Cash Management - FEI Canada 13 Treasury System - Automation Elimination of spreadsheets Integrated Treasury Management System with a strong forecasting tool Long Term Debt Operating

SIMPLIFY

YOUR

TREASURY

Cash Management

Best Practices, Trends & Insights

FEI - June 9th, 2016

www.efinancialsuite.com 2

Vision

Treasury organization

Treasury system

Cash forecasting

Key performance indicators

Independence

● Communication protocol

● File format

Governance

Working capital management

Questions and comment

MODERN TMS

TO ENSURE COMPLIANCE

AND BEST PRACTICES


Vision


Current challenges:

Do more with less

Add value at the enterprise level

Timeliness and responsiveness

Accountability

Vision

Corporate Objective

Implement the most efficient and effective treasury operations

Innovation and creativity as means to continuously improve performance


Outside consultant

Internal exercise

Benchmarking exercise

Europe vs North America

Best of breed

AFP research

Attend conference

Formal request for information (RFI)

followed by a request for proposal (RFP)

Vision – How to ?

Gather information:

Legend

Trend Best practice


Gain a good understanding of:

Banking industry product offerings

Market best practices

Comparative exercise

Challenge our current provider in terms of:

Pricing/innovation/services

Market penetration

Right platform to identify potential enhancements to cash management

operations

Undertake fully objective, robust, selection process

Vision - Why an RFP can help?

To issue an RFP for cash management services every 5 to 7 years


For basic services (i.e. lockbox, cheques, wires, EFT/ACH services, etc.) –

all banks offer the same basic services

Key differences between banks:

Market penetration

Consolidation of activities between regions

Specialized product offerings

Outsourcing of services (i.e. clearance of cheques and EFT, lockboxes

operations, etc.)

Support for/experience with SWIFT corporate access

IT investments mostly for regulatory requirements

More banks – less efficiencies, increase costs

Vision - Bank Offering

MODERN TMS


AND BEST PRACTICES


Treasury Organization


Structuring treasury operations properly to meet your company’s business needs

is critical:

Staffing

Expertise

Alignment of responsibilities

Do the right thing, focus on core treasury tasks

Treasury Organization

Improve business performance as an ongoing goal

MODERN TMS


AND BEST PRACTICES


Treasury System


Treasury System - Integration

One database – Information entered once


Treasury System - Integration current challenges

Reduce the number of database/systems

Treasury system

Accounting

system

Banking

systems

IT

systems

Spreadsheets Treasurer


Treasury System - Automation

Elimination of spreadsheets Integrated Treasury Management System

with a strong forecasting tool

Long Term Debt

Operating and

Capital Leases

In-House Banking

Money Markets

• Investments

• Short Term Debt

• Commercial Paper

• Revolving Credit Facility

• Foreign Exchange

• Derivatives (IRS, CCIRS, FRA,

Treasury lock)

AR Securitization

Letters of Credit

Cash Forecasting

Banking

KPIs


Treasury System - Decision making

Cash forecasting – critical to guide funding

and investment decisions:

Timely

Accurate

By original currency (instead of functional)

Time horizon exceeding 12 months

Supported by:

• Structured processes

• Adequate banking architecture

MODERN TMS


AND BEST PRACTICES


Cash Forecasting


Cash Forecasting

Strength:

Align with the corporate budget

Flexible

• Reporting

• Granularity

• Daily/monthly/annual

• Currency

• Subsidiary

Automated

Variance analysis

Fully integrated in ERP system

Scenario analysis


Cash Forecasting - Other Forecasts

Cash planner

Liquidity forecast

MODERN TMS


AND BEST PRACTICES


Key Performance Indicators


Key Performance Indicators

“You can not improve what you cannot measure”

Treasury must develop “Key performance indicators” to

demonstrate their value to the organization – main impact on

staffing level

Choosing the right KPIs relies upon a good understanding of what is important to the

organization.


