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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. AFP of Arizona 2013 Annual Southwest Expo Payment Factory: Leveraging Best Practices in Treasury Payment Factory Presentation AFP of AZ 1 6/7/2013 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.

    AFP of Arizona 2013 Annual Southwest Expo

    Payment Factory: Leveraging Best Practices in Treasury

    Payment Factory Presentation AFP of AZ 1 6/7/2013 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

    » Connectivity Interfaces & SWIFT for Corporates

    » ISO 20022 Format

    » SEPA

    Payment Factory Presentation – MN AFP 2 6/7/2013

  • 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 6/7/2013

  • 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

    Payment Factory Presentation – MN AFP 6/7/2013

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

    4

  • 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

    Payment Factory Presentation – MN AFP 6/7/2013

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

    5

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

    Organization

    HQ in Hamburg, international

    offices in the Netherlands,

    France, the 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

    200 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 6/7/2013

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

    Hanse Orga FinanceSuite for SAP®

    Payment Factory Presentation – MN AFP 7 6/7/2013

    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

    http://upload.wikimedia.org/wikipedia/de/5/59/SAP_2011_logo.svg

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

    Hanse Orga’s Clients (500+)

    Payment Factory Presentation – MN AFP 8 6/7/2013

  • 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 6/7/2013

  • 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 6/7/2013

    http://upload.wikimedia.org/wikipedia/de/5/59/SAP_2011_logo.svg

  • 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 6/7/2013

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

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

    Payment Factory Presentation – MN AFP 12 6/7/2013

    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

  • AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management

    Treasury Management

    eBAM

    Benefits of In-House Banking (IHB)

    Management of Intra/Intercompany Payables and Receivables

    » Without an IHB, intra/intercompany 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 6/7/2013

  • AutoBank Automatic Cash Application Cash & Liquidity Management Payment Management

    Treasury Management

    eBAM

    Payment Factory: Building a Business Case

    Payment Factory Presentation – MN AFP 14 6/7/2013

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

    What Strategy is Right for my Organization?

    Payment Factory Presentation – MN AFP 15 6/7/2013

    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

  • 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 6/7/2013

  • 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 6/7/2013

  • 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 6/7/2013

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

    Payment Factory: Other Items of Note

    Payment Factory Presentation – MN AFP 19 6/7/2013

  • 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

    » Brazil – FEBRABAN

    » Japan – Zengin

    SWIFT

    » MA-CUG, SCORE

    » Alliance Lite, Alliance Lite2

    » Service Bureaus

    Payment Factory Presentation – MN AFP 20 6/7/2013

  • 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 Standardization

    » 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, EDI, EDIFact, 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 21 6/7/2013

    http://en.wikipedia.org/wiki/File:ISO_english_logo.svg

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

    ISO 20022 - What is XML?

    090128349

    2009-01-28T08:52:13

    1

    203.00

    MIXD

    1234512345

    TRF

    Payment Factory Presentation – MN AFP 22 6/7/2013

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

    SEPA – Objective

    Uniform Currency

    Uniform Standards

    Uniform Legal Framework

    Uniform Execution Mechanisms

    Credit Transfers (SCT)

    Direct Debits (SDD)

    Card Payments (SCF)

    Cash (SECA – Single Euro Cash Area)

    Currency = Euro

    Without Amount Restriction

    In all 27 EU member states, the European Economic Area (Iceland, Norway, Liechtenstein),

    and Monaco and Switzerland, for a total of 32 countries.

    23 SEPA 07.06.2013

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

    SEPA – New Formats

    SEPA 24 07.06.2013

    XML "Old"

    camt.053.00x.0x (Bank to Customer Statement) MT940 (Bank Statement)

    camt.052.00x.0x (Bank To Customer Account Report) MT942 (Remittance Advice)

    camt.054.00x.0x (Bank to Customer Debit/Credit

    Notification)

    Aggregate Item/Bank

    Statement Information (examples: DTI, etc.)

    pain.002.00x.0x (Payment Status Report) National Transfer Protocol (examples: PTK, etc.)

    XML "Old"

    pain.001.00x.0x (Customer Credit Transfer Initiation) National Credit Transfer

    Formats (examples: Ciri, ClieOp, SWIFT MT, etc.)

    pain.008.00x.0x (Customer Direct Debit Initiation) National Debit Formats (examples: DOM80, ClieOp, SWIFT MT, etc.)

    Payment Formats

    Incoming Messages

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

    SEPA – Most Important Contents of SEPA Regulation

    25 SEPA 07.06.2013

    *EU regulation comes into effect

    Content: Valid As Of:

    Reachability for Euro countries for SCT (previously not yet regulated)

    31.March.2012*

    Reachability for non-Euro countries for SCT (previously not yet regulated)

    31.October.2016

    Technical requirements for SCT and SDD 01.February.2014 (10/2016 for non-Euro countries)

    Validity of mandates and reimbursement regulation 01. February.2014

    IBAN conversions for consumers 01. February.2014 to

    01. February.2016

    National exceptions 01. February.2014 to

    01. February.2016

    Change of EU pricing regulation • Uniform pricing regulation without amount restriction

    31.March.2012*

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

    SEPA Affected Processes

    Hanse Orga Business Briefing in Brussels 26 06/02/2013

    Credit Payment

    Runs

    Debit Payment

    Runs

    Manual

    Payments Approval

    Electronic

    Signature

    Bank Communication

    Payments & Bank Statements

    Debtors Creditors

    Validation

    Splitting

    Cash Allocation

    Banks

    Processing of

    R-Messages

    Master Data:

    BIC & IBAN

    pain.001.00x.0x

    per Country

    pain.001.00x.0x

    per Country

    Bank Protocols Significantly

    Increased

    Volumes

    New Formats:

    camt.052/053/054

    Decreasing

    Assignment

    Rate?!

    BIC & IBAN,

    SEPA Manates

    pain.008.001.0x

    per Country Change Direct

    Debit Processes

    http://upload.wikimedia.org/wikipedia/de/5/59/SAP_2011_logo.svg

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

    Setting up a SEPA Project: Checklist Bullet Points

    Set up a Project

    Team Strategic Analysis: Centralization of Payments and/or Collections?

    Timing

    Formats

    » Country Specific Requirements

    Infrastructure

    Banking Landscape

    Migrating to IBAN/BIC

    Technical Impact of Converting

    Field Usages

    Execution and Cut-off Times

    Special Preparation for SDD

    » Mandate Management

    » Creditor Identifier

    » Submission Deadlines

    » Return Messages

    SEPA 27 07.06.2013

    *no guarantee for completeness

  • 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 28 6/7/2013

    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]