Entreprise Payment Opimization

Extracts from an interview made by Kate Pohl on the TIS new concept of “EPO”.

i.e., “Enterprise Payment Optimization” and what it really means for treasurers.

?·??????In your recent whitepaper (to be soon released), you say the “EPO could be a sort of panacea, a “drug” that can legally and effectively improve performance in the payment process!”?Can you please elaborate??(FM)

?A question treasury organization already matured are addressing is how to reach the next level in treasury management digitization by optimizing both inbound cash and outbound payments. From a business perspective, there are 2 elements to any payment process. The first involves receiving money from customers. The second involves outbound payments to suppliers, partners, employees and beyond. The payment lifecycle is an ever-revolving door of inbound and outbound transactions. Though the inbound side (collecting money from customers via different means) can be accomplished by a variety of providers, the outbound side is more nuanced — and usually requires the aid of a provider with outbound-specific capabilities. Ideally, each treasury department should have a global platform to enable the full spectrum of capabilities required for true outbound payment optimization. Very often, the payment process is managed in silos (i.e., geographic, system or functional silos) and fragmented across the group. This fragmented approach is explained by legacy systems, acquisitions, specificities of some regions, group culture or even history and working habits. However, to be more efficient, treasury needs a single platform to channel all payments going out and all cash-flow and balance information coming in. In addition, full integration to all other systems used across the procurement and payment chains is required. Who is better positioned than treasury to solve this problem? And the TIS “EPO” I compared to a doping that can boost your payment processes, indeed.

?·??????What are some of the pain points or gains that you both experienced as Corporate Treasurers that could have been helped or solved by EPO? (FM)

?The poor or insufficient information received back from banks penalizes reconciliations. Reconciliations depend on quality of data received back. Therefore, it remains difficult and often chaotic given the weak quality of data received from many bank counterparties. Regardless of the size of your business, reconciliation is one of those processes that takes on a life of its own. The second major issue is the silo approach of finance departments which affects the global processes. The data are too often managed in silos too. As you can see, we can identify many challenges associated with doing it right. The finance department needs a clear and complete view of liquidity and cash flows to avoid putting the business at risk. In a “real-time” treasury environment, it is essential to enhance payment processes and manage these through a single platform, a single gateway, even if connectivity is achieved through various channels. When a treasury is fully digitalized there is less room for improvement.?However, there are still areas that can be optimized. As already mentioned, the main issue remains payment and reconciliation automation. These functions require state-of-the-art technologies that can be interfaced with any ERP, TMS or HR system to tackle business-to-business payments.?While a great deal of focus has been placed on inbound customer payment technology, corporations have done little, in general, to address their outbound payment processes. To be fully automated and reach the next level i.e., with a single gateway to banks or a payment factory, treasurers must move towards enterprise payment optimization. They need to refine and streamline both their inbound and outbound payment processes. I would like to add a few other hurdles: a classic reluctance to changes, treasurers are often too conservative and don’t like changes and innovations, legacy of IT architecture and complexity of systems may also complicate the revamping of payment processes. As you can see Kate, many hurdles and challenges for treasurers.

?·??????Francois, you specifically talk about automating and digitalizing processes to improve efficiency.?You talk about global and real-time data availability for the Hyper Treasury!?Can EPO really help? (FM)

Indeed, I do believe we all expect a more real-time treasury management. It clearly came out of the last EACT European survey in April 2021. But for accelerating access to pieces of information, we need solutions. Easy to say and to claim, much more complicate to get and to implement. It is what I like to name “hyper treasury”. The old say claims that “time is money”. The speed of access to data is therefore essential. What I think treasurers need is this type of platform to orchestrate their payments, an additional layer to optimize payments and better control what is coming out and how it will come back to reconcile easily. TIS can enable the treasurer to become the orchestra leader if you allow me this comparison. Treasurers also need a secure dashboard to control and monitor liquidities. The idea is to integrate the whole chain from payment initiation, wherever, till payment execution, by whoever. The idea is to get a bank single gateway, although connections may be done through various channels, as I said, or different connectivity mode. By enhancing efficiency, reducing risks around payments, and getting faster full visibility on cash, a treasury boosts his/her treasury management. What you refer to, the “hyper treasury” concept, I like, includes many ways to enhance treasury. EPO is one part of it.

?·??????Lets go even further!?Francois, you talked about the Treasurer becoming the CFOs best friend… how can EPO support making the Treasurer a hero??And how will this help the CFO? (FM)

A classic dream of lots of treasurers. How to become the best friend of the CFO? By providing him/her with better quality information and again faster than before. To get respect from CFO, treasurers must make the difference and bring something new. Treasurers often suffer from lack of recognition, awareness, respect, support, etc… from colleagues. They also need to enhance their soft skills and to better communicate. However, the best way to be seen and recognized is by your achievements and by adding value to other departments and breaking silos. EPO may help in that sense. There are of course many other ways to generate value for affiliates, for example, in FX process automation and by adopting dynamic hedging strategies, by offering new e-payment methods to operations, etc… But to become the CFO best friend, we must deliver value, reliable reports and as said earlier, speed and quality are key to gain respect from the C-level and get new best friends. It is not wishful thinking. CFOs during the crisis were worry about liquidities and focus on treasury, as always when the storm arises. But many were frustrated to see the poor quality of reports and time to deliver, for example CFF and sensitivity or stress-testing. All what contribute to improve quality of reporting and dashboard, help gaining support from CGOs.

