How this leading international manufacturer of speciality glass and glass ceramics is automating its bank account management and breaking new ground in treasury. A success story in cooperation with Deutsche Bank and TIPCO.
Bank accounts are the crux of every treasury department; central to every key process. At the end of the day, every financial transaction is reflected on a bank account. Which is why large corporates generally have dozens if not hundreds of accounts which their head offices and subsidiaries have to manage and check. These accounts are distributed around the globe, denominated in various currencies and held at numerous banks. Retaining an overview is therefore no easy task. What about the number, status and purpose of accounts? Are the account signatory permissions still up-to-date? Dieter Worf, Head of Treasury at Schott AG, is very familiar with these challenges: “With over 60 group entities and more than 200 bank accounts, managing these accounts takes a lot of time. That’s why our top priority is for as much work as possible to be dealt with by our IT systems.”
Attention to detail has always been a core element of SCHOTT’s DNA. This technology group is currently manufacturing glass-ceramic segments for the Extremely Large Telescope (ELT) which is being constructed in Chile’s Atacama Desert. It is therefore no surprise that SCHOTT also insists on maximum transparency when it comes to managing its bank accounts. The group is playing a pioneering role here because, what may sound logical is still rare in practice: an automated reconciliation process that forms a bridge between treasury departments and banks. The challenge here is enabling corporate IT systems and those of banks to automatically communicate with each other in a standardised language.
SCHOTT implemented the treasury software TIP as early as 2002; a solution which is designed specifically for integrating different systems. In the course of a brainstorming session with the software developer TIPCO, the treasury team at SCHOTT decided in 2018 to manage the first element of its bank account management processes by means of a workflow and to handle bank communication via automatically generated messages. The idea behind this: completely automatically checking whether certain accounts at the bank are active and which individuals have signatory rights to these accounts.
Jochen Alt, Treasury Manager at SCHOTT, highlights the biggest advantage: “We liked the idea of being able to automatically check the status of our accounts at the bank not only because of the time-savings. The option of checking who has signatory rights to an account at the press of a button also helps us in terms of compliance with our policies.”
While the idea is not a new one, in the past, one of the reasons why implementations failed, was a lack of willingness on the part of many banks to get to grips with the issue. The treasury information platform TIP meant that a suitable tool was already available in which all of SCHOTT’s bank accounts had been captured. The only thing missing was to find a banking partner who was prepared to allocate resources to the project. The treasury team at SCHOTT, however, was able to convince Deutsche Bank; one of its core banks for many years. The trio was therefore complete and the project could be launched.
The first step was for the project team to jointly define the target process for account confirmations. Why? Because only processes which adhere to clear rules can be translated into a workflow. Given that this was literally a greenfield project, it was necessary to precisely coordinate everything on the drawing board. TIPCO moderated the drafting of flow diagrams in order to clearly define the end-to-end process. This is where years of experience in the areas of system integration and data exchange really paid off. Dieter Worf: “We liked the fact that TIPCO focussed not only on its own system but on the entire process. And Deutsche Bank was totally committed from the outset to jointly implementing this solution despite a few minor stumbling blocks along the way.”
After several rounds of coordination, the process steps had been defined and TIPCO was able to set up the first prototype of the workflow. The first acmt messages were generated and sent to Deutsche Bank to be checked. After some fine-tuning, Deutsche Bank achieved a breakthrough: its system was able to receive and respond to a request captured in the acmt format and transferred via the SWIFT network in a fully automated fashion.
The TIP workflow and the automated exchange of data now mean that SCHOTT can have its active accounts checked and confirmed by the bank at the press of a mouse button. An error message is generated if the bank cannot identify the accounts delivered in its systems. If the accounts can be identified but the signature authorisations aren’t correct, then the accounts are flagged in the workflow for clarification with the bank. If all the data are 100% correct, the status of the accounts changes to ‘confirmed’ and the date of the confirmation is added.
When the entire workflow goes live as planned in February, the treasury software TIP will forward the account report request to Deutsche Bank fully automatically via the SWIFT network and the acknowledgement, any rejections and as well as the account reports will be processed without any manual inputs. This will make sending emails redundant and avoid any communication and transfer-related errors as well as any security loopholes.
