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AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM Hanse Orga International Corp. Minnesota AFP's 30th Annual Conference - OWN YOUR FUTURE Payment Factory 2.0: Reshaping Treasury Efficiency Payment Factory Presentation MN AFP 1 4/18/2012 Scott Willams Director of Consulting Mary Ann Rydel Director of Product Mgmt and Customer Support Hanse Orga International Corporation

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AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Hanse Orga International Corp.

Minnesota AFP's 30th Annual Conference - OWN YOUR FUTURE

Payment Factory 2.0: Reshaping Treasury Efficiency

Payment Factory Presentation MN AFP 1 4/18/2012 Scott Willams – Director of Consulting

Mary Ann Rydel – Director of Product Mgmt and Customer Support

Hanse Orga International Corporation

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Agenda

Multiple Definitions of a Payment Factory

Why a Payment Factory?

Who is Hanse Orga?

Types of Payment Factories

What Strategy is Right for my Company?

Building a Business Case - Benefits of a Payment Factory

Other Payment Items of Note

» ISO 20022 Format

» Connectivity Interfaces & SWIFT for Corporates

Payment Factory Presentation – MN AFP 2 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

What is a Payment Factory?

Many people may define a payment factory differently:

A hub to centrally manage communication to and from the banks.

A shared service center for payables.

A group responsible for optimizing the company’s disbursements on behalf of its affiliates.

A payment management solution that enables organizations to streamline payment

processing and control costs centrally.

Payment Factory Presentation – MN AFP 3 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Why do I Need a Payment Factory?

With the credit crunch, treasury departments must focus on better management of cash

» Require improved working capital

– Need to reduce costs

– Need to optimize efficiencies

» Require better control and visibility into cash forecast

To meet audit and compliance requirements, treasury organizations are being asked to tighten

controls in the financial supply chain

To achieve future growth goals, treasury departments must be able to quickly react to business

conditions

» Ability to quickly integrate acquisitions

» Ability to compete in new international markets and handle new payment types

» Ability to quickly react to issues with counterparty risk

A payment factory is one of the necessary components in achieving these strategic requirements.

Payment Factory Presentation – MN AFP 4 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Why do I Need a Payment Factory?

Many organizations utilize a variety of decentralized e-banking solutions

» Carries risk and is error prone

» Lacks integration with the ERP

» Carries high costs and high maintenance

The decentralized processes lack control and standardization

» No group-wide overview of all cash flows

» No standardized approval processes and workflows

The decentralized process increases inefficient manual efforts

» Time-consuming effort to manage multiple bank connections

» Manual effort to determine cash positions and create cash forecast

A payment factory is one of the necessary components in improving these operational inefficiencies.

Payment Factory Presentation – MN AFP 5 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Organization

HQ in Hamburg, international

offices in the Netherlands,

France, UK and the USA

Proven sustainable growth and

profitability

Privately owned, no external

investors

Solutions are certified by SAP®

under “FinanceSuite 4.3”

Dual product strategy: Solutions

for SAP® and non-SAP® ERP

(Oracle, JD Edwards,

PeopleSoft, …)

People

150 people

Strong employee retention

Functional experts with deep

understanding of

cash management and

liquidity planning, bank

communications, payments,

treasury, cash application,

account reconciliation, eBAM

International consulting team

Strong global partners

Clients

500+ clients

Strong client retention

Clients in all industries

including: Oil & Gas,

Chemicals, Insurance, Retail,

Manufacturing, Logistics,

Government

Client size ranges from

Fortune 500 to mid-size

companies

Worldwide deployments

Who is Hanse Orga? The Hanse Orga Group

Payment Factory Presentation – MN AFP 6 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Hanse Orga FinanceSuite for SAP®

Cash & Liquidity Management

Cash Forecasting

Cash Management

Cash Position Worksheet

Cash Pooling & Concentration

Variance Analysis vs. Actuals

Intragroup Workflow

Payment Management

Ad-hoc Payments

Payment Monitor

Bank & SWIFT Connections

Payment Factory

Payment Workflows

Bank Statement Management

Treasury Management

In-House Banking

Loan Management

Limit Management

Derivatives (FX, IR, Swaps etc.)

