The challenge
For PTTEP’s treasury team, the scale and complexity of operations brought challenges. With more than 70 legal entities, each having several bank accounts, it wasn’t easy to get a clear, centralised view of the company’s cash, and it was therefore difficult for the firm to manage its working capital. The situation was further complicated by numerous intercompany funding transactions, requiring a great deal of manual effort to manage.
Earlier on, the company had centralised its treasury processes within its treasury centre in Thailand and was keen to maximise the potential of the centre by further modernising its systems and processes, leveraging emerging technology and innovation. PTTEP began to look for ways to transform its cash management and liquidity structure, aiming to improve controls, automate and digitise processes, gain higher visibility on account balances, and make cost savings and operational efficiencies wherever possible.
The solution
Bank of America was engaged at an early stage in the project and, with both teams working closely together, a new vision for a world-class treasury centre began to take shape. It had four main components:
A payments and collections factory – with on-behalf-of transactions (OBO), handled through the treasury centre. This uses a system of ‘reference accounts’, which are owned by the parent entity on behalf of another legal entity, to execute payments and receipts on behalf of the group’s 25 entities, and segregate the activities of group subsidiaries without having to have a different physical account for each entity. The structure also helps provide tracking and management of intercompany lending and simplifies reporting.
Standardised processes – the new structure standardises the payables and other banking processes, leveraging standardised connectivity channels and file formats with the bank. All payment files are routed through the treasury account rather than multiple entity accounts, giving much better discipline and more effective management of payment cycles and usage of funds.
Intelligent account receivables reconciliation – utilising the bank’s Intelligent Receivables (IREC) solution, which uses artificial intelligence (AI) and advanced scanning techniques to capture payment information and associated remittance data from multiple sources, which is used to match against PTTEP’s open accounts receivables, resulting in more accurate posting of receipts, as well as higher straight through reconciliation rates. The programme was tailored to accommodate the specific needs of the company’s operations, including collections through multiple instruments, payments in a currency other the invoiced currency, as well as local requirements such as withholding and value-added taxes, which affect the ability to automatically reconcile payment amounts against their corresponding invoices.
Centralised liquidity management – the new structure promotes better visibility of the availability of funds as the cash is concentrated at treasury account level, offering improved management of working capital.
Best practice and innovation
Every stage of the implemented improvements has shown best practice in dealing with the complexities of treasury in Thailand. PTTEP and its bank had to take their plan to the Thai regulator. Thailand, being a regulated market, meant that getting the plan approved by the regulator would involve lengthy exchanges and detailed documentation. Both are not new to this rigorous process but this time round, their efforts gained PTTEP yet another accolade as the first Thai company to introduce an OBO structure.
Key benefits
- Massive improvement in the visibility/liberalisation of its cash.
- Bank accounts rationalised.
- Excellent cost savings.
- Transformation from a labour-intensive, mostly manual set of processes to an outstanding modern treasury.
“Our next generation account structure and the improvements in our treasury operations are transformative for PTTEP; we embrace innovation, and continually strive to be the example of an outstanding modern treasury for others to emulate,” says Anutra Bunnag, Managing Director of PTTEP Treasury Center.
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