With the aid of the workflow, SCHOTT will initially be able to reconcile account numbers, currencies and signature authorisations. A further aim is to automate the annual account balance confirmation process which is part of annual closings. In future, it could also be possible to check the lower and upper amount limits of authorised signatories. The enormous potential of this solution, however, lies elsewhere: the technical basis and the experience gained in the course of this innovative project can be leveraged to automate other processes related to opening, amending and closing bank accounts. Features which are currently only available in connection with Deutsche Bank accounts in Germany will in future also be available for international accounts. As Dieter Worf concludes: “This project in cooperation with TIPCO and Deutsche Bank has successfully digitalised an important area of bank account management. We are also convinced that far more is possible. We aim to keep focussing on this and invite all others working in treasury to do as we have done. This is the only way that completely digitalised bank account management can become reality.” The vision for the future is for other banks to do what Deutsche Bank has done and to make their systems ready for eBAM so that corporates can soon check and manage the majority of their accounts, both domestic and international, at the press of a button. Jochen Alt summarises the outlook from the perspective of SCHOTT: “We have made a start and now further steps can be taken. By the time the Extremely Large Telescope enters service in 2024, our view of our bank accounts will also be a lot clearer.”
SCHOTT is a leading international technology group in the areas of speciality glass and glass-ceramics. The company has more than 130 years of outstanding development, materials and technology expertise and offers a broad portfolio of high-quality products and intelligent solutions. SCHOTT is an innovative enabler for many industries, including the home appliance, pharma, electronics, optics, life sciences, automotive and aviation industries. SCHOTT strives to play an important part in everyone’s lives and is committed to innovation and sustainable success. The parent company, SCHOTT AG, has its headquarters in Mainz (Germany) and is solely owned by the Carl Zeiss Foundation. This is one of the oldest private and one of the largest foundations supporting scientific research in Germany. As a foundation-based company, SCHOTT assumes special responsibility for its employees, society and the environment.
Its more than 15,500 employees worldwide, of whom 5,500 are based in Germany, most recently generated revenues of EUR 2.08bn, 86% of which was generated abroad.
“Bank fee analysis is for treasurers with too much spare time.” – When Treasury departments need to get by with scarce resources, there are more important things to do than chasing banks for missing fee statements, querying unclear charges or dealing with a lack of standardisation in statement formats. It is also understandable that checking bank fees was often a bone of contention. Even those treasurers who could find enough time to deal with this mammoth task needed to first negotiate hard with their banks and then tediously work their way through mountains of data. The value of the information obtained as a result rarely warranted the effort, which is why bank fee analysis was soon shelved at most corporates.
Fortunately, these times are over. As a result of pressure from corporates, most banks have in the meantime created the basis for automatic bank fee analysis. TIPCO has been on the forefront of this issue from the outset and, with its treasury information platform TIP, has developed a tool which can efficiently process, interpret and analyse electronic fee statements. This article explains exactly how bank fee analysis works and why it can even be fun.
A bank is a supplier like any other. This means that a bank needs to ensure that what it charges is in line with what was agreed and has to regularly provide a transparent invoice (statement) setting out all of the services it has provided. While we have admittedly never heard of a bank that proactively provides its corporate clients with detailed fee statements, most banks are willing and able to do this if requested. In times of blockchain technology and autonomous cars, it also goes without saying that banks need to provide you with electronic fee statements. The following formats exist as options:
These formats contain bank fee information in the form of codes which are initially difficult for a layman to decrypt and which can vary from bank to bank. In most part, however, they all contain the same information:
The total costs associated with all services provided in connection with and charged to your accounts within a month are equivalent to the monthly fees associated with your payment transactions and other cash management services. If you automate and reliably monitor the billing of these services as part of your bank fee analysis process, you can reduce your costs by 10% to 20% while at the same time optimising your internal processes.
You might well ask what bank fee analysis has to do with internal processes. The answer is easy: Besides monitoring the application of the fees you have negotiated, the information you obtain by fully checking your banks’ fee statements also enables you to investigate your accounts and the nature of the services you source. Are there any unnecessary accounts which could be closed? Do certain subsidiaries make unusual numbers of cash transactions or are expensive services such as fax-based transfers frequently used that are really unnecessary? The findings delivered by bank fee monitoring can quickly lead to major savings, improve your compliance and considerably optimise your payment processes.
