- Senior Sales Cash Management Executive at BNP Paribas Zurich
 
 
Tuesday 13 December 2016

Remaining competitive in a complex and uncertain environment has become a daily challenge for every organisation.


More regulation and more cautious market participants. These are just two outcomes of the financial crisis, which has in turn led to the availability of external sources of credit to shrink. Consequently, organisations have shifted their focus to internal funding opportunities. Cue the increasingly important role of the Treasury function, whose primary task is to uncover hidden sources of capital and unlock working capital.

The new mantra is simply stated: free-up trapped cash, and diversify internal and external sources of capital to reduce risk and cost. In a fast-paced global finance environment, companies have understood that optimising their working capital provides a competitive advantage, maintains the organisation's health and keeps stakeholders satisfied. This translates into increasing market demand for banks and system providers to take a holistic approach to cash, trade and supply chain management. Why? Because the right mix of products, combined with an advisory approach from your banking provider, increases the efficiency of the cash conversion cycle and the entire financial value chain.

Fit for purpose: how to re-think your treasury set up

"(...) optimising working capital provides a competitive advantage, maintains the organisation's health and keeps stakeholders satisfied."
1
MASTER THE RIGHT PAYMENT AND COLLECTION METHOD:
knowing which instrument is most suitable to your market is the key to reducing "float time" of collections and the cost of payments. A cheque payment is typically slower and riskier than a standard domestic payment.

Virtual purchase cards are becoming valid alternatives to reduce administrative costs, improve days payable outstanding, and optimise reconciliation. Simplification is a must.

2
ENHANCE COLLECTIONS PROCESSES WITH NEW TECHNIQUES:
creating visibility and transparency over your receivables improves reconciliation processes and enables more informed decisions on when and where cash will be. 'Virtual Accounts' is a topic trending right now in the corporate world; they offer credible solutions to enhance the accuracy of forecasting and a positive impact on days sales outstanding. Leading to a straight-through reconciliation process, Virtual Accounts reduce the risk of chasing unpaid invoices by matching each supplier with a virtual IBAN.
3
STREAMLINE FUND MOVEMENTS WITH LIQUIDITY STRUCTURES:

 effective control of financial transactions within an organisation is crucial to minimising "bubbles" of cash tied up within an organisation's working capital. Liquidity concentration techniques ("cash pooling") and netting of intercompany invoices are useful cash management instruments to reduce the number of transactions, and in so doing increase visibility over cash now made available for investing.

4
LEVERAGE THE CASH MANAGEMENT STRUCTURE FOR YOUR SUPPLY CHAIN PROGRAMME:
whether a payment factory, shared service centre, or in-house bank, the centralisation of cash management provides the ideal platform for a supply chain finance programme. These structures provide banks with a single point of entry to corporates, equipping organisations' Treasury teams with an intuitive dashboard to help manage payments and collections, receivables discounting, and supplier finance programmes.

5
DESIGN A FIT FOR PURPOSE SUPPLY CHAIN PROGRAMME:
selecting the right factoring / reverse factoring programme helps your organisation build a strong reputation in the market and keeps it abreast of competitors. Besides unlocking internal funds by improving the cash-to-cash cycle, it will positively affect the cost of external funding. Optimising the financial chain - from the processing of working capital items (receivables, payables and inventories) to their monetisation (receivables, payables and inventory programmes) - means looking holistically at cash management and supply chain. Ensuring the right mix of these two ingredients will lead the change.


Re-thinking the financial supply chain should be a core objective of every Treasury organisation. Decisions taken by Treasury teams are increasingly influential, affecting suppliers, clients and - ultimately - the bottom line. Therefore there is a real need for awareness around financial choices and the resulting benefits for all stakeholders.

There is no "one size fits all" solution; instead, market regulations, market practices, and industry sector need to be taken into consideration. Do it right, and you create a strong "financial value chain" culture within your organisation, which will add value for your organisation.

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Focus Magazine #8
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Focus Magazine


Vincenzo DI LENA is Senior Sales Cash Management Executive at BNP Paribas Zurich. He has worked in Cash & Treasury Management for more than 10 years for both major consulting firms
Vincenzo Di Lena – Senior Sales Cash Management Executive at BNP Paribas Zurich
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