In order to realise his vision, Nanbara established several goals to address the problems Intel was experiencing in managing its cash. The company’s short-term goals were to find a jurisdiction and offshore holding company that would allow it to manage both short- and long-term cash in one place; establish a single cash pool in that jurisdiction, eliminating the need for regional cash pools; and evaluate intercompany loan balances to facilitate cashless settlement through netting intercompany payables and receivables.
Its longer-term goals were to reduce the number of bank accounts and close duplicate custody and Euroclear accounts for regional entities; automate cash management, accounting and foreign exchange for 160 bank accounts with straight through processing; facilitate an automated target-balance account structure and eliminate the need for cash conversion cycles; and improve the operational effectiveness of its cash management, operations and accounting teams.
A Dutch Besloten Vennootschap (BV) was chosen as the preferred legal entity. Now, rather than four cash pools outside the US holding various balances, a single cash concentration infrastructure has been created, relying on a target-balance account (TBA) structure with Citi.
“Despite having a year in which to execute our plan, implementing any new systems towards year end is unrealistic. So with a seven-month window in which to act, employees from treasury, tax, legal and accounting pulled together to effect the change. Not everyone worked full-time on the project, but essentially eight Intel full-time employees implemented this project,” explains Nanbara.
SunGard’s Quantum is used to record funds transfers, intercompany loan balances and interest calculations. A zero-balance account (ZBA) structure was used. Accounts from eligible entities are now zerobalanced daily into a single header account in the name of the BV entity and each currency has a separate header account such that the cash pooling entity also manages the foreign exchange.
Now fully implemented and working well, the settlement of intercompany payables and receivables has begun to offset the corresponding intercompany loan balances established. An April pilot successfully completed the netting of intercompany payables and receivables for five out of 38 entities. The remaining entities began on 12th May 2013.
Best practice and innovation
It is the time to implement and the volumes involved that make this project stand out. From project kick off in April 2013 to roll-out in November, Intel created a Netherlands BV and an automated cash concentration system that consolidated excess cash from 99 entities in 34 countries into one pool, representing over 90% of the excess cash balances outside of the US.
Many companies pool cash and have netted for a long time, but what differentiates this solution is that a firm the size of Intel was able to consolidate cash from more than 250 bank accounts in those countries and implement an automated, efficient solution using only one bank account within a seven-month timeframe – three months earlier than projected.