Bank fee analysis depends on numerous working steps which need to be systematically applied. The easiest way to do this is to set up a clear workflow which guides you step-by-step through all of the tasks and even learns from your past inputs. Over time, the manual work necessary decreases and the goal of largely automated monitoring gets closer and closer.
The first step is making sure that your bank and your system understand one another when identifying your accounts. Based on the fee statements submitted in the electronic formats mentioned above, the identifiers the bank uses for your accounts need to be mapped to the account identifiers in the system. In the case of existing accounts, this step only needs to be performed once. After this has been done, the workflow will only ask you to take action if a new account has been opened or an existing account closed.
Our clients are often shocked at the results once this ‘account mining’ process has been completed. It is not uncommon for accounts to crop up which have been forgotten and which urgently need to be dealt with.
The workflow provides an instant overview of all accounts which require your attention and automatically proposes the appropriate working steps. If you first need to discuss a ‘new’ account internally or with your bank, you can also automatically set up a task list for this.
How is an account mapped?
In the simplest case, an account will already exist in your system and the only thing you need to do is to map the previously unknown code used by your bank to the existing account on your internal list of accounts. In future, this account will be automatically identified by the system and the issue is done and dusted.
Things get more interesting however if an account contained in the bank’s fee statement cannot be found on your internal list of bank accounts. Either it dawns on you why this account exists, then simply set up the account in the system using the data provided (such as the bank name, currency, account number or IBAN). Other systems such as your ERP or TMS will also be automatically informed about the existence of this previously unrecorded account during this step. This allows you to gradually complete your portfolio of accounts in all your systems. A pleasant side effect of bank fee analysis.
But what if the account is entirely unfamiliar to you? For example, the general manager of a local subsidiary may only recently have opened it. Just add it to your task list to be clarified during your next internal meeting. Another plausible scenario: fees continue to be charged for an account which you thought had been closed a long time ago. By marking the account for discussion with the bank, you put it on the task list for your next bank meeting.
As soon as it is clear how you need to proceed with the account, then the status of this account is changed and it is therefore documented what needs to happen in the next step.
Once you have identified all of your accounts, the next step entails checking all of the services and the associated fees charged. Due to the considerable number of services which could be contained in the bank fee statement, it is particularly helpful that the system facilitates an easy and efficient process.
This working step essentially revolves around two key questions:
A glance at the workflow is all it takes to identify that the latest statement of fees includes services which haven’t been charged in the past and which therefore require attention. Again, manual intervention required will decrease over time: While all of the fee positions will initially be flagged as ‘new’, with each subsequent round of analysis the number of these positions will decline until only those items for which the bank has not previously charged you will be highlighted.
How to allocate the correct fee to a service:
If the details included in the statement are correct, i.e. the fee agreed and the fee charged correspond, the service charged on the statement can be imported into the list of agreed fees at the click of a button. The next time, the system will identify this fee automatically thus ensuring a swift and reliable analysis.
If the service has been agreed with the bank but an incorrect fee has been charged on the statement, you can allocate the correct fee yourself in just a few mouse clicks. Once this one-off procedure is completed, the system takes over again.
During this working step, you can also flag fees which should in future be avoided within your corporate group. These fees generally relate to services in connection with unwanted payment methods (e.g. express payment services, fax-based payments, manual transactions, etc.) and point to processes which need to be internally discussed and optimised. Once flagged, these positions no longer go unnoticed, generating unnecessary costs or security risks. Instead, a press of a button will be all it takes for you to check the status of your payment processes in future.
And in case you stumble across unknown or unjustified fees: A click is all it takes to mark these positions and automatically shift them into the task folder to be discussed at the next opportunity. It’s as easy as that.
The system can now fully automatically interpret and check your bank fee statements. It knows the relevant account and fee codes and the correct rates which the bank is entitled to charge. That’s all that is necessary to monitor your statements on a monthly basis. Once again, workflows are best suited to support you with this recurring task because even if there are only a limited number of accounts to be analysed, the amount of manual work necessary to do so would be excessive. The workflow, however, ensures that only those statements which warrant a closer look are actually scrutinised:
The list only contains positions where the workflow has identified deviations between the agreed fees and the fees delivered in the statement. This way you can speedily analyse how the deviations arose. Also, the expected total volume of fees, computed as items charged times agreed fee per item, is displayed and contrasted with the actual total volume of fees charged. The next step lets you either directly generate a list of refund requests at the click of a button or set up a task list of items to be discussed at the next internal or external meeting.
