In seeking to generate improved working capital, BAT wanted to achieve straight through processing, automation and the flexibility to be able to release working capital when needed, even to counterparts with whom it had no existing credit relationship. Here’s how the company did it.
Global Head of Cash and Banking
British American Tobacco plc (BAT) is a British multinational tobacco company headquartered in London. It is the largest publicly traded tobacco company in the world. BAT has a market-leading position in over 50 countries and operations in around 180 countries. In 2017 is reported revenues £20.3bn.
Factoring in working capital improvement
British American Tobacco (BAT) was seeking to generate improved working capital through a receivables finance solution across its portfolio of customers in multiple regions. The company required a comprehensive solution to help by improving working capital management through a reduction of days sales outstanding (DSO). It also sought secure ‘true sale’ accounting treatment through 100% credit risk transfer. Finally, it wanted to ensure the efficient purchase and reconciliation of receivables in its accounting system.
A key objective was to achieve a fully automated SWIFT enabled end-to-end process using standard SAP functionality. As such BAT required a partner with the expertise not only to evaluate, structure and deliver the programme but the necessary flexibility from a technical perspective to seamlessly integrate to BAT’s systems to support the optimal process.
In June 2017, Deutsche Bank was mandated as BAT’s primary global accounts receivables financing bank – responsible for the financing of receivables across Asia, Western Europe and other emerging markets.
The solution is particularly noteworthy for its ‘buyer pool’ or portfolio approach to financing receivables. This allows Deutsche Bank to finance receivables from counterparts with whom they do not have an existing credit relationship (for example, those located in emerging markets). This is typically a challenge for those running large account receivables programmes.
Furthermore, the platform delivers automated straight through processing. To facilitate this, BAT and Deutsche Bank were able to leverage the existing cash management platforms and SWIFT connectivity, providing an efficient end-to end automated process across all markets.