Cash & Liquidity ManagementCash ManagementHow to Enhance Efficiency with an Integrated Approach

How to Enhance Efficiency with an Integrated Approach

Fragmented Systems: A Challenge for Corporate Treasurers

It is not uncommon that companies have to deal with fragmented systems when they want to obtain a group-wide overview of resources, cash flows and liquidity levels. Sound familiar? When companies are acquired or new companies are founded, local representation is required to access new markets. As a consequence, the company inherits a heterogeneous IT landscape and decentralized procedures so that treasurers are faced with an array of different systems and processes that need to be taken into account in order to be able to get that company-wide overview. Consolidating key data for treasury, risk management and reporting thus becomes a Herculean task. The diversified settings frequently lead to a great manual effort for treasurers to amalgamate the decentralized data into a central system or even just a spreadsheet. Therefore, anyone aiming to get up-to-the-minute information on cash flows and resources across the company has a lot to do.

The Importance of Integration

The more complex and international the company structure, the more difficult will be the task of data consolidation, and the more important will be an integrated approach that enables a harmonization and automation of processes in order to achieve central and real-time data with a mouse-click.
An integrated approach ensures that all ropes tie in centrally and in real-time in the head office so that important treasury decisions can be made for the company. With a harmonized concept, companies will be well-prepared for everyday business as much as for stormy weather, should another financial crisis arise in the future.

Moving from fragmentation to integration is increasingly revealing its value as a sustainable concept for more efficiency and transparency in all financial processes of a company.

How this works in practice can be seen in the following exemplary case for the area of leasing, where a global company optimized its processes through implementing integrated technology that helped interlink all processing steps, reduce workload and save time and costs.

Best-practice Example: From a Fragmented to an Integrated Approach

A leading tool manufacturer used to deploy different systems for its financial supply chain management. How the fragmented approach impacted this company’s process efficiency shows in the example of the management of its leasing contracts. With the legacy system landscape, it was necessary to enter the same contract multiple times: not only was a SAP recurrent document required for the monthly booking, but the document also had to be attached as a “loan” in the legacy treasury system for short-term planning. Moreover, it was necessary to enter the data in Excel for reporting and the determination of the liability. It also had to be reflected in assets accounting and archived conventionally, including copies.

The multiple and mostly manual tasks proved a great challenge, as it was time-consuming for the treasurer to reconcile the different data sources. Further, the many processing steps across various sources were not only inefficient, but also error-prone and constituted a risk in terms of data security.

As a consequence, the manufacturer decided to implement new and integrated technology to streamline processes. The company implemented new solutions for payments, cash management and treasury management that could be embedded within its central enterprise resource planning (ERP) system, in this case SAP. As the new solutions were integrated in SAP and also amongst each other, the manufacturer was able to reduce the manual efforts significantly and increase efficiency. Instead of entering the leasing contract multiple times, now a single entry of the contract is sufficient. It is captured once in the new treasury solution where it is electronically archived. The monthly short-term plannings are now done automatically by the new cash management system, which immediately forwards any necessary carryovers to the new payment solution. A specific posting logic feature automatically generates the monthly journal voucher. The new system landscape also includes an integrated connection to assets accounting. Any liabilities that may incur are immediately visible to the central treasury.

In fact, after the initial single entry of the document, all subsequent steps are carried out automatically by the system based on specific posting logics that were defined and could be flexibly customized with the software. All in all, the company benefits from faster and more efficient processes, less manual work, time and cost savings, real-time data, and increased data security. With a mouse click, the treasurer can now get all the necessary data for reporting.

System Requirements to Support a Harmonized Concept

In order for a company to maximize efficiency and transparency, it is vital to have interwoven systems so that all financial data can be optimally linked. The following are some key elements for achieving such integrated processes:

  • A central technical platform that enables integration and also a seamless connection of decentralized and external systems of subsidiaries
  • An all-in-one system, e.g. a payment is generated within the system, verified, approved, sent and confirmed – and the data is immediately available for cash forecasting
  • Technology that enables automated processes
  • Automated data consolidation with a mouse-click from all corporate entities
  • Capacity to cover the complete transaction cycle – from the generation to the hedging of a business
  • Replacing decentralized electronic banking systems by a bank-neutral bank communication from within the central ERP system
  • Seamless documentation in the central ERP system for greater transparency and compliance.

Conclusion: Benefits of Integration

As the above example shows, integrated software is the backbone for achieving greater efficiency and transparency along the financial supply chain. Treasurers will benefit from transparent and global visibility of essential data, which will be available much faster than before due to high levels of process automation. Having all key data centrally available in an electronic archive that is easily accessible at all times with a mouse-click is very useful for ensuring timely reporting in compliance with international regulations. Moreover, integration eliminates risk-prone interfaces and, thus, enhances company-wide data security. Greater control and real-time overviews of all payments, treasury transactions, plannings and risk management data will be the great advantage of harmonizing systems across a company.

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