Having tripled in size as a result of 30 acquisitions and rapid global expansion, Brady Corporation found its finance costs and complexity increasing. Over 50% of the company’s revenues derived from Europe and Asia, which led to a fragmented and decentralised cash and treasury environment, where almost 400 bank accounts across more than 50 banks resulted in both counterparty and operational risk, not to mention high costs and inefficiencies.
Photo of Anne Whalen, Bank of America Merrill Lynch, Kathryn Campbell, Linda Nuttall, Katharina Wissdorf of Brady Corporation and Jennifer Boussuge, Bank of America Merrill Lynch.
Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect premises, products and people. Brady’s products include high-performance labels and signs, safety devices, printing systems and software, and precision die-cut materials. Founded in 1914, the company has millions of customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and employs approximately 6,600 people at operations in the Americas, Europe and Asia-Pacific. Brady’s fiscal 2010 sales were approximately $1.26 billion, with nearly 60% of those revenues generated outside of the United States.
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In 2009, Brady launched an enterprise-wide finance performance optimisation initiative with a view to eradicate some of this complexity and inefficiency. To help reach its goals, Brady invited The Hackett Group to review its internal processes and benchmark its overall finance and treasury operations in comparison with peer organisations and best practices.
“This initiative provided an ideal framework for treasury to transform its activities and centralise processes, so that business units would analyse rather than process data, and treasury would retain control over financial and credit risk management,” says Kathryn Campbell, Assistant Treasurer.
As part of its overall finance review, Brady’s treasury team undertook a major cash management transformation, replacing fragmented, inefficient and decentralised cash management processes with a cohesive, global approach to liquidity. To achieve this, Brady worked closely with Bank of America Merrill Lynch to develop a highly efficient payment, collection and cash management infrastructure across Europe and Asia, with automated and integrated processes. As part of this transformation, Brady migrated payments, cash application and collections, which were previously managed in-country, to newly established shared service centres in India, China and Manila. Centralising these activities has aided in the implementation of standardised, efficient processes. By leveraging an integrated solution comprising Brady’s SAP system and Bank of America Merrill Lynch, the cost and reliability of transaction processing has improved,
“Brady Corporation is honoured to receive this international Award along with many of the world’s leading corporations.”
As master data has been cleansed, resulting in fewer errors and repairs. Payments are automatically routed through the most efficient and cost-effective payment method, further reducing costs. As a result, Brady’s overall straight through processing rate has risen to over 99% for the European and Asia Pacific entities that use SAP for payments.
Furthermore, the integrated solution also enables Brady to process all bank statements electronically, which automates previously manual general ledger postings, accounts payable clearing and application of cash receipts from customers. For example, in Europe approximately 15,000 bank statement transactions per month are now processed automatically with a straight through reconciliation rate of approximately 68%, which continues to improve.
The centralisation and standardisation of treasury management activities has enabled the company to reduce headcount dealing with treasury-related tasks from around 14 FTEs to eight, and reallocate resources from payment execution, statement retrieval, reconciliation and cash posting to more valuable tasks.
A further element of the solution, and another substantial win for the Brady treasury team was the implementation of a netting system to net intercompany payments globally on a monthly basis. This has resulted in a reduction in foreign exchange volatility of around 75%.
“There were inevitably challenges in implementing such a significant finance transformation. For example, business units were concerned about the loss of autonomy over their treasury and cash management activities. Brady’s enterprise-wide finance performance initiative provided the optimal lever to demonstrate to business units both the value of a centralised finance function to them, and to the business as a whole,” says Kathryn.