As total costs charged could also be incorrect due to the volumes (i.e. number of items) charged being incorrect, the last step also entails determining the actual volumes of transactions and services initiated and contrasting these with the volumes delivered in the statement of fees. The best data source for the number of payment transactions is your electronic account statements. This is also where the total amount of charges deducted from your account can be found and contrasted with the total amount of charges included in the fee statement.
As soon as a discrepancy has been confirmed, the system automatically generates an entry in the ‘refund’ workflow. This is where all refund applications are ‘parked’ and subsequently marked as ‘done’ once the bank has re-credited the account. This ensures that nothing gets overseen and allows you to see how your bank fee analysis really pays off. At the moment, it is still necessary to apply for refunds manually since banks are not yet offering any standardised messages which would also allow this process to be automated.
Even for automated bank fee analysis, the old adage still applies: No pain, no gain. An in-depth mapping of accounts and fees is initially necessary due to the fact that the different codes used by both corporates and banks hinder automation of this process. As standardisation increases, however, so the workload involved decreases. The internal codes used by the banks will nonetheless always need to be mapped manually. Thanks to the clearly structured workflow, this task, while still time-consuming, is no longer insurmountable and the process also delivers new insights into your account landscape and your payment processes.
Our clients all agree: bank fee analysis offers them far more than just a means of demanding refunds for unjustified bank fees. It allows them to rapidly compare banking terms and conditions across various banks and countries, and supports them in identifying dubious payment processes throughout their corporate groups. The detailed overview of all services, fees, volumes and incorrect fee statements bolsters their position in negotiations with banks and subsidiaries, and is therefore the ideal basis for tapping latent cost savings.
To find out which banks in which countries already support electronic fee monitoring, simply send an email to firstname.lastname@example.org. We look forward to hearing from you.
“We don’t need cash flow forecasting” – statements like this are frequently heard at companies with significant cash reserves. They mainly highlight concerns about major internal expenses given that capturing the relevant data can tie up significant resources. Modern cash flow forecasting, however, is about far more than just safeguarding against insolvency.
Top companies such as Lufthansa, Siemens and HOCHTIEF have for years been relying on the treasury information platform TIP to manage their cash flow forecasting. Corporates of this size generally already use a ‘classic TMS’, but this is rarely able to meet the local requirements of their subsidiaries. Yet, this is exactly what a good forecasting tool should do: it needs to be easy-to-use even at the local level in order to gather and compile important monthly forecasting data from all regions without the need to resort to Excel. TIP allows both major global players and mid-sized enterprises to easily prepare forecasts which provide them with a revealing data landscape. This article explains how you can also optimise your forecasting with TIP.
Many of the data needed for cash flow forecasting already exist in the various systems you use. ERP systems are a particularly efficient data source. For example, this is where you’ll find all of your receivables and payables, including the associated due dates and terms of payment. You can also source the total amount of regular salary payments from your ERP system. With this information at hand, you can already cover a major share of the overall volume of payments. This is exactly the key strength of TIP: As a result of direct links to all other systems, you can import and include these data in your forecasts at the press of a button.
Another helpful tool is predictive analytics. This procedure allows you to derive an amazingly accurate forecast from your historical data. A good case in point is a company subject to major seasonal volatility in terms of revenues and expenses. Assuming there is a revenue target for the coming year, the treasurer can use the statistical methods to rapidly and precisely predict how annual revenues will be spread across the individual months ahead. Other companies even analyse their social media data with predictive analytics in order to identify trends which have an impact on their cash flows.
Forecasting liquidity requires flexibility.
The treasury information platform TIP allows you to freely define the structure of your forecasting – and to do so in just a few minutes. Regardless of whether you need standard forecasts of operational and non-operational payments and financial cash flows or whether your company mainly engages in project-related business, you should be able to freely define your forecasting structure down to the last detail. Alternatively, you can use the on-board templates as a starting point and modify these whenever necessary.
