Omnicom Group agencies operate autonomously, processing their own receivables, payables, and related receipts and disbursements through separate bank accounts at OGI’s relationship banks. The US agencies receive approximately 120,000 cheques and 32,400 electronic payments from their clients annually, with a value of approximately $15.6 billion.
As the treasury arm of OGI, Omnicom Capital Inc. (OCI) operates the in-house bank (IHB) for all US operations. The process of moving all client receipts to OCI required 232 bank accounts and 232 daily wire transfers.
John Voorhis, Director of Treasury Operations, Omnicom Group, explains “Conceptually, OCI felt that agency receipts could be more effectively managed through a single third-party bank account if such receipts were tagged with unique identification codes identifying the receiving agencies and then further applied to receiving agencies IHB accounts. Therefore we set out with the objective of streamlining the US receipt process in order to reduce cost and increase availability of funds.”
Omnicom began by assessing all the product offerings of the group’s US banks for processing paper and electronic receipts, factoring into the equation the capabilities of OCI’s treasury platform. OCI also conducted an assessment of the 232 receipt accounts – which included 139 deposit accounts and 93 deposit accounts with lockbox. OCI’s initial goal was to convert only the deposit accounts and not the accounts with lockbox at that time.
OCI further determined that one deposit account needed to remain segregated and would not be converted. That left 138 deposit accounts ready for conversion. As Voorhis comments, “The treasury team believed its vision of a streamlined process could reduce bank fees by as much as $711,000 per year.” The company issued its Request for Proposal in January 2009.
Because of the differences in the clearing processes of paper receipts and electronic receipts, OCI decided to establish two third-party bank accounts:
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A Remote Deposit Capture (RDC) account to handle paper receipts, and
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An Electronic Receipt Capture (ERC) account to handle electronic receipts. From there, things moved forward on a fast track.
In April 2009, after selecting its partners, Union Bank for RDC (Union Bank allowed for unique identification through ’location codes’) and Wells Fargo Bank for ERC (Wells Fargo allowed for unique identification through ‘sub-account numbers’) OCI conducted a pilot with 30 operations. The pilot was a complete success and by 31st July, all operations were fully enabled and using the new Centralised Deposit Services system.
This was an internally developed solution and OGI engaged no outside entities to help them develop the system beyond their banking partners, Union Bank and Wells Fargo Bank, who have provided outstanding support at every step of the process.
“Our Centralised Deposit Services solution has given our corporation much more timely control over our subsidiaries’ cash, delivering more than $1m per year in cost savings and increased efficiency at both the corporate and the subsidiary level.
As we move on from here to convert the lockbox accounts as well, we expect this figure to increase to $1.8m,” Voorhis adds.