?·??????Why are enterprise payments so complex? How does EPO harmonize this process? (FM)

?Complexity can be explained by number of banks across the world, with different capabilities, features and networks, or local regulations. Some regions remain problematic and payments there difficult. The scope makes things more complex as some exotic destination can become real issues and connectivity cannot as far as I know done everywhere with one single channel, it seems to be wishful thinking. There is not a single channel which would fit all banks. The difficulty also comes from the payment generation systems are different, not always connected and not centralized in one place. That is the reality of numerous MNCs. We have legacy of IT systems and must do it without changing them. We therefore need to be interfaced and connected to those systems across the group. The bank capacity to manage different connectivity models may help. But often clients must define a connectivity strategy to be efficient and reduce costs, if possible. There is no panacea here to cover 100% of the cases. And we know that the more systems are standardized the easier it becomes. The good strategy consists of selecting ways to best connect to a bank, to use payment formats library of the supplier, and to connect in a secure way the bank and the entity. By adopting one single tool for payment execution, in terms of internal controls and frauds, it helps a lot. Standardization of systems and processes, paperless processes, common policies and procedures and centralization as far as possible also help securing and reinforcing the organization to make it more resilient to any risk, fraud, or attack.

?·??????What are the short- vs long-term benefits EPO? ?(FM)

EPO in my opinion is a starting point or necessary first step to get access to pieces of data we will be able to reuse, crunch and analyse. The benefits in the short-term are huge with better visibility on cash and possibility to better manage timing of payments and outflows. The treasurer must hold the helm and decide when to pay what. In the long run, it is also the foundation for making better use of data. The data mining and Artificial Intelligence are tempting and interesting. But the first and preliminary step is to get quality data in one place prior to pretend doing something out of them. Integration is a key factor to make good use of data and crunch them. In my opinion, once centralised, harmonized on one platform, then together with the supplier, the treasurer can make better use of the data and get analytics for proactive management. That is the high value treasurers can generate for the c-level.

?·??????Given the importance of optimising inbound cash, why do you advocate concentrating on Payables only rather than Payables and Receivables? (FM)

Ideally, we need to concentrate on both. Payables we can manage efficiently if proper managed and centrally controlled and receivables despite lack of information about timing. The objective is to get access to the incoming flow and to allocate it asap to reconcile the transaction and potentially free headroom with customers to make more business. I have the impression that treasurers have focused on one at the expense of the other. Payments are “controllable” where incomes are less controllable in terms of timing. However, if reconciliations are accelerated, it helps getting access to cash and free credit facilities of customers to continue delivering them. I would say, none should be preferred to the other. I would suggest rebalancing efforts dedicated to each one. The optimization passes by enhancement of both sides, in my opinion. ?

·??????Do you think this will help companies to close some of their product and services gaps? (FM)

I do believe it is an area for enhancement and to be in general improved because of the standardization approach, because of lack of IT strategies and IT architecture vision. TIS offers us a way to revamp our processes and to make it faster. I like the idea of closing the loop faster, of going from A to Z and not to stop when you reach the borders of your scope of activity. They have a clear vision of specialists of what Treasurers need and would like to get. EBAM is also one area where they may help a lot the bank account management.

·??????Sustaining an optimal set of processes is not easy – how does the TIS Capability Model afford opportunities to keep improving processes? (FM)

Here again the quest of optimization and process improvements are important. To gain in efficiency, we need to revisit existing processes and reconsider a bank single gateway, even if multi-channel connected. Even those having payment systems or factories in place admit easily they still have manual payments here and there. The idea is to implement a system which will not suffer from any exception. The framework is important and the tool to guarantee principles from the policies are applicable and feasible. Such platform helps aligning processes to policies.

·??????Why is EPO and the EPO platform the right vehicle??And why is it better suited than more “traditional” TMS platforms? (FM)

The idea looks great. One single platform cloud-based where all payment types will be store and concentrated looks great. To improve end-to-end processes, we need to concentrate, standardize, and centralize processes around payments. The unicity of the platform will enable better efficiency and optimization. But as we always face in MNC’s, there are many ERP’s and systems generating payments. Therefore, the hub approach makes lot of sense. This is the TIS proposed EPOP solution. They want to create a multi-banks, multi-channels, and multi-partners platform to connect to banks. TIS EPOP is a sort of grand canal through which every single payment passes and is traced, via a multi-connectivity channel (e.g., H2H, EBICS? SWIFT, etc…). Once you have concentrated al movements to one channel, it becomes easier to apply AI or data analytics to make use of them. It also comes with what I like the BAM for managing all the bank accounts. TMS’s are not fit for BAM or EBAM. Treasurers need data repositories for BAM and tools to maintain them. Again, TMS’s are like monoliths and not fit for doing all. The platforms can be interfaced via API’s.

·??????Any final words…

We need to move to the next level of automation, for those already “advanced”. For the others it may be a way to make a leapfrog and directly optimize payments, from both sides, inbound and outbound. Cash visibility is (re)becoming key and ways to get better and more precise view on it, the faster as possible enable to smooth decision-making processes and to faster react when crises occur. In my opinion, adopting such an in-the-cloud platform is and will become a best practice, a must have.

Extracts from Fran?ois’ interview (made by K.Pohl as moderator and Joerg Wiemer from TIS during last GTE conference).

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