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In-House Bank & Payment Factory:Challenges & Opportunities
October 9, 2008
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Forum Moderator and Panelists
Moderator
David Conroy is the Deutsche Bank Region Head, Americas Trade and Cash, based in New York
Panelists
Judith Van Paasen is a Senior Partner at Zanders Consulting, based in the beautiful town of Bussum on the outskirts of Amsterdam. She is an expert in Treasury Consulting and has significant experience with several global corporations in advising as well as implementing In-House Banking & Banking Rationalization strategies. Zanders has particular expertise in end-to-end projects involving IHB formation, SAP In-House Cash & Bank system implementations.
Dieter Stynen, based in Brussels, runs the Treasury Solutions team for Deutsche Bank’s Bank in Benelux, Southern Europe, Switzerland and Eastern Europe. He has more than 12 years of experience in European banking markets and has worked on a large number of projects involving banking, SSC, Payment Factory & In House Banking.
Kerstin Schoenwitz from Deutsche Bank’s Integrations team. Based in Frankfurt, Kerstin works with global clients directing straight-through integrations between the bank, and Deutsche Bank’s customers’ SAP platforms.
Karen Harwick is the Treasury Operations Manager at Air Products & Chemicals. Based in Allentown, PA, Karen is responsible for Cash Management & Treasury Operations on a global basis. For several months now she is spearheading an IHB / Banking rationalization project for Air Products.
Charles Duperré is assistant-treasurer for Celanese Corporation in Dallas, Texas. Prior to joining Celanese, Charles was vice-president customer services for Aventis Pharmaceuticals in Bridgewater, New Jersey and vice-president & treasurer for Aventis Pharma AG in Frankfurt, Germany. Charles is responsible for global cash management and is engaged for several months in global IHB/Treasury Rationalization project for Celanese.
Stephan Heissenberg is a Senior Consultant at SAP and has worked on several large implementation projects. Stephan has expert knowledge specifically about SAP In-House Cash and generally about technical infrastructure as it relates to IHB implementation.
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Agenda
Introduction: David Conroy, Region Head Americas Trade and
Cash, Deutsche Bank
Setting up an In-House
Bank/Payment Factory using SAP: Judith van Passen, Partner, Zanders Consulting
Establishing an IHB
Structure/Payment Factory
(Key decisions to be made):
Dieter Stynen, Treasury Solutions Team Leader
& Kerstin Schoenwitz, Product Manager,
Channel Management and Integration Services
Introduction and European
Banking Optimization:
Karen Harwick, Treasury Operations Manager,
Air Products & Chemicals
In-house Bank Optimization &
Bank Rationalization:
Q and A
Charles Duperré, Assistant Treasurer,
Celanese Corporation
Includes above panelists and Stephan
Heissenberg, Senior Consultant, SAP
In-House Bank & Payment Factory:Challenges & Opportunities
Setting up an In-House Bank/Payment Factory using SAPJudith van Paassen, Partner
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Zanders in a Nutshell
Zanders is an independent European consulting firm specialized in
the area of Treasury and Finance:
– Cash & Liquidity Management
– Risk Management
– Corporate Finance
– Treasury Strategy & Organization
– Treasury Processes & Systems
Founded in 1994 by Chris J. Zanders, currently with presence in
Belgium, Luxembourg, the Netherlands and the United Kingdom
With more than 125 professionals the leading company in Europe for
international advisory, interim, outsourcing and transaction services
Winner SAP Partner Award „highest client satisfaction‟
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Which Features Will Impact theFuture Role of the Corporate Treasurer?
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Future Role
ExtensionsTechnology
Regulation
Globalization
Traditional
Role
Risk Intelligence
Business Relationship
CFO Relationship
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Strategic Opportunities for Corporateson Technology
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Centralized Treasury Organization
SSC / Payment Factory
In-House Factory
Single ERP/TMS
Seamless IT interfaces
Dematerialization of paper
Straight-Through-Processing (STP)
Bank connectivity (SWIFTNET)
Products and formats (SEPA)
Trends ResultsKey Drivers
Reduce Cost
and
Create Value
Reduce Risk
and
Improve Control
Centralization
Automation
Standardization
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In-House Bank: Are We talking About the Same Thing?
