LEADING PRACTICES - Strategic Treasurer · 2019-05-23 · Treasury Accounts Payable Inventory Protect Liquid Assets Secure Liquidity Enable the firm’s long term balance sheet Align

LEADING PRACTICESB2B Payment Risk & Cash Flow Management

Proprietary & Confidential: Strategic Treasurer © 2017

January 2017

Co-Presented By:


About the Series & Presenters

2

Strategic Treasurer is a consulting firm advising

on treasury, financial risk and risk technology issues.

Experience: 30 years – 12 years leading ST -serving corporate, government, education and not-for-profit institutions

Today’s Co-Presenter:

Drew HoflerSr. Director, Financial Supply Chain

MarketingSAP Ariba


Debbi DenisonSenior Consultant

Strategic Treasurer


Craig JefferyManaging Partner

Strategic Treasurer

SAP Ariba is the world’s largest B2B

network – connecting over 2 million companies across the source to settle process. They have partnered with Discover to develop the award winning B2B payment platform: AribaPay.

Experience: 20 years leading innovation initiatives impacting treasury, finance, and procurement functions.

http://strategictreasurer.com/?utm_source=proposal&utm_medium=pdf&utm_campaign=global-payments-2016


B2B Payment Risk and Cash Flow Management

Topics of Today’s Discussion

3

Context. Treasury as a Steward

Payment Risk

Liquidity and Relationship Management

The Way Forward: Conclusions

1

2

3

4

http://strategictreasurer.com/?utm_source=proposal&utm_medium=pdf&utm_campaign=bellin-2016



Treasury as a Steward

4

Protect Liquid Assets

Secure Liquidity

Enable the firm’s long term balance sheet

Align operational risks to risk appetite

Secure Payments

Manage treasury Risk/Security Framework

Promote appropriate business actions



Cash Conversion Cycle

5

$

Business

Treasury

SSC

Collection of Payments

Cash Purchase Services, Goods, or Raw Materials

Payments for Purchases

Production of Goods

Inventory Holding Period

Sale of Goods

Treasury Accounts Payable

Inventory

Protect Liquid Assets

Secure Liquidity

Enable the firm’s long

term balance sheet

Align operational risks to risk

appetite

Secure Payments

Manage Treasury

Risk/Security Framework

Promote appropriate

business actions

Accounts Receivable

Treasury Controllers

SSC



Polling Question

6

What is your biggest concern in managing payables ?

Delivering to KPI’s (i.e. DPO)Managing fraudReducing exception callsDriving rebatesNo concerns




Cash Conversion Cycle: Opportunity Areas

7



Payment Exposure

8

Mail:

• Check Stock• Physical Custody (Internal)• Postal Service (Points of Exposure)• Receipt Process (Lockbox, Invoice)• Application Process• Control of Address Information

ACH Wire:

• Change process for vendor master list

• Confidentiality/security of data

Timing: Unaware of exact timeframe-Delay for fraud detection




Fraud Risk

9

2016 Strategic Treasurer & Bottomline Technologies Treasury Fraud and Controls Survey



Treasury Security

1. ASSESS & ARCHITECT Greater Awareness Assess Major Exposure Risks Understand Required Layers Regular Revision Ongoing Monitoring

Market & Situations

2. PREPARE & PREVENT Stronger Defense Posture Upgrade Processes Systems Staff Knowledge

3. MANAGE PROCESSES Maintain & Reinforce Position Ongoing Training Testing

4. REMEDIATION Respond & Recover Reporting Response (Fast, Appropriate) Rework (Restore to New Model)

FOUR PILLARSo f TREASURY SECURITY



Polling Question

11

Payment RiskWhat are you doing to protect vendor master information?

We restrict access within our systemWe outsource mgmt. of data to a 3rd partyWe have no procedures in place




Areas of Exposure: Cash Conversion

12




Balance: Efficiency vs. Control

13

Automation results in reduction of head count for operational task and processing

Standardized process are scalable and easily adjusted as the business changes over time

Replace manual process reduces exception management

Efficiency is a key goal for projects, but other values may be key for ROI

Resources can be reallocated to more strategic initiatives

Consolidation or centralization of exception management, reporting and risk management

Better visibility and control over management of cash forecasting

Transformation of data to useable intelligence for fraud management and actionable areas of focus

Efficiency Control



Payment Drivers

14

57% Fraud Protection

47% Efficiency

22% Cost

18% Liquidity Management

16% Working Capital

16% Scalability

14% Vendor/Supplier Management

13% Visibility

There are 2 top drivers

for payment initiatives with

a significant gap

between the other items.

Working capital management and

managing the financial supply chain

are both very important from

operational and strategic perspectives.

