to Achieve Your Vision for Treasury Operations Wednesday, November 16, 2011 Brought to you by: In partnership with:

2 Featured Speakers Mike Gallanis Partner Treasury Strategies Greg Kerwick Managing Director J.P. Morgan Treasury & Securities Services Jason Torgler Vice President, Strategy Reval

3 Why a Treasury Assessment? Treasury is the Financial Nerve Center

4 Treasury Influence & Value Add Treasury Corporate Perspective Treasury Management Timeline HIGH Treasury 1.0 Treasury 2.0 Treasury 3.0 Treasury Operations is an immature, fragmented or informal function, characterized by manual processes Treasury centralizes key roles, improving transparency and controls Greater access to data and computing power and consolidation of competency Treasury is a strategic advisor, more closely integrated with business units, supporting globalization, efficiency, trading partner/supply chain integration and greater sophistication in risk/return optimization Data Information Intelligence LOW Pre Now - Future

5 Scope of influence Data vs. Intelligence 3.0 Expanded Risk Responsibility Strategic Advisory 2.0 Narrow Executional Focus Full Automation & Integration 2.0 Technology / Data Architecture 3.0

6 Review: Assess the Current State of Your Treasury Key elements of a treasury assessment. Liquidity & Cash Flow Organizational Structure Bank Account Structure Policies & Procedures Treasury Technology

7 Review: Define a Vision for Your Treasury Organization s Future 1. Gap Analysis 2. Benchmark Reporting 3. Opportunities for Improvement 4. Reporting Protocols 5. Roadmap Planning & Development

8 Essential Elements to Create your Future Vision Roadmap Prioritization Dependencies Timelines Resources Milestones Risks

9 The Treasury Roadmap A treasury roadmap enables organizations to visualize: Critical assets within the organization Interdependencies of tasks Required skills, competencies and technology

10 Roadmap Benefits Provides focus and direction Identifies issues and interdependencies Provides management control Improves departmental communication Links tasks to needs and milestones Visually represents goals to employees

11 The Treasury Roadmap Process Preliminary design Setting the framework, vision, timing & organizational goals Roadmap Development Priority Sequencing High-level timeline Follow-up & Implementation Roadmap Update

12 Driving your Treasury s change to the Future State Five areas of success in a global proactive Treasury organization POLICIES & PROCEDURES Published & understandable? Business continuity? Reviewed frequently? Standardized? Actionable? ORGANIZATIONAL STRUCTURE Clear command hierarchy? Duties segmented adequately? Timely audit & review process? Appropriate staff & authority? Clear roles of group companies? WORLD CLASS TREASURY Safe-Efficient- Safe-Efficient-Effective Effective ACCOUNT STRUCTURE Do you have visibility? Do you have control? Are balances at risk? Is complexity minimized? TECHNOLOGY CASH FLOWS Are key AR-AP flows efficient? Is liquidity maximized? Can cash move quickly? Are flows vulnerable? Adequate risk management? Is it secure and available? Is automation sufficient? Have you minimized interfaces? Is there clear support? Is there a robust redundancy? Each area should be assessed regularly to ensure sufficiency and applicability.

13 Case study: Shared services organization for a large corporate company BEFORE A large company with ownership in several independent companies with strong brands Current State Treasury Completely decentralized Over 20 legal entities with identical structures All units operating autonomously; no harmonization of collections and disbursements Challenges Could they be more efficient and profitable if they consolidated financial activity? Could they consolidate without weakening brands and independent companies? Was there a way to streamline and automate, Safe-Efficient- but still deliver the same level and breadth of financial services? Safe-Efficient-Effective Legal Effective Entity #1 Sales Web/ACH Collections Separate or no web payments Separate lock boxes Sales Web/ACH Collections Front Office Sales Production Cash Mgt AR AP Front Office Sales Production Procure Legal Entity #20+ Procure Cash Mgt AR AP Disbursements Payroll Separate controlled disbursement accounts Disbursements Payroll x 20+ Legal Entities