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Time
Level of
Centralization
Internal funding
Internal FX
Netting
In-House Bank
Payment factory /
payments „on behalf of‟
Collection factories /
collections „on behalf of‟
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SAP ERP Treasury
SAP Process
IntegrationSAP Business
IntelligenceSAP Portal
SAP In-House Cash
Subsidiaries
SAP Bank Communication Management
SAP Treasury and Risk Management
Credit Risk
Analyzer
Market Risk
Analyzer
Portfolio
Analyzer
Transaction Manager
MM FX Der. Debts Sec.
Hedge Mgt Commodity Mgt
Comm.
Exposure Mgt
SAP Cash & Liquidity Management
Cash Management Liquidity Planner
SAP Financial Accounting
Banks
SAP Integration
Package for Swift
Partner
Solutions
SAP In-House Cash
Subsidiaries
SAP Bank Communication Management
SAP Treasury and Risk Management
Credit Risk
Analyzer
Market Risk
Analyzer
Portfolio
Analyzer
Transaction Manager
MM FX Der. Debts Sec.
Hedge Mgt Commodity Mgt
Comm.
Exposure Mgt
SAP Cash & Liquidity Management
Cash Management Liquidity Planner
SAP Financial Accounting
SAP ERP
SAP ERP Treasury
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Cash Management Strategy
Objectives of a Cash Management Strategy:
– Centralized treasury in terms of liquidity and risk
– Rationalize bank account structure – reduce the number of banks involved
– Understand and facilitate pricing for cash management services
– Liberation of excess / trapped cash from subsidiaries
– Visibility of liquidity positions by currency, country and entity through
a single report
– Centralized, streamlined and secure payment processes
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Payment Factory to Support Your Cash Management Strategy
Bank rationalization projects:
– Standardization of transaction types
– Standardization of bank communication and connectivity
– Reduction of the number of bank relationships and bank accounts
Implementation of payment and collection factories:
– Treasury Shared Service Centers
– Standardization transaction types and bank connectivity
– Electronic Invoice or Bill Presentment and Payment (EIPP/EBPP)
Increased efficiency, security and improved controls:
– Automation and standardization of processes and systems
– Segregation of duties (four-eyes principle)
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Summary
Technology is the key strategic opportunity that enables corporate
treasury to centralize, standardize and automate processes. SAP can
be an important enabler
Payment/collection factory is an extension of your In-House Bank
Implementation of a payment/collection factory is a part of your cash
management strategy
Payment factory increases efficiency, security and improves
controls
Zanders assists the corporate treasury departments in becoming
a best in class value center
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Contact Information
Zanders, Treasury & Finance SolutionsBrinklaan 1341404 GV BussumThe Netherlands
T: +31 35 692 89 89F: +31 35 692 89 99
www.zanders.eu
Judith van PaassenPartnerM: +31 6 54 39 34 02E: [email protected]
In-House Bank & Payment Factory:Challenges & Opportunities
Establishing an IHB Structure / Payment FactoryKey decisions to be made
Dieter Stynen, Treasury Solutions Team Leader Kerstin Schoenwitz, Product Manager, Channel Management and Integration Services
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Key Decisions To Be Made
Bank Partner
Scope
Account Structure
Access Channel
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Bank Partner
Regional Network Bank
Single communication, security and
format interface
Consolidation of credit facilities
Regional terms and conditions
Single documentation partner
Single implementation contact
Uniform customer service model
Standard transaction and reject
codes
Gaps in local services?
Multiple Banks
Multiple interfaces, which lead to
higher IT costs
Distribution of credit facilities
Variable terms and conditions
“Heavier” documentation process
Several implementation managers
Different processes and service
models
More complex reconciliation
process
More partners to share business
with that might have full local
service offering
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Scope
Accounting? FX? Cash Management? Invoice processing?
Payments:
– Vendor payments
– Salary payments
– Tax, VAT, social security payments
– One-off urgent treasury payments
Collections to be included?
– Centralisation via direct debits – PEDD as of November 2009
– Local instruments such as cheques, LCR, Riba, Recibos etc?
Hybrid structure is often implemented:
– Vendor payments & direct debits centralised
– Salary payments, specific local instruments handled locally
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Account Structure
Split between Accounts Payable & Accounts Receivable?
