Do you know the full level of liquidity in your company, broken down by currencies and financial institutions? Is your organization, and not only your network or your software, sufficiently equipped to handle internal and external attacks on your funds? In addition to procedural and compliance matters, transparency and security are most often the two issues that a company’s treasury department must deal with today.
Support for Cash Management and Payment Transactions
Bank balances available in almost real time, transmitted through bank communication channels such as SWIFT or EBICS as the established standards, are the indispensable basis for efficient liquidity management today, irrespective of whether the company only has bank accounts in Germany or also has international accounts.
While cash management was pursued to avoid overdraft interest in times of a “normal” yield curve, we live in a somewhat reversed situation where it is also necessary to ensure that liquidity on current accounts moves within the scope of potentially defined thresholds so that “fees for credit balances” are not incurred. This is also a reason why you should consider introducing direct, and ideally regular, rolling liquidity planning. This is the only way to identify potential liquidity bottlenecks or periods with too much liquidity and thus take countermeasures. Furthermore, currency-differentiated liquidity planning is the basis for managing currency risk.
For years, there has been an unbroken trend towards centralization, including the use of a dedicated treasury management system. In such a system, it is possible to easily map things such as the bundling of liquidity by means of cash pooling contracts at banks and presentation on “internal bank accounts.”
These are in turn the basis for netting and clearing processes within a company. This is understood to be the calculating and netting of trade receivables within a company. They are compared and settled on a monthly basis via a central body, that is, the netting center. This is a procedure that makes coordination work for the annual financial statements easier and also saves bank fees and interest, since there are fewer physical movements of money between companies.
In order to round out the central cash management and the payment transaction method and to continue meeting the desire for control and transparency with regard to a company’s liquidity, concepts such as “payment factories” or “collection factories” have been established as fixed components of an “in-house bank” or regional shared service organization. The basic idea in a “payment factory” is that the processing of payment transactions from central bank accounts is only done from one central company in the corporate group. Similar to cash pooling operations, “on behalf” payments are debited from the internal bank accounts of the respective companies requesting the payment after execution. The same applies in reverse to the receipt of customer payments by companies in a corporate group. It is also necessary to mention the legal and tax aspects with regard to a debt-discharging payment, which we would be glad to check as part of our integrated comprehensive advisory services offer.
We also pay close attention to the market and know about new developments such as instant payments or alternative payment methods. This also goes for further development by established service providers on the market such as SWIFT and their new option of letting you have full transparency over the flow of an international payment (“SWIFT GPI”).