How treasury’s delivery of real-time forecasting brings significant savings for this international organisation
The challenge
The company has a centralised treasury model with all subsidiaries’ treasury activities managed in Peru. The treasury team here comprises of four people, a challenge when managing 15 companies, 17 banks, 86 bank accounts and over 3,000 payments from multiple entities per month.
The firm continually looks for ways to improve process efficiency, increase automation and reduce manual processes. It particularly wants to reduce time spent on the day-to-day operational treasury, overcoming challenges relating to different cut-off times of different bank platforms, and better manage regulations, which vary by country. Ultimately, Hochschild Mining has sought to free up treasury time to focus on value-added activities, including real-time forecasting and financial cost reduction.
The solution
In 2018, it upgraded its ERP to S/4HANA, working with Citi to design and implement a cash management solution to improve security and efficiency through greater automation. The solution included implementation of host-to-host connectivity, using the latest XML ISO 20022 file V3, and Citi’s InfoPool tool to aggregate and deliver third-party bank account statements. This offered Hochschild a streamlined end-to-end process, from payment to reconciliation, across all its banks.
Best practice and innovation
Host-to-host connectivity provides a unique secure channel between the company’s ERP and Citi’s server, making the payment process (for suppliers and employees) safe and efficient, while the XML file V3 – the most up-to-date version – acts as a standard file, eliminating the complexity associated with making payments via multiple banking platforms. Information is sent back to the company using the same connectivity channel, ensuring payment reconciliation is straightforward and fast.
SAP S/4HANA, combined with a robust connectivity channel, eliminates manual processes associated with payments and reconciliation: bank statements and other information now goes directly from the ERP system to Citi.
InfoPool complements Hochschild’s connectivity arrangements. It allows the company to obtain bank statements from Citi and third-party banks by using MT940 messages. The seamless integration of host-to-host connectivity, XML ISO 20022 files, SAP S/4HANA and InfoPool gives Hochschild a clear, reliable view of its cash position across all banks every morning without having to access multiple bank platforms. This dramatically reduces reconciliation time.
As a result, the company’s small treasury team can better manage cash management processes for its different legal vehicles across multiple geographies, freeing up time for value-added tasks and strategic support for the business.
In order to ensure buy-in across the organisation and a smooth implementation, Hochschild enlisted the support of senior management before cascading its strategy to all relevant departments.
Approval responsibilities are clearly defined to prevent fraud and minimise cyber risks. At the same time, maker/checker processes associated with payments have been accelerated, with different layers of approval depending on the payment amount.
Key benefits
- Staff costs associated with manual processes and non-value added tasks reduced by 50%.
- Use of XML files and S/4HANA reduced time spent on payment processing by 30%.
- Back office time reduced by 35%.
- More time for value-added tasks eg cash flow forecasting in real-time (able to increase surplus cash by 10% on previous year).
- More time to focus on financial cost reductions: relationship bank fees and other costs cut by 12% in Q119.
- Reduced time spent on payment processing.
- Improved visibility and control and enhanced risk management on balance information across all Citi and third-party accounts.
- Improved fraud and cyber-security risk management.