14 Case Study Large Corporate Account & Bank Structure rationalization Rationalize group companies accounts Form SSO bank account structure Solution Details Each company had a complete set of accounts Close transactional accounts and move to the SSO Close liquidity accounts and move to the SSO Determine account needs for specialized processing Open accounts for consolidated activity at the SSO Open liquidity accounts Implement sweep/concentration services for accounts Link accounts for uniform bank pricing Implement bank relationship management process Key Resources Client Treasury Third party consultants Legal & tax specialists Client Treasury Third party consultants Legal & tax specialists Bank specialists Bank implementation staff Bank customer service staff Key Benefits Saves costs: Accounts and systems used for redundant processing eliminated Increases flexibility: Accounts at SSO aggregate activity with more flexibility and capabilities Reduces risks: Fewer accounts means reduced vulnerability and risk

15 Case Study Large Corporate Cash Flows: Collections Perform Collection study for optimization Solution Details Configure optimal lock box structure Integrate electronic receivables Develop reporting process & teams Create High Order Prefix structure Key Resources Client Treasury Bank specialists Bank implementation staff Bank customer service staff Minimize Paper and move to electronic collections Launch efforts to move check to incoming ACH Move check returns from paper to RCK Client Treasury Bank specialists Link collections to liquidity Implement liquidity management structure for receipts Develop accounting and reporting structure to aggregate and disaggregate funds to and from group companies Client Treasury Legal & tax specialists Bank specialists Bank customer service staff Key Benefits Saves costs: Aggregates all collections into a single account in one process for all group companies Increases liquidity: Expedites collection and investment of funds with appropriate accounting forgoing one level of concentration Increases speed & certainty: Moving to electronic receipts increases predictability and speed of collection

16 Case Study Large Corporate Cash Flows: Disbursements Implement streamlined disbursements Minimize Paper and move to electronic disbursements Link disbursements to liquidity/ working capital Solution Details Configure single disbursement process Integrate disbursements (check, wire, ACH) in one file Develop reporting process for SSO and group companies Create High Order Prefix structure Introduce prepaid cards for low value cash disbursements to employees, vendors and contract employees Improve and enlarge commercial card activity across all group companies with SSO as aggregator/manager Control release of ad hoc payments to maximize liquidity Harmonize disbursement cycles to maximize liquidity Key Resources Client Treasury Bank specialists Bank implementation staff Bank customer service staff Client Treasury Bank specialists Bank implementation staff Bank customer service staff Client Treasury Legal & tax specialists Bank specialists Bank customer service staff Key Benefits Saves costs: Aggregates all disbursements into a single account in one process for all group companies. Encourages the most cost-effective payment method for each disbursement Increases liquidity: Normalizes disbursements to insure higher working capital and liquidity Increases speed & certainty: Moving to electronic receipts increases predictability and speed of collection

17 Case Study Large Corporate Technology Solution Details Key Resources Remove all free standing systems Eliminate multiple proprietary systems at each company Eliminate interfaces development, support, future costs Remove multiple inconsistent file structures Eliminate redundant processing and staff Client Treasury Client IT Third Party consultants Implement a single file bulk messaging process with one bank Implement a single linkage to one bank Build the linkage to support multiple payment methods Create the linkage to aggregate activity from all companies Harmonize timing to allow for bulk delivery Client Treasury Client IT Bank specialists Bank implementation staff Bank customer service staff Deploy best practices to improve efficiency Use industry standards to lower cost and improve support, e.g. SWIFT, ISO Build in a robust secure disaster recovery process Client IT Bank specialists Bank Implementation staff Key Benefits Saves costs: Dramatically reduces the number and cost of systems and interfaces Increases stability & recovery: Multiple systems standardized into one system with enhanced support Expands capabilities: New systems allows for greater global support and more payment methods and data

18 Case Study Large Corporate Technology (cont d) Diagram of New SSO Systems Structure Eliminated dozens of free-standing banking systems Aggregated activity to fewer banks using more sophisticated technology Introduced economies of scales significantly reducing costs Positioned the new shared services center for increased volume in the future J.P. Morgan Collections Client Systems J.P. Morgan Payments Collections Channels Client Platforms File Formats Channels Payments Paper Branch/ATM Lockbox Point-Of-Sale Remote Deposit Electronic ACH Credit / Debit Wire Credits Card J.P. Morgan Interfaces SWIFT Files Host to Host Browser Receivables Edge Pay Connexion J.P. Morgan ACCESS ERP platforms SAP Oracle PeopleSoft TMS platforms SunGard Wall Street Other Industry standard formats ISO20022 (XML) SWIFT EDI EDIFACT SAP idoc Others J.P. Morgan Interfaces SWIFT Files PaySource Direct Send / Transmission Browser J.P. Morgan ACCESS Multicash ACH Global ACH Global Wire and FX Services Check Services Multi-bank Services - used in this solution

