Photo of Christopher Swiss, Micro Focus.

Christopher Swiss

Group Treasurer

Founded in 1976, Micro Focus International plc is a British multinational software and information technology business based in Newbury, Berkshire, England. The firm provides software and consultancy and is a constituent of the FTSE 250 Index.

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TMS, IHB and pooling solution frees up US$100m of working capital

The challenge

Micro Focus had an in-house banking (IHB) solution, but it only covered half of the business. The company recognised a significant opportunity to better optimise its cash pooling and treasury workflow by expanding the IHB across the entire business and introducing a cashless netting solution.

The solution

Micro Focus implemented GTreasury’s treasury management system (TMS) for its automation and connectivity capabilities, as well as some additional advanced features that applied to the company’s broader business goals. The transaction assignment logic of the new IHB delivers information feeding into tables in the backend of the TMS and IHB accounts which record transaction activity within the TMS.

“We then run an interest allocation process against those balances at the end of every month to calculate how much interest is due to, or due from, company subsidiaries,” explains Christopher Swiss, Group Treasurer.

The treasury team posts those calculations within the IHB and into the company’s general ledger. It then reconciles all IHB balances to the ledger every month. Any adjustments due to manual entries posted directly in the ledger are loaded back into the TMS before running that interest allocation process. Banks themselves run the pooling and sweeping functionality, which the team tracks through the TMS’s balance reporting. Micro Focus are a SWIFT SCORE member and use the TMS’s hosted SWIFT solution to have balance reporting data fed directly to their core banks. The comprehensive and cross-company cashless netting solution the team has built requires close coordination of ERP and TMS functionality. Within its ERP solution, the treasury team aggregates due-to/due-from balances across entities using a Dell Boomi integration to send them into the TMS, which in turn acknowledges the need to settle those balances. The TMS sends a message to trigger the accounting that settles the invoices, executes the settlement, and sends an accounting file to NetSuite to post the final movement of the accounts payable and accounts receivable balances into the IHB. NetSuite then processes those journal entries, the TMS reflects those settlements in the IHB function, and they become a component of the reconciliation.

“With our new solution implemented in 2021, we now concentrate our liquidity to the top of the house much more efficiently and can more easily deploy capital to meet ongoing business funding needs,” explains Swiss.

The solution is also considerably more efficient from an investing perspective, enabling them to take advantage of earnings credit rate (ECR) programmes and investment vehicles not available to subsidiaries. In a company that holds more than a half a billion in cash on its balance sheet, this cash pooling has freed up over US$100m in working capital and enabled the company to reduce their minimum cash floor by US$100-150m. In all, there are more than 10,000 rules programmed into the TMS to track IHB activity and other cash accounting, achieving more than 90% automation across the business.

Best practice and innovation

Before the TMS implementation, they performed cash settlements for all netting flows, meaning that hundreds of millions of dollars were scattered across the business at the end of every month. The team would often have to take two to three days to reconstitute those balances into the company’s central concentration infrastructure. With the cashless netting solution, treasury simply books IHB entries against the ledger to account for settlements.

Key benefits

• Cost savings.
• Headcount savings.
• Process efficiencies.
• Return on investment.
• Increased automation.
• Risk mitigated.
• Improved visibility.
• Errors reduced.
• Manual intervention reduced.
• Increased system connectivity.
• Future proof solution.