Cash Management

Effective cash management has become a vital component of how businesses operate and interact with their customers and vendors

The arrival of the single euro payments area (SEPA) did not create the large benefits authorities have advocated. SEPA was going to be the major driver for companies reorganizing their treasury.  Large multinationals operating in various euro zone countries had wished SEPA would bring the standardization required for centralizing the management of cash flows. In majority they already centralized their cash positions using their bank’s sweeping and pooling. No wonder centralizing cash flows was next on their agenda. SEPA implementation gradually brought to the surface that various countries and within each country various banks maintained their own interpretations of the SEPA standards. A major challenge for any payment software. It also has led that many companies still encounter reconciliation challenges, leading to increased costs and inefficiencies. Reason for some companies to turn to the banking sector to come up with a smart and more efficient way to centralize its cash flows. The bigger network banks introduced e.g. virtual account structures. Others selected on-behalf-of account structures with automated sweeping, an older proven concept.

Why do companies wish to centralize their Treasury in the first place? What is there to gain? The typical drivers are improving the management of group cash (flows and balances), optimizing working capital and mitigating various risks, amongst others. Centralization should at least add up to increased economies of scale for the central Treasury.

So, is there a standard approach to standardization? No, there is not. Companies are by nature very diverse and have adopted their own culture. Designing a central Treasury is often influenced by factors ranging from the size of the company, the geographical spread, speed of commercial expansion and the cash position of the company. The boundaries of a central Treasury tasks are typically dictated by a corporate Treasury policy statement. On top of this, complexities of the various SEPA dialects have not disappeared and banks in the Eurozone still tend to use a different set of solutions if it comes down to cash sweeping, pooling and reporting of incoming funds. This sounds like a true entanglement requiring professional assistance.

We at Proferus worked on a large number of implementations of SEPA for large multinationals. Our senior consultants have deep knowledge of SEPA, Global Payments and SWIFT. We know what is required to successfully centralize cash flows, the last challenge in centralizing corporate cash management.