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Best in Class Treasury Solution in the Middle East Winner: Almarai Company

Published: Aug 2020

almarai

Photo of Chandana De Silva, Assistant Treasurer.

Chandana De Silva

Assistant Treasurer

Almarai Company, Middle East’s largest vertically integrated dairy company with its headquarters based in the Kingdom of Saudi Arabia, is a listed company on the Tadawul stock exchange. Almarai specialises in food and beverage manufacturing, bakery products and poultry processing and distribution.

Shared service centre in India and automated innovations contribute to Saudi Vision 2030

The challenge

Almarai had a decentralised operations model in the Kingdom of Saudi Arabia (KSA) and the Middle East and North Africa (MENA) region, with multiple bank relationships and dividend distribution accounts. Not only did this mean its cost of banking was high, but processes and controls were not standard across countries and currencies. This resulted in the treasury team having no real-time view of its cash positions across its group entity, which made forecasting an added challenge. The need for improved visibility became more critical for Almarai to ensure that any future expansions and increasing complexities were being handled efficiently.

KSA was also largely paper-based. Supplier payments across the region were made by cheque, which were signed manually and sent through dispatch to cover domestic payments. Fifty percent of receivables in KSA and other GCC countries were also cash-based because a large portion of their business is selling milk and dairy products to kiosks and small local shops.

These sole proprietors typically do not have credit cards, so they pay in cash, increasing the risk of fraud. The company was looking to increase operational efficiencies and productivity with as much automation and digitisation as possible by developing a regional cash management solution covering receivables, payables and foreign exchange.

The solution

The company settled on a shared service centre (SSC) in India to consolidate payables activities. This provided efficiency, flexibility and reliability while also freeing up resources to support other strategic initiatives. This was coupled with a new ERP (SAP) rollout.

Best practice and innovation

With the SSC in India combined with the SAP rollout, Almarai was able to switch reporting and operations onto a single platform. Using SWIFTNet and implementing a POBO structure allowed them to consolidate accounts and reduce its number of banking relationships. Introduction of the POBO structure has given Almarai the opportunity to reduce the number of bank accounts drastically and reduce its costs.

The company added a cheque outsourcing scheme to eliminate manual payments processes. This was combined with a unique payroll card programme to cover its large number of employees, many from overseas (such as those employed on farms). These cards can be used as a debit card or to withdraw cash at any ATM.

For receivables, a digital cheque deposit scheme gave Almarai the ability to clear cheques in-house using special scanners. For on-site collections from sole proprietors, innovative smart cash deposit machines (SCDM) were installed at key locations. These provide end-of-day balances and reporting with payer identification. Employees were also given handheld point-of-sale devices to encourage kiosk and small shop owners to pay for at least a portion of their order with a debit card.

Key benefits

  • Number of accounts reduced.

  • Improved visibility and cash forecasting.

  • Standardised processes.

  • Risks mitigated.

  • Cost savings.

  • Increased control.

  • Receivables accelerated.

  • STP with forex connectivity through a single platform.

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