TIP also allows you to define any forecasting horizon you want. Banks often require companies facing a critical cash flow situation to provide them with short-term, day-by-day, cash flow forecasts. TIP makes this possible in addition to long-term forecasts spanning several years on a month-by-month basis. It is also possible to combine daily, weekly and monthly forecasting periods. For example, your forecast could include the next seven days on a daily basis, the following 12 weeks on a weekly basis and the remaining nine months of the year on a monthly basis. You can specify how the weekly and monthly values are automatically distributed by TIP. This means that you are free to define how previous figures with a low degree of granularity appear at the weekly or daily level after the next data rollover.
Flexibility is also required when it comes to displaying the data. TIP offers several features which enable you to investigate the causes of significant differences between the current and earlier forecasts. For example, switch between the various levels of granularity (in terms of the structure and the timeline) or compare forecasts at different points in time. A single click is also all it takes to compare forecast and actual figures. Thanks to these flexible display options, expensive analysis tools are no longer necessary; all you need to do is take a quick look at your cash flow forecasting module.
More than just safeguarding liquidity
The primary purpose of forecasting of course remains ensuring sufficient liquidity. Based on your current cash reserves the cash flows associated with the various future time periods are aggregated to provide you with the forecasted volume of cash available at the end of every period. This makes it possible to quickly spot cash bottlenecks.
TIP also offers you the option of managing your credit lines and taking these into account in your forecasts based on the defined due dates. This allows you to immediately recognise when credit lines need to be drawn down or increased. This is just one of the many aspects which make it clear how you can be supported by a well-designed system.
Currency-differentiated forecasting is yet another major advantage offered by TIP. It allows you to capture all cash flows in the original transaction currency. The advantage here is that as soon as you have prepared the forecast, you not only get an overview of the development of liquidity, but also of your FX risk exposures. And because you can also manage your FX hedges in TIP, all it takes is a few clicks to calculate your open FX exposures based on a comparison of your FX payments and existing hedges. If required, TIP can even generate hedge proposals for you based on the unhedged exposure; proposals which are then automatically forwarded to your trading system in a workflow-based process once these have been confirmed and approved.
Technological progress has made preparing a cash flow forecast easier today than ever before. Even if no liquidity bottlenecks are currently likely at your company, due to the ongoing reduction in the expenses involved, it nonetheless makes sense to avoid unnecessary risks and to exploit the advantages that comprehensive cash flow forecasting offers.
“Three hundred and seventy-five thousand and thirty-three Swiss francs”. If you are involved in guarantee management, you’ll know that it is often still necessary to write guarantee volumes in words. Besides this, treasurers also spend lots of time dealing with complex requests, ticking numerous boxes correctly and accurately transferring addresses. The margin of error is zero.
Guarantee management is a specialist area where details really matter, and where a well-trained eye, top levels of concentration and lots of hard work are preconditions. At corporate groups, this often involves many subsidiaries and therefore numerous players and parties.
When a subsidiary needs a guarantee, it often takes several days and no-end of coordination until the bank guarantee is finally available. During these tedious coordination processes, it is often necessary for a colleague to pick up the phone after the fifth email and personally ask about the guarantee – but that doesn’t make things any more efficient. Double data entries are not rare, cost everyone involved lots of time and increase the error rate. And, if high volumes require several approval steps, then compliance checks and even more patience are necessary.
Imagine you could do away with this paper chase and digitalise your guarantee management as far as possible. Starting with the request for a guarantee, on to the approvals process and distribution, all the way to issuing the associated documents. Paper-based applications which are circulated within the group and later forwarded to the bank by fax, email or post, would then be a thing of the past.
That is all possible with a digitalised process and tailor-made workflow management: Reduce your processing times, forget tedious typing work and have more time for performing analyses. The following case study highlights what this could look like in practice.
When a subsidiary needs a guarantee, it simply enters the request via a standardised form directly in TIP. Group Treasury is automatically informed about the guarantee request via the workflow module and then decides in the next step whether this should be processed. If the request is granted, the competent treasurer can directly select in TIP the relevant bank or credit insurer which should issue the guarantee. Depending on the agreed guarantee limit, Group Treasury then also adjusts the ideal utilisation level and manages the allocation of business among the group’s banks.