– More transparency, but
– Greater number of accounts to manage
– Often used with “hybrid” structures
SEPA offers opportunities, but for many corporates, it is still too
early to move to a one disbursement/collection account structure:
– Local inefficiencies, such as CBR/higher fees
– Local instruments, such as cheques, LCR etc are not included in SEPA
scope
Legal account holder:
– Local entity accounts or
– On-behalf of payments/collections
– Hybrid structure: payments on-behalf of; collections on local entity
accounts
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D
B
S
Y
S
T
E
M
db-eBridge (EU)
db-eBridge (US)
db-eBridge (AP)
ACH
Cheque
Draft
HVP
C
l
e
a
r
i
n
g
db-worldPAS
Global Business Solutions
manual or automated
file transfer options
Customer
ERP /
TWS /
SAP
Local
Format,
XML,
EDIFACT,
CSV,
IDOC,
MT101
manual or automated
authorisation options
manual or
automated
feedback file
transfer options
MT940
MT942
BAI
manual or automated
statement file
transfer options
Access Channel Integration Flexibility
db-direct internet
HTTPS
db-direct connect
e.g. HTTPS / AS2
SWIFT FileAct
MA-CUG and
SCORE
DB System
Validation
Account
Booking System
In-House Bank & Payment Factory:Challenges & Opportunities
Introduction and European Banking OptimizationKaren Harwick, Global Treasury Operations Manager, Air Products
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Who Is Air Products?
Global atmospheric, process and
specialty gases, performance materials,
equipment and services provider
Serving industrial, energy, technology and
healthcare markets worldwide
Fortune 500 company/ Founded in 1940
Operations in over 40 countries
~22,000 employees worldwide
Known for our innovative culture and
operational excellence
Corporate responsibility commitment
December 2007
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Sales into Diverse Markets
US$10B in sales
Diverse markets and geographies
Positioned for long-term value creation
FY07 Consolidated Sales
United States
32%
Canada/ Latin America
2%
Europe
5%Asia
44%
Rest of World
17%
By Reporting Segment By Destination
Equipment and
Energy
6%Electronics and
Performance
Materials
21%
Healthcare
6%Chemicals
9%
Merchant Gases
32%
Tonnage Gases
26%
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Air Products Current Transaction Processing Environment
SAP Shop (+90% of global business on one-instance of SAP)
SAP Treasury – Implemented in Nov 06 for Europe & North America,
Nov 07 for Asia
Shared Service Centers:
– North America – Allentown, PA
– Europe – Barcelona, Spain
– Asia – Shanghai, China & KL, Malaysia
Regional Treasury Centers
– North America & Europe – Allentown, PA
– Asia – Hong Kong
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European Banking OptimizationThe Opportunity
Current environment:
– Too many banking relationships
– Too many bank accounts
– Suboptimal cash management structure
– Too much manual intervention in transaction initiation and bank account
reconciliation
– Manual intervention required for intercompany trade settlements
– Large number of intercompany loan transactions/agreements
(driven by tax)
– Large quantity of cash management & intercompany loan related
FX trades
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European Banking Optimization/In House Cash Benefits
Banking Optimization – Select one regional bank for Europe –
eliminate numerous local banks
Implement SAP In House Cash
– Payments on Behalf
– Intercompany payments
– Receipts on Behalf
Straight Through Processing – Eliminate large volume of manually
processes transactions
Streamlined cash management structure
Reduced number of intercompany loans and intercompany loan
relationships to maintain
Reduced # of FX Transactions required for CM and IC loans
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European Banking Optimization Costs
External Consultant Resources for IHC Implementation
Internal IT Costs:
– IHC Implementation
– Banking Optimization – Connections
– Re-engineering existing SAP environment
Finance Team – Europe and US based
– T&E
– Leverage Virtual conferencing to reduce costs
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The Project…Timeline
Minimum 1 year + Project timeline
May08 – Aug08
– Banking Partner RFI/RFP‟s
– SAP Consultant RFP‟s
– Define Internal Project Team
– IT - Resource Commitment
Current Phase Sept08 – Dec08 – Design Solution
– Select Strategic Banking Partner (4 candidates)
– Selected SAP Consulting Partner
– Begin Blueprinting phase for SAP Project
– Business Case Lockdown
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The Project…Timeline (continued)
Jan09 – May09 – Implementation & Testing
– New Bank accounts established
– Connections (SAP to Bank and Bank to SAP)
– In House Cash Configuration – Testing
July 09 – Initial Go-Live
– Big Bang or Phased Approach
Aug09 – Oct09 – Stabilization
2010+ – Rollout to North America or Asia?
