Best Risk Management Solution Highly Commended: Microsoft Corporation

Published: Sep 2021


Photo of Priya Shenoy, Senior Finance Manager, GTFS.

Priya Shenoy

Senior Finance Manager, GTFS

Enrique Lara

Senior Finance Manager, GTFS

Taru Rintamaki

Director, GTFS

Damaris Sardenberg

Director, GTFS

Founded in 1975, Microsoft is the worldwide leader in software, services and solutions that help people and businesses realise their full potential.

Solution reduces credit risk on end customers as well as partners

The challenge

The Government of Brazil published a new regulation that stipulates federal (and certain state, local) public sector entities cannot pay for subscription licences/services before usage. The need to comply with this rule is primarily on Microsoft’s partners, since all public sector purchases in Brazil are through partners. This would not only affect potential revenue for Microsoft, but also have a big impact on the working capital of the company’s partners in this sector.

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The solution

Microsoft came up with a creative solution to collaborate with a local bank who would buy Microsoft’s receivables upfront and provide its partners the flexibility to pay by monthly or quarterly instalments directly to the bank in lieu of their Microsoft payables. This solution allows the end customer (public entity) to abide by the new regulation while continuing its digital transformation journey unaffected. Partners on the other hand, would be able to match their inflows (from customers) with their outflows (regular bank repayments), thus eliminating any adverse working capital impacts.

Best practice and innovation

The bank financing facility provided directly to partners, allows Microsoft to maintain upfront billing, standard operations, and documentation in accordance with its existing subscription business processes.

With the extended term bank facility repaid in monthly or quarterly instalments, partners can bill and collect correspondingly in monthly or quarterly in arrears from the public sector customers, thus meeting regulatory requirements.

Microsoft can continue to be a part of the digital transformation of the public sector entity while adding value to its partner and reseller ecosystem.

Key benefits

  • Allows customer/partner to continue purchasing licences and services for daily needs of their organisations, while adhering to new government regulation on such purchases.
  • Partners are able to match their inflows (from customers) with their outflows (regular bank repayments), thus minimising any working capital impact.
  • Engaging with a local bank reduces credit risk on end customer as well as partner.
  • Enables Microsoft to minimise the impact on revenue due to change in the local regulations.
  • Reduces accounts receivables exposure significantly (even eliminates in some cases).
  • No change to existing budget and/or operational processes.
  • Improves cash flow for Microsoft and for its partners.

“This solution is innovative, focused, and tailor-made for us to resolve customer and partner pain points in Brazil and is a great example of One Microsoft collaboration and partnership with many functional areas,” says Priya Shenoy, Senior Manager, GTFS.

The Adam Smith Awards is the industry benchmark for best practice and innovation in corporate treasury. The 2021 Awards attracted a record-breaking 309 nominations spanning 40 countries. To find out more please visit: https://treasurytoday.com/adam-smith-awards.

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