Fides Treasury Services & Strategic Treasurer 2016 Global Payments Survey




Liquidity & Working Capital

15

0%

6% 6%

16%

72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Our organization measures:

Strategic Treasurer Supply Chain Finance Survey

3 to 1. Working capital metrics are used nearly 3x liquidity…if only one

is measured

3 out of 4. Nearly 3 out of 4 firms use Liquidity

and Working Capital Metrics

Accounting Definition:

Current Assets

–

Current Liabilities

Includes:• Cash

• Access to cash or convertible-to-cash sources

• Measure of creditworthiness

Liquidity Definition:

Net Working Capital

NWC

=

A/R + Inventory – A/P

Reflects:• Cash invested in operations

• Financing of inventory and customer sales (A/R)

• Financing provided by vendors (A/P)

• Highlights areas to free-up cash

• Excludes cash on hand

http://strategictreasurer.com/?utm_source=proposal&utm_medium=pdf&utm_campaign=global-payments-2016


Polling Question

16

Working CapitalDo you have formal working capital KPI’s ?

Yes, DSOYes, DPODPO and DSONone of the above



Comprehensive View

Working Capital / Cost View

17

Wire TransfersOften ideal for extremely large

payments but can be too costly in other applications

Check/ACH PaymentsVery inexpensive and often superior to

checks. However some vendors have no visibility to the payment details, resulting in a

phone call. Paper check payments contain details with the payments. A familiar process, but slow with no visibility. Availability and posting mismatch with a high % chance of fraud.

Card PaymentsHave a significant fee for the vendor

which can impact the overall cost structure. The timing improvement of payments and reduced risk in many

cases nearly or fully offsets the cost to the vendor.

Availability/LiquidityWorking Capital

(Treasury)

Working Capital (Accounting)

Payment types impact the financial model

A/R + Inventory – A/P

Current Assets – Current Liabilities

Continuous vs. Monthly

http://strategictreasurer.com/?utm_source=proposal&utm_medium=pdf&utm_campaign=2016-tms-trms



Comprehensive View: Moving Beyond Win/Lose

18

PO Order

ShipmentReceipt of

Goods

PaymentReceipt of Payment

Cash Application

InvoiceReceipt of

Invoice

• One company’s A/P process impacts the other company’s A/R process

• Optimizing one part of the process sub-optimizes the whole.

Risk: Might create a liquidity situation.



Competing Drivers

19

Solution

WCM Services and Supply Chain Financing

Discounting

Secure Network payment

Payment Status

Increase Free Working Capital DPO

Earn Discounts

Secure Electronic Payment at Reduced

Cost

Provide Payment Status & Approved

Invoice Portal

Low Cost, On Demand Financing, Faster DSO

Early Payment

Payment Remittance Details

Visibility to Payment Status and Approved

Invoice

Bu

yer

Va

lue

Su

pp

lier

Va

lue



Benefits of Network-Based Payables

20

• Track and trace payments

• Get notification of short payment with additional payment details

Improved Supplier DSOVisibility into Payment Status

• Protect bank information with payment processing partner secure storage

• Faster method than check or lockbox

• Achieve ACH-like payment speed with enhanced information

Secure Payment Method Apply Cash

Example: Payment solution that allows buyers a secure payment option via a managed network.

• Apply funds with rich remittance details

• Support resources for inquiries



Action Items for Everyone

• Examine Payment Process

- Efficiency

- Methods

• Opportunities to outsource payment duties

• Balance working capital/liquidity and fraud control

B2B Key Items

• Identify points of exposure

- Data

- Physical

- Processes

• Cash Flow Management




Contact Information

22

Strategic Treasurer was founded in 2004 by Craig Jeffery, a financial expert and trusted advisor to executive treasury teams since the early 1980’s. Partners and associates of Strategic Treasurer span the US, the UK, and continental Europe.

Atlanta Office Headquarters

525 Westpark Drive, Suite 130

Peachtree City, GA 30269

Website: strategictreasurer.com

Debbi DenisonSenior Consultant

Email: [email protected]

Direct: +1 678.466-2237

Craig JefferyManaging Partner


Direct: +1 678.466-2222

Pittsburgh Office

210 Sixth Ave.

Pittsburgh, PA 15222

Website: ariba.com

Drew HoflerSr. DirectorFinancial Supply Chain Marketing


Direct: +1 651.440-3165

With our recent twenty year milestone, the Ariba Network is nearly two million businesses strong, with tremendous support as a member of the SAP family. Together with our customers we’re changing the way business gets done. And we invite you to join us.


Documents

LEADING PRACTICES - Strategic Treasurer · 2019-05-23 · Treasury Accounts Payable Inventory Protect Liquid Assets Secure Liquidity Enable the firm’s long term balance sheet Align