Payment Factory Building Blocks
Building a payment factory should start with clarifying your company’s current payment transactions procedures, as well as the business environment: what type of payments and which payment methods do the units use, with what volumes, and who has the right to authorise the payments? This will establish the basis on which your company’s new, integrated payment transactions system can be set up. Your current payment transactions will give you a sense of the choice of banks that will best serve your company in the years to come and the payment methods and channels it would pay to choose. Naturally, these choices will be influenced, for instance, by any growth plans for the coming years.
There are currently three viable options for centralising payment transactions. Firstly, Nordic and continental banks offer one-stop payment and account services, through which a company can manage all of its accounts in several countries. The second is bringing single euro payments area (SEPA) standards into use. Alongside SEPA, the popularity of the XML standard will gain ground. Following the introduction of SEPA, euro-denominated payments to many countries can be centralised into one account.
The third option, a SWIFTNet connection to the global banking network, will particularly suit large consolidated groups with payment transactions in many countries. With a payment factory, a company can dispense with a large number of country-specific accounts and the use of several payment transaction banks. A key question is whether one bank is sufficient for the company or whether it would be preferable to carry on operating in a multi-bank environment. One viable solution, for instance, is to choose one bank for the eurozone and one for Swedish crowns, for instance, whereby each currency area will have its own bank. If all of your systems cannot use the chosen payment format yet, there are vendors who can convert it before it is sent to the bank.
If, along with its payment transactions, a company wishes to centralise staff handling payment transactions into one geographic location, the payment factory solution can be further developed into a shared service centre (SSC) for the business group. International groups can even set up one for each of their market areas, e.g. the Nordic countries, the Continent and Eastern Europe.
Although when transferring to a payment factory, units remain responsible for the handling of their own in- and out-bound money transactions, a unified payment transactions process would provide support for decentralised companies, making their work easier: for instance, with common software, electronic payment authorisations from two people will run smoothly even if they are in physically different locations. It is important for the staff handling payment transactions for the units to be involved and committed to the transition. They, as users of the system, must receive candid communication about what will change, why and when.
The units will gain maximum benefit through the reduction of manual processing. Payment transactions pass from a ledger all the way to the bank in the most automated way possible and, thanks to a standardised process, the processing of bank statements can also be automated. A company’s payment factory projects are often linked, for instance, to the updating of operations control or accounts ledger systems.
In such instances, the parties to the project are the customer’s accounts and finance departments, the ICT department, the implementer of the payment factory and the supplier of the bank and ERP or ledger software. To begin with, it is advisable to focus on careful planning and scheduling, while ensuring well-functioning liaison activities in the course of the project. Furthermore, it pays to allocate sufficient time to project implementation. For instance, in the case of Edifact solutions alone, a bank will typically allocate, on average, three months for the introduction of a bank connection to one country. It is sensible to introduce one unit and one country at a time. The benefits will start to accumulate with immediate effect. Ultimately, the finance staff will be able to view all of the company’s bank accounts and their money transactions at a glance.
Over the past few years, companies’ interest in the payment factory solution has grown steadily. For example, the streamlining of payment practices within the euro areas has led companies to harmonise their internal payment processes too. The greatest incentive for setting up a payment factory, however, comes from within the company.
Within finance departments, the requirement exists to identify, on a more detailed and up-to-date basis, all of the cash flows scattered across the units, in order for the company’s cash to be put to the best possible use at all times. Centralised payment transactions and accounts management, together with a harmonised payments process, creates an excellent basis for the improvement of liquidity management.
The payment factory is a worthwhile solution for a company with operations in more than one country. Such a company does not have to be a Europe-wide business giant; a presence, for instance, in the Nordic or Baltic countries, however, is a good starting point. In addition to more efficient payment transactions and improved liquidity management, companies list savings in banking and systems costs as significant benefits. The payment factory also means less work for the ICT personnel. Instead of several, local payment transaction software packages, there is just one, common software package to maintain and update.
Another underlying factor may be company acquisitions: the new owner will want to harmonise the systems environment. Regulatory requirements for transparency and centralised control, such as the Sarbanes-Oxley Act or SOX, are also contributing factors.