Key Performance Indicators - Examples of KPIs

Bank fees compared to:

• Volume of transactions

• Total cash inflows and outflows

Cash sitting idle daily

Variance between cash forecast and actual results

Performance of money market operations

• Investment and borrowing portfolio - Compare the interest rate of each trade with proper

benchmark (CDOR, Libor rates etc.)

Foreign exchange

• Compare the FX conversion rate of each individual spot purchase with the average foreign

exchange rate for the day as published by Bank of Canada

• Calculate the weighted average FX conversion rate of the spots performed for a specific period of

time and compare it the average exchange published by Bank of Canada for that same period

• Demonstrate that the total amount of spot trades (US $ to Cdn $) is within the total forecasted

amount of US$ that needs to be converted on an annual basis, and cover entire fx exposure

MODERN TMS


AND BEST PRACTICES


Independence


Independence

Derived benefits: Straight-through processing Eliminate use of electronic banking systems for the

purposes of exchanging files and making payments Lower costs

SWIFT technology to support

all communications with banks

Standardization

of file format

Bank agnostic

connectivity


Work with several Internet platforms:

Administrative burden (administrators,

setup accounts, services, order security

device etc)

Need to develop in-house expertise

Operational issues

Independence - Business case for implementing SWIFT

Significant need for an integrated solution



Speak one language with banks



Existing Interfaces

Banks

Accounting system

Other

system

Treasury system

Sub ledger # 1

ED

I

GXS

Klein Schmidt

FTP Server

Expedite

Sub ledger # 2



A single standardised gateway

Banks

TMS

Connected to

SWIFT

Network

Accounting system

Internal

Systems


Independence

Format Harmonization

Apply CGI standards for payment files

Reconciliation done through bank statements, intra day statements and

additional debit/credit notifications

New formats to be adopted by the Canadian Payment Association

Note : The goal of CGI is to simplify implementation for corporate users and, thereby, to promote wider

acceptance of ISO 20022 as the common XML standard used between corporates and banks.

MODERN TMS


AND BEST PRACTICES


Governance


Governance – Treasury Policies

General Operational Banking

Investment guidelines

Define priority list of

preferred method of

payments:

Incoming

Outgoing

Opening & closing bank

accounts

Foreign exchange

(NAP, NIH)

Negotiation of banking

services RFP (formal

bidding process)

Derivatives Use of credit cards :

A/R

A/P

Mandate T&E

Signing authority

Leasing negotiation Wire transfers

Fraud protection

Reconciliation of bank

accounts

Rigorous controls

MODERN TMS


AND BEST PRACTICES


Working Capital Management


Working Capital Management - Collection

Reduce payment methods / eliminate paper

Alternatives

Pre-authorized debits

Single:

• CCIN

• ACH CTX

Multiple:

• EDI payments

• ACH CCD+

Electronic fund transfer

Wire

Image cash letter

Credit/debit cards

Collection - Past Lockbox #1

Lockbox #2

Lockbox #3

Lockbox #4

Lockbox #5

Lockbox #6

Lockbox #7

Lockbox #8

Collection - Future


Working Capital Management - Disbursement

Disbursements - Past Disbursements - Future

Alternatives

Credit cards:

• Bank to performed a credit

card analysis

Pre-authorized debits

Electronic fund transfer

ACH CCD +

ACH CTX

EDI payments

Wires

Costly

Fraud - Positive pay services

Manage images/date cashed/storing

Float

Controlled disbursement accounts

Full reconciliation services

Consolidate payments / reduce payment methods eliminate paper / centralize disbursements


Working Capital Management - Paying Suppliers

Extend payment terms

• From 30 to 90 days

After invoice approval date

• Rather than invoice date or date goods delivered/service rendered)

Implement a Supply Chain Financing solution

• Advance payment in exchange of a discount

MODERN TMS


AND BEST PRACTICES


Questions and Comments

Documents

Cash Management - FEI Canada 13 Treasury System - Automation Elimination of spreadsheets Integrated Treasury Management System with a strong forecasting tool Long Term Debt Operating