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Presentation to: SAPSA
Establishing an internal bank
About infiniance
• Consulting firm
• Specialized in advanced financial topics,
processes, systems and organizational
aspects
• Very experienced consultants
• Client base in Europe
About Lars Arne Christensen
• Partner in infiniance
• Responsible for global internal bank
solutions to international corporates in
Northern Europe
• Used by SAP Centres of Excellence as
subject matter expert
Topics today
• What is an internal bank?
• When do we establish it?
• How do we establish it?
• How does SAP contribute?
• How good is the business case?
What is an internal bank?
• It is in broad terms related to our handling
of our cash flows
• It is an integral part of our financial
operation(s)
• It has a good combination of centralised
processes as well as organizational
structures and systems
What financial processes does
an internal bank cover?
Credit Management, Incoming payments,
Collection Management, Outgoing
payments, Cash Management, Cash Flow
Forecasting, Subsidiary integration, Bank
integration, Payment integration,
Reconciliation, Internal accounts, Netting,
Debt and FX management, Hedge
Accounting, Risk Management, Compliance
What financial operations can an
internal bank fit into?
Local, finance operation, few
banks, few finance
professionals, good overview
Regionalized, more decentral finance operations, more
banks, more finance professionals, good
local , less good global overview
Globalized, hybrid finance operation mostly
decentralised with some global processes, systems and organization, many
banks, many finance professionals, good local
overview that is suboptimal, less good consolidated global
overview with doubtful quality
How can we characterise an internal bank in
a centralised financial operation?
Central finance operation with defined and agreed
global and local processes, systems and organizational
structures, few selected banks, less finance
professionals, shared service centres, good local
overview, good consolidated global overview with known
quality
Central processes for credit scoring, payment terms, cash management, liquidity forecasting, payments, risk management, funding
Central organizational responsibility for bank agreements, credit line approval, payment execution, reconciliation of incoming payments
Central systems, ERP, payments, forecasting, consolidation
When do we establish or
augment an internal bank?
LocalCentral
RegionalCentral
Global Central
LocalHybrid
Local Decentral
RegionalHybrid
Global Hybrid
RegionalDecentral
Global Decentral
We establish or augment an internal bank when we want to chase synergies with more central processes, organizational structures and systems.
We typically have this need when we are in transition from local to regional to global.
Transitions can have many forms and last for years.
How do we establish an internal
bank ?
Organization
e.g. SSC for payments, SPOC for credit lines
Systems
e.g. ERP, forecasting solution, bank integration
Processes
e.g. cash management, credit scoring,
internal accounts
We do it either incrementally or in a big bang.
It is most easy and less risky to make it incrementally based on a master plan and roll it out over a couple of seasons.
During implementation we focus on changes to processes, organization and systems that have a really good business case
SAP can contribute within order
to cash, and procurement to pay
IssueInvoice
ForecastCash
FinanceWorking Capital
ResolveDisputes
CollectCash
CheckCredit
Worthiness
Settle& Pay
Reconcile
SAP Dispute Management
SAP CollectionsManagement
SAP Credit Management
SAP Biller Direct (Electronic Bill Present-
ment and Payment)
Order-to-Cash
SAP can contribute within cash
management and payments
Centralise access to cash
and liquidity and reduce
funding costs
SAP Cash and Liquidity Management
Cash Management Liquidity Planning
Reduce costs on internal and
external payment handlingSAP In-House Cash
SAP Bank Communication Management
Centralise and reduce cost
and improve security on
Bank Communication
SAP can contribute within
financial risk management
SAP Treasury and Risk Management
Risk Analyzers
Transaction ManagerMoneyMarket
ForeignExchange
Secu-rities
Com-modities
Deri-vatives
Debt Mgmt
Manage Global
Financial Risks
Exposures
Hedge Accounting
Improve internal and
external debt FX
strategies
Exposure Management Hedge Management
Credit Risk Analyzer Market Risk Analyzer Portfolio Analyzer
SAP Contribution in details
Internal bank accounts
Business partner
Conditions
Blocks
Turnovers
No Post.dte Curr. AmntVal.dte
1 30.12.00 31.12.00 EUR 100.00 C
2 31.12.00 31.12.00 EUR 9.58 D
.........Reporting
Limits
Account A
Bank statements
+ 100
- 120
...
G/L Transfer
Currency
convesion
IHC
S1
- 50
+ 340
S2
+ 200
- 150
Pmnt clearing
IHC
Payab.
IHC
Receiv.
(2) 540
FI – GL
200 (1)
540 (2)(1) 200
SAP Contribution in details
Payment factory
External
business
partner
Partner bank Head officehouse bank
1.
2.
7. 6.
Subsidiary 3
Subsidiary 2
Subsidiary 1
Pmnt Program OP
Corporate
GroupHead Office
In-House Cash
Center
Account
management
Financial
Accounting
5.
4.
3.
Payment Bank Statement
SAP Contribution in details
Internal payments
Pmnt Program OP1.
2a.
2b.
Payment Bank Statement
Corporate
Group
Subsidiary 3
Subsidiary 2
Subsidiary 1
Head Office
In-House Cash
Center
Account
management
Financial
Accounting
How good is the business case ?
Probably substantial
Cash flow predictability – Cash put to better
use – Reduction in funding needs - Reduction
in credit loss – Security on payments –
Efficient reconciliation – Less errors -
Reduction in financial FTEs – Fewer banks -
Better compliance – Better financial risk
management – Fewer systems
And please note that cultural aspects of decentralised decision making may make it difficult to take a central approach
How can you set it all in motion ?
Implementation Support
Strategy Models Processes Organisation People Technology
Advisory TrainingAssessment
Contacts
19
Lars Arne ChristensenPartner and pinricipal consultant
+45 3144 4814
Henrik JuhlerCEO
+45 3086 0082
René AndersenDirector
+45 2521 0436
The global financial crisis has reinforced the
need to identify the most critical and costly risk
factors that may affect the business negatively.
The big challenge is to identify how often a
particular risk becomes reality, and how
precious and critical its consequences are?
Through methodical risk management, we
have built a long and credible experience in
helping companies to reduce the most critical
risks and limit their consequences.
At infiniance we focus on financial intelligence
Risk management creates
value when it is a natural
part of the decision making
process at all levels - and
when risk culture becomes
part of the company's DNA.
