Best Cash Management Solution Winner: Hindustan Unilever Ltd
Published: Jan 2016
Photo of Munir Nanji, Citi, Dinesh Thapar, Hindustan Unilever Ltd and Pauline Wee, Deutsche Bank.
Dinesh Thapar
General Manager & Head of Treasury, Investor Relations and M&A
Hindustan Unilever Limited (HUL), is India’s largest FMCG company with an annual turnover of over INR 300bn (about $5bn). A subsidiary of Unilever, it is listed on the Bombay Stock Exchange and National Stock Exchange in India and has a market capitalisation of INR 1,888bn (about $30bn) as of March 2015.
in partnership with
Integrated cash management solution for major FMCG name
This is India’s largest Fast Moving Consumer Goods (FMCG) company. Dinesh had a simple ambition – to do more with less. He has built a cash management system which is arguably the best among Indian corporates. The solution comprises SWIFT ISO payments, an interface to the company’s SAP system, an e-collections platform, Intelligent Receivables and much more. Bank accounts across eight legal entities have reduced from 200 to 40.
The challenge:
A key challenge for the HUL team was to simplify banking operations to support the growth and future needs of a business with an extensive value chain footprint whilst ‘doing more with less’. Dinesh Thapar, General Manager & Head of Treasury, Investor Relations and M&A, explains: “Recognising the context of a fast growing business and an evolving environment, we embarked on a journey to transform our transactional banking capabilities, essentially with a view to making it future ready.” He continues: “What we had in place had served us well but we knew that there were opportunities to raise the bar further, that’s when we put into action, a project which involved rewiring a range of internal processes and deploying best in class solutions, with a strong emphasis on technology and simplification.”
The solution:
The following was implemented in the last 12-18 months:
A two-stage cash management tender was undertaken aiming to significantly simplify transaction banking operations while delivering multiple benefits of process efficiency, people productivity and lower costs. Through multiple work streams involving the early adoption of leading-edge banking technologies, the ensuing project has overhauled the cash management capabilities, positioning it to be future ready. The change management process was seamlessly delivered alongside ‘business as usual’ operations, the team having managed a cash velocity of INR 550bn (around $8.5bn) without disruption.
The following are some of the key features of the project:
SWIFT ISO based payment instructions for all types of payments directly integrated with SAP.
First-of-its-kind ERP integrated, SWIFT ISO-based payments for statutory taxes and levies.
Supplier finance/invoice discounting over SWIFT, also integrated with SAP.
An e-collections platform using the new ‘Automated Clearing House’ (ACH Debit) module of National Payments Corporation of India (NPCI).
‘Intelligent Receivables’ for automated reconciliation of customer initiated payment transactions in the Modern Trade channel.
There has been a significant simplification of banking operations across the organisation involving:
The reduction of bank accounts across the Group (eight legal entities) from 200 to 40 (on course to get to 30).
Extensive use of SWIFT and a treasury management system to simplify back office operations. Through a combination of MT101 and MT320, paper-based transaction initiation was eliminated.
Automated bank reconciliations using the MT940 module linked to SAP.
Best practice and innovation:
This was a complete transformation project that touched all parties of the value chain. The team built cash management processes that can be scaled up to support the agenda of rapid growth and transaction proliferation. The entire change was delivered within a ‘business as usual’ environment without any disruption. Thapar concludes: “HUL has been one of the early adopters of technology, and continuing to leverage developments on this front has really been the essence of what we have done in the cash management space. With a set of partners who support us on both banking and transaction processing, we have been able to build what is arguably amongst the best cash management systems across corporates.”
Diagram 1: Introducing Hindustan Unilever Limited
Given its experience and the benefits in the cash management space, the team has now proceeded to overhaul the trade transaction banking system through a similar approach.
Key benefits:
99% electronic payments and collections.
Robust cash management infrastructure, best in class solutions deployed.
Significantly improved banking process efficiency and controls.
Reduction in bank accounts by more than 75% across the Group.
Elimination of manual effort equivalent to over 2,500 man days.
Substantial reduction (50%+) in bank charges.
Improved end-to-end cash visibility to support daily liquidity planning.
Tighter liquidity management leading to reduced idle funds by more than 80%, <$1.5m.
Sustained negative trade working capital with improvement in cash conversion cycle.
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