Intercompany Netting

Treasury Accounting

eBAM

Bank Scoring & Conditions

Bank Account Administration

eBAM Messaging

Bank Performance Analysis

Workflows

Bank Relationship Management

Finance

Suite

HR IS-

U

CO FS-

CD

BW

MM

FI

SD

AutoBank

Dispute Management

Bank Statements

Optimized Post-Processing

Remittance Advices

Performance Cockpit

Lockboxes

Payment Factory Presentation – MN AFP 7 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Hanse Orga’s Clients (500+)

Payment Factory Presentation – MN AFP 8 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Types of Payment Factories

Focus on centralizing and standardizing payment flows enterprise-wide

» All company-wide payment flows (batch and manual) are routed through the payment factory

» All bank communication is managed centrally

» All payment formats are managed centrally

Focus on consolidation and optimization of payment processing

» Business rules are utilized to route the payment through optimal channels (e.g. transformation of cross-

border payments into domestic payments)

» Smart (re)grouping and/or aggregation of payments

» Due to tax and legal implications this setup might require the implementation of an in-house bank

Virtual or decentralized payment factory

» Roles and responsibilities are still retained at the level of the subsidiary

» Entire organization uses one central system for managing payments and bank connectivity

Payment Factory Presentation – MN AFP 9 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management

Payment Management

Treasury Management eBAM

Payment Factory Structure

Bank 2 Bank 3 Bank 4 Bank 1

Non-SAP®

Companies

Protected

Company Network

Payment Factory

Paymen

t run

file

Paymen

t run

file

Paymen

t run file

Payment

run file

Payment

run file

Payment

run file

Payment

run file

RFC

SAP® FS-CD

SAP® HR

SAP® IS-U

Payment

run file

CC 2 CC 3 CC 4 CC 5 CC… CC 1

SAP®2

Payment Factory Presentation – MN AFP 10 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management

Payment Management

Treasury Management eBAM

Payment Optimization Examples

Payments can be reformatted and rerouted in order to change payment channels.

Payments can be aggregated so that many individual payments for one creditor are

grouped and sent as one payment.

Payments can be restructured in order to route the payment to a different, cheaper

bank in a different country.

Payments with partially entered data can be programmatically completed and

delivered.

Data fields, such as a reference field, can be automatically edited in order to reduce

the data entry workload.

Urgent payments can automatically be monitored and executed.

Payments can be validated for completeness and accuracy before the files are

delivered so that unnecessary rejections and delays are avoided.

Returns processing can be enhanced by receiving, repairing, and reissuing from a

centralized point

Internal company payments can be netted and settled internally without having to be

processed through a financial institution.

Payment Factory Presentation – MN AFP 11 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

How Does In-House Banking Relate to a Payment Factory?

Bank 1

Holding

Subsidiary 5

Subsidiary 2

Subsidiary 3

Subsidiary 1

Subsidiary 4 Bank 3

Bank 2

Subsidiary 5

Subsidiary 2

Subsidiary 3

Subsidiary 1

Subsidiary 4

Bank 1

Bank 3

Bank 2

Without IHB

With IHB

Intragroup

All Payment Files

Sent Externally

Payment Factory Presentation – MN AFP 12 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management

Treasury Management

eBAM

Benefits of In-House Banking (IHB)

Management of Intracompany Payables and Receivables

» Without an IHB, intracompany payments occur through the external banking system and therefore have real transaction fees and settlement delays

» In-house banks remove the need for an external and/or individualized transfer of funds between two subsidiaries

» Instead, a netting process occurs which allows for the net value of the transactions to be exchanged between the virtual accounts of each subsidiary

Payments on Behalf of Another Entity

» Allows the parent company or subsidiary to pay on behalf of another subsidiary (e.g. Cross Border Payments)

» Multiple payment structures are possible

» Multiple accounts & interest compensations models are supported

Internal Lending

» The In-House Bank can directly loan funds to subsidiaries that have a short term cash deficit

» Borrowing internally is less expensive than paying interest to a third party.

» The In-House Bank can monitor and settle a cash pooling structure

Payment Factory Presentation – MN AFP 13 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

What Strategy is Right for my Organization?

