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After payment factories come collection factories. How close are treasuries to making this a reality?
Workshop stream three in the first afternoon of EuroFinance 2011 looked at what was termed 'liquidity plus' - which included two case studies on balancing the cash and building the right buffers, presented by Sven Vorstius, head of interest rate risk management, Bayer, as well as how to improve on cash flow forecasts, presented by Diane Wilson, assistant treasurer, TI Automotive.
Despite the interest both sessions attracted, it was the third session of the day, entitled 'Payment and Collection Factories for the Future', which caught my attention - mainly due to the fact that many corporate treasurers have expressed intense frustration when attempting to set up a payments factory, let alone a collection's equivalent.
Willem Dokkum, global head of sales payments and cash management (PCM), ING, asked a number of questions in a straw poll of the 120-strong audience. The first asked whether the collection factory would become a necessity for corporates in the near future, for example by 2015. The majority (60%) said "yes", while 14% said "no". Interestingly not a single participant had already set up a collection factory to date.
Speaking from the panel, Laurent Guillouët, head of back office and cash management at ArcelorMittal, said: "A payment factory is relatively easy because the information comes from inside the group, or an internal system; whereas the information for a collection factory comes from an external system. That is the real problem. Is it a necessity? Everyone is interested in a more centralised and efficient system."
The second question looked at what is the most important element for the successful introduction of a collection factory. Almost half (48%) of the audience cited an integrated enterprise resource planning (ERP) system, while 24% said an integrated policy, 17% picked top-down/directive approach, and just 10% thought it was shared key performance indicators (KPIs).
Marco Schuchmann, head of treasury operations and payment factory, AkzoNobel, disagreed, saying that integrated ERP in not that important. He believes that the most important element is the top-down approach. "It is important that senior management indicates what direction we are going in. There needs to be a shared goal and mandate from senior management." AkzoNobel is implementing a payment factory despite having over 160 ERP systems.
Erik van den Enden, general director treasury, AB Inbev, agreed that no one has a single ERP system, yet everyone is creating these factories, but did admit that it makes it much easier to only be dealing with one system. He argued that it was shared KPIs that were the most important. "It can't be done in an ivory treasury tower, but must get everyone - IT, local people, etc - involved," he said. "It is important that senior management has buy-in, too."
When asked what was the most important benefit expected of introducing a collection factory, half of the audience identified visibility and control on cash/to improve funding. Almost a quarter (23%) chose a very efficient order-to-cash (O2C) process. Only 13% picked reduction of risk and focus on credit management. Reduction in headcount/free up capacity was the least popular, with only 4% of the audience citing that as the most important benefit.
Schuchmann jokingly said: "Well in today's world, where countries cannot service their debt and Blackberries don't work, it is all about risk."
A third of the audience identified local practices or lack of uniformity as the main bottleneck to implementing the collections factory. Almost a quarter (24%) said that it was a lack of commitment by senior management as the major pitfall, while 21% cited too many applications (e.g. accounting, billing, etc).
In order to make a collection factory a success, 30% and 31% chose one technical platform (interconnected IT systems) and one shared service centre (SSC). Worryingly, 15% said "nothing special".
Wouter Ligteringen, manager treasury operations, KPN, said that one important choice was missing - project management. He said that it was critical to gather together people with different areas of expertise and from different environments. KPN's success was based on a phased approach, rolling out outgoing payments, direct debits, high value payments, and then subsidiaries. The project manager needs to set deadlines and monitor consultants, according to Ligteringen.
Although Guillouët voted for one technical platform, he also agreed that the project team is an important factor.
The final question focused on what the next challenge or ambition is after the collection factory is created. Over a third (36%) thought it would be 'other', i.e. promotion to chief financial officer (CFO). The next most popular answers were expanding the collection factory geographically (26%), connecting the payment with the collection factory (16%), and expanding the collection factory geographically.
Van den Enden made the point that implementing a collection factory was part of a larger cash management optimisation plan. Although it was a very important milestone for AB Inbev, the next step was to build on the infrastructure that the company now has, he said.
Despite the interest both sessions attracted, it was the third session of the day, entitled 'Payment and Collection Factories for the Future', which caught my attention - mainly due to the fact that many corporate treasurers have expressed intense frustration when attempting to set up a payments factory, let alone a collection's equivalent.
Willem Dokkum, global head of sales payments and cash management (PCM), ING, asked a number of questions in a straw poll of the 120-strong audience. The first asked whether the collection factory would become a necessity for corporates in the near future, for example by 2015. The majority (60%) said "yes", while 14% said "no". Interestingly not a single participant had already set up a collection factory to date.
Speaking from the panel, Laurent Guillouët, head of back office and cash management at ArcelorMittal, said: "A payment factory is relatively easy because the information comes from inside the group, or an internal system; whereas the information for a collection factory comes from an external system. That is the real problem. Is it a necessity? Everyone is interested in a more centralised and efficient system."
The second question looked at what is the most important element for the successful introduction of a collection factory. Almost half (48%) of the audience cited an integrated enterprise resource planning (ERP) system, while 24% said an integrated policy, 17% picked top-down/directive approach, and just 10% thought it was shared key performance indicators (KPIs).
Marco Schuchmann, head of treasury operations and payment factory, AkzoNobel, disagreed, saying that integrated ERP in not that important. He believes that the most important element is the top-down approach. "It is important that senior management indicates what direction we are going in. There needs to be a shared goal and mandate from senior management." AkzoNobel is implementing a payment factory despite having over 160 ERP systems.
Erik van den Enden, general director treasury, AB Inbev, agreed that no one has a single ERP system, yet everyone is creating these factories, but did admit that it makes it much easier to only be dealing with one system. He argued that it was shared KPIs that were the most important. "It can't be done in an ivory treasury tower, but must get everyone - IT, local people, etc - involved," he said. "It is important that senior management has buy-in, too."
When asked what was the most important benefit expected of introducing a collection factory, half of the audience identified visibility and control on cash/to improve funding. Almost a quarter (23%) chose a very efficient order-to-cash (O2C) process. Only 13% picked reduction of risk and focus on credit management. Reduction in headcount/free up capacity was the least popular, with only 4% of the audience citing that as the most important benefit.
Schuchmann jokingly said: "Well in today's world, where countries cannot service their debt and Blackberries don't work, it is all about risk."
A third of the audience identified local practices or lack of uniformity as the main bottleneck to implementing the collections factory. Almost a quarter (24%) said that it was a lack of commitment by senior management as the major pitfall, while 21% cited too many applications (e.g. accounting, billing, etc).
In order to make a collection factory a success, 30% and 31% chose one technical platform (interconnected IT systems) and one shared service centre (SSC). Worryingly, 15% said "nothing special".
Wouter Ligteringen, manager treasury operations, KPN, said that one important choice was missing - project management. He said that it was critical to gather together people with different areas of expertise and from different environments. KPN's success was based on a phased approach, rolling out outgoing payments, direct debits, high value payments, and then subsidiaries. The project manager needs to set deadlines and monitor consultants, according to Ligteringen.
Although Guillouët voted for one technical platform, he also agreed that the project team is an important factor.
The final question focused on what the next challenge or ambition is after the collection factory is created. Over a third (36%) thought it would be 'other', i.e. promotion to chief financial officer (CFO). The next most popular answers were expanding the collection factory geographically (26%), connecting the payment with the collection factory (16%), and expanding the collection factory geographically.
Van den Enden made the point that implementing a collection factory was part of a larger cash management optimisation plan. Although it was a very important milestone for AB Inbev, the next step was to build on the infrastructure that the company now has, he said.
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