Problem Solved: Gaining control over cash flows in China
Published: Nov 2023
Cognizant’s in-country payments in China were managed manually by local finance teams, impeding visibility over cash and making it difficult to forecast future cash flows. The solution: working with Standard Chartered Bank to create a domestic cash pooling solution with host-to-host ERP integration.
Hariharan Subramanian
Senior Treasury Manager
Headquartered in the US, Cognizant is a multinational information technology services and consulting company. The Nasdaq-listed firm has over 345,000 employees and reported revenues of US$19.4bn in 2022. Cognizant has operations across APAC and a treasury team which operates from Kuala Lumpur, Malaysia and India.
Problem…
Cognizant has multiple registered entities and branches across China. As Senior Treasury Manager Hariharan Subramanian explains, “All our in-country payments – including vendor payments, travel and expenses and payroll – are managed manually, in the sense that they are directly initiated by our local finance team via a bank portal.”
This situation resulted in a number of challenges. Without clear line of sight of daily cash collections, the treasury team found it difficult to forecast cash flows accurately, hindering effective working capital management and impacting payments to vendors. At the same time, manual end-of-day reconciliation processes led to an increased workload – and there was also an opportunity cost relating to yield on account balances.
In other countries in the region, the company’s payments and cash flow management are managed by the central treasury team. As such, the treasury team wanted to address the arrangements in China and bring these activities under the umbrella of the central treasury. “This would reduce the work of the local finance team and enable them to concentrate on their own core work, instead of spending time supporting treasury,” added Hariharan
However, local language practices made this a challenging undertaking. As Hariharan notes, “We don’t have language expertise in the treasury team – we are dependent on the local finance people for this.”
…Solved
To create a solution, Cognizant’s treasury team approached Standard Chartered Bank, which is the company’s partner bank in China and has an extensive branch network in the country, as well as supporting Cognizant across Asia, Africa and the Middle East. “Standard Chartered supports all our markets across the China provinces, and they have the facilities and systems in place to handle all our requirements,” notes Hariharan.
The result was a structured liquidity management solution, including a domestic cash pool and host-to-host connectivity with Cognizant’s ERP system, which has been developed in-house. Daily and monthly sweeping reports provide a consolidated view of the company’s cash positions, while the company also benefits from timely updates on its intraday cash positions. The concentration of funds has enabled the company to earn higher interest on its cash balances. At the same time, the use of segregated concentration and disbursement accounts has resulted in better control over Cognizant’s payment flows.
As part of the solution, the bank provided a bespoke mapping tool to help the treasury team centralise its payment and cash flow management activities into the central treasury. “Standard Chartered recommended that we needed to assign alphanumeric codes in our system in an ISO XML file, and in parallel register the beneficiary details such as name and bank together with that code in Standard Chartered’s portal,” says Hariharan. The local finance teams helped to register around 2,000 beneficiaries as a one-off exercise.
Consequently, when a payment is made to a beneficiary, the corresponding vendor code is now transmitted from the global payments team in India to Standard Chartered Bank in China using the company’s existing host-to-host connectivity. “Standard Chartered’s system will then look for the code and pick up the beneficiary details registered in the local language,” Hariharan explains.
“This solution automates the entire payment process, including reporting and retranslation. So we were able to move away from the manual process of uploading payments through our local finance teams.”
Standard Chartered supported the transition with local expertise from China and helped to coordinate the local finance and centralised treasury teams. Looking forward, Hariharan says the solution is scalable and will be able to gain control quickly of any new acquisitions in China. In addition, the positive implementation experience could provide an opportunity to replicate the solution in other markets in the future.
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