Direct debit and SEPA direct debit payments/collections also came under the microscope. Treasury identified current users and either cancelled or set them up on new accounts. It also established appropriate blocks, filters and mandates where available and rolled out a new direct debits policy globally. In moving transactions to new accounts, it managed to significantly reduce the number of challenging direct debits by vendors that had existed for some time. Depending on countries and payments types in scope, the team also made a point of registering with local automated clearing houses.
Under the banner of payroll and accounts payable payment processing, Open Text identified and established connectivity types and file formats depending on the country. It was necessary to register new IDs with a local automated clearinghouse, as appropriate. This continues to be ongoing for some countries. It was also necessary to integrate payment uploads with the TMS where payments were previously manual, and rigorously test all payment files.
A multibank reporting solution has since enabled balances held with third-party banks to be fully integrated into a single reporting solution. This necessitated the identification and implementation of all relevant legal entities and accounts, and the capturing of details of all in-scope third-party banks and accounts.
In terms of tackling project and professional management services, the treasury team worked to develop a standardised documentation and approval strategy, and provide a regional coordinator to support documentation. For this to be executed effectively, a project manager was allocated to manage the banks and project plan according to a rigorous Statement of Work.
Best practice and innovation
For this broad sweep of improvements to reach a satisfactory conclusion, it is clear that sound principals of project management had to be employed. These principals had distinct objectives, scopes and timelines. The project itself was driven by a strong leader in treasury management, bearing a clear vision of process improvement and enhanced controls. Furthermore, robust senior and executive management support on the governance committee was in evidence, with active and positive participation throughout.
The reduction of manual paper-based payments is a simple example of best practice for collections and payments. More complex, but nonetheless achievable, was the implementation of best practice for liquidity management through the adoption of physical pooling rather than notional pooling. Treasury, working with tax, legal and its banking partners determined that a physical pooling set-up would be a more transparent and cleaner approach, especially with rising tensions on intercompany flows between government jurisdictions around the world. The EMEA pool uses bank accounts in London to maximise efficiency and minimise paperwork. Entities in each of Open Text’s four lines of business now pool to a single header account (one for each currency) to ensure optimisation of cash.
As part of the bank account opening process (which involved intense KYC and account opening documentation), the team standardised signatures, general banking resolutions and banking-incumbency certificate templates for use worldwide.
Technology has played a key role in all of this. The project uses a third-party TMS connected to the Open Text Trading Grid, an Open Text cloud-based hosted B2B integration platform, to connect directly with the company’s five major banks: Citi, J.P. Morgan, Bank of America Merrill Lynch, RBC and HSBC.
Other banks are connected to the Open Text Swift Service Bureau, giving treasury a single way to connect with banks, suppliers and customers.
“As you can imagine, there was a lot of additional analysis required to complete these activities,” noted Burkhead. “And keep in mind that all of this was accomplished while executing several acquisitions, legal entity rationalisation, and preparing for the implementation of SAP on 1st July 2017.”
Improved visibility of global cash, liquidity, and control over cash assets.
Enabled easier acquisition integration and aggregation of excess cash for acquisition.
Leveraged transactional volumes and eliminated fixed costs across fewer banks.
Streamlined transactional processes (ERP system integration and straight through processing for balances, transactions, and payments).
Implemented best practices utilising electronic payments vs paper.
Achieved higher returns on excess cash (leveraging liquidity pools for short-term investment purposes).
Reduced administration effort.
Significantly reduced documentation requirements, signatory mandates, KYC needs and bank access for users.
Improved controls environment (reduced bank accounts, segregated cash flow for payroll).
Reduced counterparty credit risk.
Key learning points
It’s vital for a project of this scope to get senior management support. Everyone is busy and it’s difficult to find time to support other department’s initiatives. Our Treasury Transformation Project brought significant benefits and efficiencies to other groups but it would not have been something they would commit to help us with without the management team’s support. In addition, nothing is ever as easy as it seems so you have to consider the extra time, resources, and efforts to complete a project like this. Understanding local markets and practices can be complex so having the right bank partners to support the knowledge transfer and implementation process was key too.