In-House Bank & Payment Factory:Challenges & Opportunities
In-house Bank Optimization & Bank RationalizationCharles Duperre, Assistant Treasurer, Celanese Corporation
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Who Is Celanese Corporation?
Leading global integrated producer of chemicals and advanced materials
Among the world‟s largest producers of acetyl products, intermediate chemicals for nearly all major industries
Leading global producer of high performance engineered polymers used in a variety of high-value end-use applications
Operations across North America, Europe and Asia
Net sales of $6.4 billion in 2007;approximately 70% generated outside of North America
Approximately 8,400 employees worldwide
Fortune 500 company
Celanese($ in millions)
2007 Revenue1,2: $6,444
2007 Operating EBITDA2: $1,325
Acetyl IntermediatesConsumer and Industrial
Specialties
Advanced Engineered
Materials
2007 Revenue1: $2,955
2007 Operating EBITDA: $762
2007 Revenue: $2,457
2007 Operating EBITDA: $393
2007 Revenue: $1,030
2007 Operating EBITDA: $252
Celanese($ in millions)
2007 Revenue1,2: $6,444
2007 Operating EBITDA2: $1,325
Acetyl IntermediatesConsumer and Industrial
Specialties
Advanced Engineered
Materials
2007 Revenue1: $2,955
2007 Operating EBITDA: $762
2007 Revenue: $2,457
2007 Operating EBITDA: $393
2007 Revenue: $1,030
2007 Operating EBITDA: $252
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Geographically Balanced Global Positions and Diversified End Market Exposure
29% 43% 28%
Other 10%
Construction
7%
Paints &
Coatings
15%
Automotive
9%
Consumer &
Medical
Applications
11%
Filter Media
16%
Consumer &
Industrial
Adhesives
4%
Textiles
6%
Food &
Beverage
5%
Chemical
Additives
5%
Paper &
Packaging
8%
Performance
Industrial Applications
4%
Geographic breakdown based on 2007 Net Sales (by destination)End market breakdown based on 2007 estimated Gross Sales
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Treasury at Celanese: Our Guiding Principles
Structure
Centralize Treasury activities under a Global Treasury Center (GTC)
supported by Regional Treasury Centers (RTC‟s)
Use in-house bank to centralize cash and risk in one location.
Cash Management
Minimize cash held by subsidiaries by maximizing Cash Pooling, Interco
lending & borrowing, netting, etc.
Align cash management banks with credit providing banks
Global Cash Management RFP to simplify cash pooling structure,
reduce number of banks and bank accounts
Risk Management
Minimize balance sheet exposure and reduce earnings volatility
No Trading for Profit. No speculation.
Align FX banks with credit providing banks
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GTC and RTC‟s Roles & Responsibilities
Global Treasury Center
Sets Policy & Guidance
Ensures Control & Compliance
Drives Standardization
Executes Capital Markets transactions
Manages Corporate Finance activities (Debt, Capital Structure, I/C funding, etc.)
Sets and executes Risk Management Strategy (FX, IR)
Manages Global Banking relationships
Regional Treasury Centers
Coordinates & Executes in accordance with Global Policy
Ensures compliance with local regulatory requirements (tax, legal, banking, etc.)