Every bank issues its own forms, each of which needs to be processed separately. Given that the information required for a guarantee request hardly varies from bank to bank, this complexity is not really necessary. For this reason, we have developed a standardised form which is already pre-filled with your master data in TIP, meaning that you only need to add the details of the relevant guarantee. And what’s even more practical: Printing, signing and scanning the documentation is not necessary with this process due to the fact that you sign the request digitally and can send it directly from TIP to the bank via email at the click of a button.
And the future looks even rosier: It will soon be possible to generate bank guarantees in MT798 formats directly in TIP which the system forwards to the bank via SWIFT FileAct. The electronic bank confirmations are subsequently imported into the system and compared with the guarantee request for security purposes. If everything is OK, the process can be closed with just a few clicks.
Group-level guarantees can also be requested and even issued in TIP. Once the purpose of the guarantee has been clarified and the group-internal guarantor defined, the only thing missing is the certificate. In order to also handle this digitally, the guarantee text is dynamically generated based on the previously captured guarantee details. This automation saves everyone involved time and clarification steps. It will only take Group Treasury a few clicks instead of numerous manual steps to issue the guarantees. Thanks to the workflow and the standardised forms with an in-built commenting feature, the number of queries in the entire request process has been significantly reduced. Manual reprocessing is not necessary.
Once a guarantee has been issued, the next step is to deal with the associated fees and charges. This involves breaking guarantee-related charges down into different classes so that these can be calculated and allocated in TIP. Issuing and amendment charges as well as minimum commissions can be clearly differentiated between. External charge classes can be used to check that the charges billed by banks and credit insurers are correct. Due to the internal charge classes, Group Treasury can also see at a glance which amounts needed to be passed on to the relevant subsidiaries. This is made possible by clearly structured reports which can be generated in a few seconds at the press of a button. This will save your accounts department a considerable amount of work related to booking guarantees and setting up accruals, and allow the treasury department to analyse the utilisation of guarantee lines directly in TIP.
Independence from specific individuals and policy compliance are often the key arguments in favour of considering a new system solution for guarantee management. Approval levels and deputisation rules need to be clearly defined and also complied with. In addition, Group Treasury also needs accurate and full process documentation in order to ensure that an end-to-end audit trail exists. Every guarantee request in the workflow module passes through various statuses, each associated with specific tasks. Besides this, those involved can also add comments to requests at every stage of the workflow. As a result, the question of “Who did what when?” can be easily answered at any time and it is obvious where a request currently is in the process and which tasks need to be completed by whom.
There is more to the buzzword Digital Office than you might think. In order to really do away with paper-based documents, you also need digitalised document management. That is why the treasurers can store all of the documentation relating to the underlying transaction and the copies of guarantee certificates directly linked to the data record and speedily access these again.
Less work and more compliance – digital guarantee management works (nearly) at the touch of a button. Naturally, you still need the expertise of an experienced treasurer, but the tedious coordination/clarification work and the manual processing of numerous forms and certificates are a thing of the past – with TIP. Create a group-wide database for comfort letters and bank guarantees with completely digitalised document storage which makes it possible to generate reports which offer many advantages, not only for Group Treasury but also for your accounting department.
Do away with endless paperwork and manage your guarantees as digitally and easily as it gets. This webinar will highlight how you can manage your guarantees largely automatically and, above all, electronically. REGISTER now.
What is awaiting you at Stand S023? TIP offers you amazingly flexible reporting at the press of a button. Regardless of whether you have already deployed a treasury management system or still prepare reports manually with Excel, TIP is the key to saving you valuable time and increasing the quality of your data. We also offer smart solutions in the areas of cash flow forecasting, automatic bank fee monitoring, risk management, guarantees, derivatives and workflows. And, to make sure that a visit definitely pays off, we will be raffling off a PlayStation®4 plus a compatible Virtual Reality headset among all participating visitors to our stand. We look forward to your visit!
Since 2008, the BSB Newsletter is a major source of information on Bank Service Billing Standard. It’s objective is to provide regular updates on the adoption of the industry standard by the banks and the corporate treasury application providers. Download the newsletter here.