A payments factory can be truly transformative for a corporation, combining the operational capabilities of a shared service centre (SSC) with the financial coordination and aggregation capabilities of an in-house bank (IHB), according to Dennis Gniewosz, a vice president at JP Morgan.
It helps a company to achieve the very highest level of efficiency, rather like “an SSC on testosterone”.
The payments factory “does all of the heavy lifting”, he suggested in ensuring that service level agreements and time commitments are met to achieve operational savings.
An “extra kicker” is the IHB as the decision making element of the payments factory, taking the company’s major commercial flows, deciding on funding and the use of cash, and choosing when wire payments are made, in what currency and whether payment is netted or pooled.
Gniewosz recommended a five-stage approach in developing a payments factory: forming a core working group; securing the support of senior executives; setting a realistic budget; soliciting consulting expertise; and ensuring the tax implications are considered.
“There were relatively few payment factories in existence 10 years ago and they represent a significant investment by the company,” he reminded his audience.
Responsible for the motor group’s cash management in the Americas region, David Osborne is treasury operations manager for BMW US Capital and has been with the group for 26 years. With production centres in 14 countries worldwide and sales in 140 countries, BMW needed a seamless payment factory operation across the world.
The group’s three main aims were:
- Improving transparency, control and efficiency.
- Reducing payments and transaction costs while making greater use of the IHB.
- Streamlining the group’s bank and account structures
Osborne said that in the early stages of the project, BMW’s European operations suggested that the North American division simply abandon the use of cheques. “Consultants who came over from Europe had problems with cheque processing in the US,” Osborne recalled. “However, they started to understand that it wasn’t all automated clearing houses (ACHs) in North America.” Among other findings, it became apparent that BMW had retained a number of legacy processes that no longer had any purpose.
The approach to developing the group’s payments factory involved defining its validation points, confirming the design, taking over SAP coordination to consolidate and prioritise the various enhancements, with the final execution phase delivering more capabilities than had existed prior to centralisation.
The payments factory operation that was eventually established has the following capabilities:
- Transaction files are submitted to a global payments processor (GPP).
- The GPP analyses the files and routes payments by beneficiary.
- IHB statements fully replace bank statements.
- Foreign exchange (FX) is optimised, settled internally by the IHB.
- Liquidity is optimised.
Osborne said that BMW has achieved cost savings in the region of 30%, with “tens of thousands” of external bank transactions moved in-house, making better use of the IHB. In the process “we’ve now identified the experts and we know who to go to should we have questions or experience problems”
He added: “We probably haven’t achieved our ultimate goal, but that doesn’t minimise our progress or success – and we’re continuing to move forward.”
In this case study, the group treasurer of South Africa’s Imperial Group describes the generic and specific challenges of its treasury environment, and how an integrated team works together to achieve best practice treasury and risk management results.
This month’s meeting of the financial planning and analysis (FP&A) board of senior practitioners in London discussed the pros and cons of rolling forecasting, how best to introduce it and heard a case study from Maersk Group about how the shipping, transport and oil firm has benefitted.
The Chicago company’s slogan is ‘Technology that combines geek with chic’. In this interview its chief financial officer and chief operating officer, John Everts, describes how Madiafly’s use of dynamic discounting has boosted its business performance.
Mario Del Natale is director of global treasury operations, systems and applications at Fortune 500 group Johnson Controls, the US’s biggest supplier of auto batteries. The group is undergoing a major reorganisation that impacts its technology systems, since announcing plans to merge with Ireland’s Tyco. In this interview, he discusses the deal and the changing technology landscape.