Supports local BU requirements
Executes daily Cash Management activities
Manages Regional/Local Banking relationships
Global Treasury Center
Dallas
European Treasury Center
Asia Treasury Center
China
Transactional treasury
services carried out by
Financial Shared Service
Center In Budapest
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2 Types of Projects (as identified in 2006)
Quick Wins/Technology/Best Practice
Investment Portal
FX Trading Platform
Interco Book Entry Settlement System
Strategic/Transformational/Structural/Enabling
Shared Services Implementation
In-house bank optimization
Bank Rationalization (Cash Management RFP)
Treasury System
Implementation
Complete
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Shared Services ImplementationProject Description Relocation of financial shared services (including transactional treasury activities)
performed across the world to a common center in Budapest, Hungary
Project Objectives and Benefits To increase standardization of processes and implement best practices
To decrease costs (through labor cost arbitrage and process improvements)
To enhance control at Corporate Treasury
Project Scope Local transactional treasury operations in Europe relocated to Budapest Shared
Services Center (SCC)
Project scope includes AP, AR & Master Data for all countries (except China) & GL for Europe
Project involved building infrastructure (systems & offices), determining processes at SCC & hiring and training personnel
Project Implementation Project implemented in a phased manner by country, following pilot runs
Project duration: 18 months
Project implementation to be completed by Q1 2009
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In-house Bank OptimizationProject Description Relocation of the company‟s In-house bank to Luxembourg
Project Objectives and Benefits To enable tax optimization on earnings of the in-house bank
To provide greater visibility, transparency and control by concentrating cash and risk in one location
To capture external banking transactions and to execute them internally so as to reduce bank fees and charges
Project Scope Evaluation and selection of tax jurisdiction
Conceptualization of entity structure and loan restructuring, in accordance with tax laws
Transfer of In-house bank operations from an administrative services subsidiary to a dedicated In-house banking center in Luxembourg
Project Implementation In-house bank concept and structure determined
Identifying funding options for the new In-house bank
Evaluating tax consequences
Estimated Project duration: 9 months
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Bank RationalizationProject Description Rationalizing the bank account structure in line with credit providing banks and payment factory
mechanics
Project Objectives: To simplify Banking structure by decreasing number of bank accounts by 50% (Celanese has
relationships with 52 banks including more than 450 bank accounts)
To align the cash management and FX banks with the credit providing banks and simplify the bank account structure
To prepare for and take advantage of the introduction of SEPA and to further standardize and automate the P2P and O2C process
To save costs from lower banking fees
Project Scope The bank rationalization concerns the design, selection and implementation of the future bank and
system structure for Celanese in:– North America
– Western Europe
– Central Eastern Europe
– Nordics
– Asia-Pacific & Others
China is excluded from the scope of the bank rationalization
Project Implementation Partnered with external consultant
Aligned with In-house bank and Treasury system projects
Estimated Project duration: 18 months
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Treasury SystemProject Description Improving / overhauling the treasury IT infrastructure
Project Objectives and Benefits To implement a treasury system that is end-to-end that will eliminate need to reenter same
information in multiple systems and extract data seamlessly
To increase system reliability, while improving productivity and standardization
Simplify communication to banks. From multiple bank platforms to a single bank agnostic system.
To improve system report generation capability
Project Scope Revisit systems used in the RTC
Create blueprint for end system environment (TWS, SAP or ASP)
Create processes, banking structure etc. around the system to maximize efficiency
Look at treasury system from a big picture standpoint rather than a quick fix to problem
Project Implementation Initiative to be led by treasury with support from IT and treasury super-users
Project duration from conceptualization to implementation expected to be 12 months
Confirmation/validation of the system environment to precede implementation of new banking structure
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Current P2P and O2C Process
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Considerations Future P2P and O2C Process
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Considerations Future Bank Structure
3 to 5 global/regional banks with approximately 250 accounts:
Allow to further standardize and automate P2P & O2C
One standardized payment format
All internal and external payments are debited on internal bank accounts in
name of the legal entities
Payment factory is responsible for timely and secure transmission of the
payment instructions to the external banks and distribution of received
bank statements
All external payments are sent and all bank statements are received through
a single bank independent delivery channel
Payments are processed as domestic „on behalf of‟ payments
Payment factory uses an international account structure to process all
payments at the lowest bank transaction fees
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Questions and Answers
Q and ATo ask a question via phone, press 1 on your telephone keypad when prompted during the forum. You may also submit a question directly to Dave Conroy our moderator by typing and submitting your question.
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Contact Information
If you wish to contact any of today‟s presenters, please do so using the following information:
Judith Van Paasen, Senior PartnerZanders [email protected]
Dieter StynenTreasury Solutions Deutsche BankDieter Stynen/Brussels/DBBenelux/DeuBa@dbcom
Kerstin SchoenwitzProduct Manager, Channel Management and Integration ServicesDeutsche BankKerstin Schoenwitz/GCM/Zentrale/DeuBa@dbcom
Karen HarwickTreasury Operations ManagerAir Products & [email protected]
Charles DuperréAssistant-TreasurerCelanese [email protected]
Stephan HeissenbergSenior [email protected]