Centralized (IHB)

Decentralized

Sophistication

Maximize

Group’s

Return

Ensure

Liquidity

Control Lost

Opportunity

Costs

Manage

Liquidity/ Cash

Flow Forecasting

Control Manage

Cash & Bank

Infrastructure

Manage

Commercial

Payments/

Collections

Optimized

Use of Cash

Manage

Working

Capital

Integrated Finance SSC & Treasury IHB

Objectives

Typical Large Corporate

Link WCM to Performance

Manage

Bank

Relationships

Visibility over

Bank Accounts/

Balances

Payment Factory and IHB

Central Treasury

Payment Factory Presentation – MN AFP 14 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Payment Factory: Building a Business Case

Payment Factory Presentation – MN AFP 15 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Business Case for a Payment Factory (1 of 3)

Reduce costs with increased operational efficiencies

» Increase Straight-Through-Processing (STP)

» Reduce exception processing costs

» Reduce/eliminate costs of e-banking platforms

» Rationalize the infrastructure

» Obtain global overview of banking volumes & statistics

» Improve ability to measure Key Performance Indicators (KPI)

Reduce operational costs by eliminating manual or redundant processes

» Center of Excellence for creating or maintaining payment formats and support

» Decrease the number of required bank accounts

» Decrease auditing and compliance efforts

Payment Factory Presentation – MN AFP 16 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Business Case for a Payment Factory (2 of 3)

Meet security, audit, and compliance requirements

» Reduce fraud and risk

» Standardize audit trails across banks and payment processes

» Company-wide adoption of processing procedures

» Consolidated point of sanction screening

» Leveraging of master data

Enable flexibility to quickly adapt to changing market conditions

» Minimize reliance on a single financial institution

» Reduce time to market and promptly add new banking partners in new geographies

» More quickly integrate new acquisitions

» Effectively respond to market e-initiatives and fraudulent concerns

Payment Factory Presentation – MN AFP 17 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Business Case for a Payment Factory (3 of 3)

Improve working capital by optimizing payments

» Reduce costs of cross-border payments

» Reduce transactional processing and warehousing costs

» Reduce bank communication costs

Increase control and visibility into cash position and cash forecast

» Central visibility into real-time cash position

» Optimized liquidity management

Payment Factory Presentation – MN AFP 18 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Payment Factory: Other Items of Note

Payment Factory Presentation – MN AFP 19 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

ISO 20022 - Format

What

» Data format standards developed by the International Organization for Standards

» Five financial business domains in scope (payments, FX, securities, trade services, cards)

» Format management – pain, camt

Why

» To enable communication interoperability between companies and their financial partners

» Create a single standardized approach for methodology, process, and repository that can be used by

all financial standards initiatives

» Eventual elimination of the numerous other overlapping standardization initiatives

Benefits

» It allows clients to use a single, globally-recognized file format to originate multiple payment types

(e.g. wire payments, ACH credits and debits, SEPA, FEDI, etc. payments).

» Adoption can result in reduced IT costs and increased Straight Through Processing (STP).

» Reduction in reconcilement processing and detailed matching based on field tags

Payment Factory Presentation – MN AFP 20 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

ISO 20022 - What is XML?

<Document xmlns="urn:iso:std:iso:20022:tech:xsd:pain.001.001.02"

xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance">

<pain.001.001.02>

<GrpHdr>

<MsgId>090128349</MsgId>

<CreDtTm>2009-01-28T08:52:13</CreDtTm>

<NbOfTxs>1</NbOfTxs>

<CtrlSum>203.00</CtrlSum>

<Grpg>MIXD</Grpg>

<InitgPty>

<Id>

<OrgId>

<BkPtyId>1234512345</BkPtyId>

</OrgId>

</Id>

</InitgPty>

</GrpHdr>

<PmtInf>

<PmtMtd>TRF</PmtMtd>

<PmtTpInf>

Payment Factory Presentation – MN AFP 21 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Connectivity Interfaces

Bank Proprietary

» Websites and Tokens

» FTP/SFTP/VPN -> Mailbox/Portals

» Encryption methodologies

National

» Europe – EBICS, FTX- Connector, MBS-IP, BCS

» United Kingdom – BACS

SWIFT

» MA-CUG, SCORE

» Alliance Lite, Alliance Lite2

» Service Bureaus

Payment Factory Presentation – MN AFP 22 4/18/2012

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management Treasury Management eBAM

Questions?

Thank you for your time.

Payment Factory Presentation – MN APF 23 4/18/2012

Mary Ann Rydel

Director of Product and Customer Service, North America

Hanse Orga International Corp.

Office: +1 734 302 3000

Cell: +1 847 650 2926

[email protected]

Scott Williams

Director of Consulting, North America

Hanse Orga International Corp.

Office: +1 734 302 3000

Cell: +1 847 7691448

[email protected]