Viacom is a US$13bn global media conglomerate with a focus on cinema and cable television. Gianluca Gubbini, one of the firm’s Treasury Directors, tells Treasury Today how it is making the most of some major technological changes to implement its plans to deliver an industry leading collections-on-behalf-of platform. In part two, we learn about the selection process and the results.

“It was easier than expected.” That was how Gianluca Gubbini, Director, International Treasury, Viacom, and his team at global media giant, Viacom, described the search for a powerful business case for implementing a new virtual account management (VAM) structure for payables and receivables for their Paramount division.

With Viacom Corporate having taken over international treasury operations that had previously been split between Paramount and Media Networks, bank account rationalisation became the focal point of the team with the goal to minimise the number of bank accounts as well as banking partners in order to achieve greater levels of visibility and operational efficiencies. Therefore, management was supportive of the VAM product because it would greatly enhance our liquidity structure whilst reducing cost. With the closure of around 50 accounts and annual maintenance fees typically around US$4,000 per account, a US$200,000 per year saving would be possible. In its first year alone, these savings would pay for the IT resources dedicated to rolling out the project. But the business case did not end there.

Another primary benefit of a VAM structure, explains Gubbini, is that VAM functionality effectively avoids the monumental effort required to implement a SAP in-house banking module for Paramount. “SAP in-house bank is a big implementation, it requires a lot of work to set up. By moving to virtual accounts, we can get more or less the same thing, but a bank is doing the work,” he explains.

Indeed, VAM typically uses a single physical header account, with as many virtual accounts as are needed sitting underneath. From the header, both payments and collections can be made through each virtual account. Whilst there are limitations (no direct debits or cheque deposits, for example), “the majority of transactions can be processed in the same way as we would in the SAP bank module using internal accounts.”

Close encounters

With management buy-in and budget secured, Viacom conducted a concentrated RFP/workshop process to select the best partner for its Paramount VAM initiative. “Because we had the experience of in-house banking we were able to challenge the prospective partners in so many areas,” says Gubbini. In fact, one of the prospects incorporated much of our feedback in their development of their VAM product. VAM technology is still in development so even after selecting a partner, Viacom found there would be the need for some manual work arounds. The identified un-met needs are now on the selected bank’s development road map, so ultimately the desired functionality will be accomplished. Missing elements aside, the final decision was an exercise in assessing and balancing wants and needs.

Towards an end goal

Once live, on the payables side, the VAM structure will deliver much the same functionality as has been enjoyed by the Media Networks using XML via the SAP in-house bank, with at least 95% of orders clearing straight through processing for payments and general ledger entries says Gubbini. Receivables will be the real test.

“The expectation is that VAM will increase our automation,” he says. “Sometimes the difficult part of cash application is determining which invoice should be cleared with the money received. By using virtual accounts, we can use one account per customer; whenever money comes in from that account, we can post it straight away.

The enabler

Having taken great steps, beyond physical and notional pooling, towards a new way of thinking around liquidity management, he acknowledges that systems and technology can be the way forward for many treasuries.

Viacom’s own treasury has gone from 40 banks to a handful of core banks and much improved visibility. It added SAP with XML capabilities, IT2 TMS and SWIFT to bring about bank-agnosticism in terms of making payments. The use of technology has allowed Viacom to optimise its liquidity structure.

Now Viacom is on the verge of virtualising its account structure to bring a new era for payments and collections and, with it, a vastly more efficient approach to working capital management. Indeed, there is now no doubt in Gubbini’s mind that technology and centralisation is the treasury enabler of the future, if not the new star of the show.