Photo of Ciaran Brady, Bank of America Merrill Lynch and Kevin McKenna from Brocade Communications Systems accepting on behalf of Yun Kong.

Brocade’s treasury helped its shared service centre (SSC) implement an electronic file delivery (EFD) platform with Bank of America Merrill Lynch for foreign subsidiary payroll batch payment processing. The solution replaces the old wire payment process for most foreign subsidiaries with over 1,000 employee payrolls.

The treasury took the initiative to help improve corporate process efficiencies in many areas such as accounts payable (AP), accounts receivable (AR), general ledger (GL) and tax. The driver behind the project was that there were a few shortfalls with the existing FX wires and drafts module within the online tool the company was using, for example:

• Wires are not designed for batch payment processes. “Each month the AP team must manually input wires by modifying the date and value of each wire template. The team also needs to manually maintain wire templates for each payee,” says Yun Kong, Head of Foreign Exchange Operations, at Brocade.
• Due to the large number of transactions involved (1,000/ month), it was taking three to four full days to input the wires into the system. There are also limitations in approving wires in batches.
• In addition, wires are more suitable for high-volume low frequency urgent payments, such as vendor payments and are not commonly used for payroll, because wires cost more than other types of payments such as ACH. There is a need to implement an automatic batch process to dramatically reduce time and cost on this process.

Treasury identified a web-based electronic file delivery (EFD) platform tool to be the right solution – this was Bank of America Merrill Lynch’s CashPro. The solution allows for upload of CSV files to the system by a click of a button. “This means the SSC team can load one or more batches into the system instead of doing manual entries. Approvals can also review and approve payments by batches at the click of a button,” Kong explains. “Once files are submitted, they are received by the bank then processed and cleared within three days. As long as the payroll files are delivered two days in advance of pay day to the bank, all payments are processed in a timely fashion.” The selection and implementation of an EFD web-based service has helped to automate and standardise the international payroll process across countries; even where each country has its own requirements.

The web-based platform allows the SSC and management team to upload and approve payment batches from anywhere in the world. There is no waiting time wasted in the process. The system also brings benefits such as improved efficiency, reduced cost, a reduction in payment processing time and also manual data entry risk. The total time spent on inputting payments is also reduced from four days to just one for four people. Additional time is saved in payment verification and submission to the bank by management – approximately 60 hours a year. “The ROI achieved is above 1,000% and time savings are in excess of 1,000 working hours,” explains Kong.

Moreover, there is no need to maintain wire templates in the system, reducing the time in creating, approving and cleaning up of the templates – approximately 40 hours a year. “The total cost saving is approximately $6,000 a month as ACH clearing costs a fraction of wire payments,” says Kong.

“Brocade treasury initiated the EFD implementation with Bank of America Merrill Lynch in mid-2011 and our SSC team in Singapore kicked off testing in the second half of 2011. In November 2011, 17 entities in EMEA and APJ regions passed the testing for EFD and went live with the process seamlessly. The team will do more testing for five more entities in Asia and Latin America and these are expected to go live by end of Q2 2012,” says Kong.