The challenge
Whilst many of the acquisitions made by Littelfuse had been integrated, its treasury processes remained disjointed and there was a need to standardise processes and a centralised banking system to improve visibility and control.
The company wanted a holistic treasury solution that would transform its treasury operations and deliver a new level of efficiency, leveraging technology advances and cutting-edge solutions in the market. Besides integrating and centralising its treasury operations in China, it wanted to further automate its processes and improve visibility of its cash positions. It set out the following objectives for its treasury team in Suzhou:
- Improve its payments and collections operational efficiency. Set up an infrastructure that allows its internal ERP system (SAP) to connect directly to its banking partner for straight through processing. There was also a need to simplify cross-border payments.
- Centralise management of accounts to increase visibility. Centralise its receivables management and work with one main bank to improve visibility across its accounts, further automate services and reduce time-consuming manual tasks.
- Reduce petty cash collections. Utilise mobile payment modes to minimise the need for over-the-counter cash collections at its plants.
- Adapt to regulatory changes, particularly those aimed at simplifying processes and easing administrative burden. Draw on its banking partner’s local expertise and knowledge to adapt to new regulations and support the company’s cross-border M&A transactions.
The solution
Littelfuse worked with Bank of America to develop solutions to create a consistent, centralised and automated treasury management system using a combination of technological innovation and effective management strategies.
“Our journey of a thousand miles began with a single step and our treasury transformation journey would begin with assessment, building strategic and implementation plans,” explains Janet Chong, Asia Treasury Manager.
Host-to-host (H2H) connection for payments and collections – using H2H connection, it can now send large payment volumes by batch and reduce time-consuming manual processes.
Centralised banking model – established a centralised banking model whereby each entity in China has one local Chinese bank for transactions such as tax or utility payments, and one preferred partner bank account for business-related transactions. Littelfuse is now in discussions about setting up a domestic cash pool, cross-border sweep and netting solutions.
Going paperless and chopless with Bank of America’s balance of payment (BoP) solution – to improve transaction processing efficiency, Littelfuse implemented the bank’s BoP solution that allows for payment instructions of foreign currency and cross-border transactions to be sent via the H2H link.
Virtual account payroll solution – set up a virtual account payroll solution to handle thousands of monthly payroll payments.
Mobile collection solution to reduce petty cash collections – introduced a mobile collection solution that allows money to be collected from payment apps such as Alipay and Tenpay using a QR code.
Best practice and innovation
There was a high level of engagement with its bank on regulations governing cross-border activities in China. By taking a proactive stance, Littelfuse was able to recognise the opportunities new regulatory changes offered, as well as ensuring the company remained compliant. Littelfuse also relied on the bank for additional support on regulatory clearance/filling for some special payment types and cross-city shareholder loan arrangements.
Key benefits
- Centralised and streamlined daily payments and collections.
- FX transaction administration reduced with paperless solutions.
- Full visibility on transactions.
- Resilience to the COVID-19 crisis.
“We are well on our way to achieving efficient and consistent treasury management practices across China. We have made significant cost savings through reduced transaction fees, and administrative work, which is increasingly important as the impact of COVID-19 crisis affects global demand for goods and places new pressures on us,” says Chong.
Listen to podcast
