Dematic sets out to address the key treasury task of ensuring that cash is always available in the right place, at the right time, and in the right currency to meet the payment obligations of the company when they fall due. This solution is an excellent example of how a treasury can design an automated bank-driven cash management system on a global basis that works 20 hours a day, starting from opening in Australia to closing in the US.
The system defines the core currencies for each subsidiary. Due to the small number of receipts and payments in non-core currencies, these payments are made from group treasury accounts on behalf of subsidiaries. This structure reduces bank fees due to the smaller number of accounts and sweep transactions. Each subsidiary has an account in its core currency located in the currency centre, thus having access to domestic banking products. All core currency accounts are automatically zero balanced on a daily basis. Using two-way cross border sweeps, funds are concentrated in a single location and linked through single entity, single location, cross-currency notional pooling.
Each account statement is automatically imported into the treasury management system (TMS) in MT 940 format. Using BAI codes in the electronic MT 940 format account statements allow the company to identify all inter-company sweeps and book inter-company lending positions automatically. On a daily basis the TMS creates reports with individual account balances, global cash position, locations of the cash and inter-company positions and distributes it via email to respective recipients. Based on the booked inter-company transactions, the TMS calculates interest on inter-company accounts and automatically issues interest calculation letters on a monthly basis.
The solution is global, covering ten currencies and involves cash concentration and notional pooling in a single location (London) of all the major currencies of the business which do not have any regulatory restrictions. The solution is provided by J.P. Morgan with all reporting using Reval´s Treasury and Risk Management (TRM) solution, and the estimated completion of the project is August 2013.
As Maris Zutis, Treasury Associate, concludes: “Our new system ensures automatic ‘just-in-time’ – place, time, amount and currency – management of the cash. It is a global solution that covers different regions, currencies and time zones from Australia to the US. Due to the high degree of automation, it is very efficient in terms of reducing any liquidity and operational risks. Cash concentration and notional pooling in one location increases liquidity and substantially reduces the need for cash in the system, thus reducing the cost of borrowing.”