19 Case Study Large Corporate Organizational Structure Rationalize group companies processing Launch new SSO Solution Details Inventory and standardize group company processes Move subject matter experts to the SSO Migrate activity in phases Get approval and guidance of all stakeholders New and separate legal entity Service level agreements Key Performance Indicators & standards Professional staff Independent management Clear escalation process & strategy Develop a clear liaison between group company and SSO Key Resources Client Treasury Third party consultants Client Treasury Third party consultants Legal & tax specialists Bank specialists Bank implementation staff Bank customer service staff Key Benefits Saves costs: 20+ individual staffs streamlined down to one SSO Increases capabilities: Independent SSO can provide more and deeper services in each area Reduces bureaucracy: Clear roles & responsibilities with simplified organizational structure

20 Case Study Large Corporate Policies & Procedures Document & rationalize Solution Details New procedures documented Policies affirmed and published New policies and procedures are dynamic and consistent Policies designed to support dispersed operations with centralized processing Key Resources Client Treasury Third party consultants Key Benefits Saves costs: Clarity of roles reduces redundancy and exception processing waste Reduces risks: Roles are owned by specific staff and policies & procedures are more carefully managed

21 Case study: Shared services organization for a large corporate company AFTER A large company with ownership in several independent companies with strong brands Future State Treasury Cash flows and core Treasury centralized Each of 20 Legal entities operates business, but all support functions handled by new legal entity Results Reduced costs Increased Liquidity Reduced bank systems complexity and costs from 20+ interfaces to one Reduced the number of bank accounts by over 90% Legal Entity #1 Legal Entity #2 Legal Entity #20+ Strong brands! Strong banking! Front Office Sales Front Office Sales Front Office Sales Production Procure Production Procure Production Procure ONE web payments approach ONE lock box Sales Web/ACH Collections Shared Service Center Cash Mgt AR AP ONE controlled disbursement account Disbursements Payroll Consolidated payroll ONE Purchase Card Prepaid Cards

22 Roadmap to Achieve the Vision Total Visibility into Worldwide Cash Global Cash Flow Forecasting Accounting GL Integration Case Study

23 Total Visibility into Worldwide Cash Goal - Real-time visibility of cash on hand to optimize liquidity decision making 1. Gather current understanding of global bank and bank account list 2. Explore and select best connectivity options 3. Explore and select best cash-viewing technology 4. Troubleshoot connectivity issues 5. Implement cash cube 6. Document process 7. Cash structure optimization a) Pooling structures v intercompany loans b) Payments and factories c) Bank rationalization and reorganization d) Decentralized v centralized

24 Global Cash Flow Forecasting Goal Accurate cash forecast enabling confident and strategic decision making 1. Identify why? 2. Achieve top-down support 3. Identify desired time horizon 4. Identify best data sources 5. Automate the consolidation of these data sources 6. Performance test 7. Hone 8. Create and compare scenarios 9. Document

25 Accounting Integration Goal Streamline the process of booking accounting entries to save time, speed month-end close and achieve STP accuracy. 1. Understand the current process Treasury & Accounting 2. Identify the bottlenecks and quantify the pain 3. Seek management buy-in for the fix 4. Start with manageable subset 5. Review last 2 months of bank statements and Treasury accounting entries 6. Identify recurring transactions 7. Collaborate with Accounting for how-to-book 8. Automate tagging 9. Test daily process and month-end close 10. Move to production

26 Case Study Client $2B Public Pharma Company In the process of examining efficiencies as they explore moving from a decentralized to centralized Treasury structure Project: Total visibility into worldwide cash Global cash flow forecast Accounting integration (HQ to start) Benefits: Identified $20M in trapped cash Able to close 3 banking relationships across 38 accounts Reduced daily cash buffer by $300k Morning productivity gain 2.5 hours Accounting productivity gain 20 hours to 20 minutes Treasury department confidence Treasury documentation Staff morale and turnover reduction Enjoyable vacations

27 Q&A Mike Gallanis Partner Treasury Strategies Greg Kerwick Managing Director J.P. Morgan Treasury & Securities Services Jason Torgler Vice President, Strategy Reval

28 Thank You! Brought to you by: In partnership with: