LONDON -- Last week at the ACT Cash Management Conference, Andrew Griffiths, assistant treasurer for UK water and wastewater utility Anglian Water, provided a look at how his organization implemented a cash visibility solution that centralized the function and ensured his department gets the final look at all money that leaves the business.
No funds can be sent without Anglian Water’s treasury seeing the request and giving the go-ahead. “And that, for us, is an absolute key control,” Griffiths said. “In the past, we’d have seen divisions running their own cash books and having their own urgent payment requests, and so the position at the end of the day wasn’t necessarily the position we expected from the information we had previously.”
Treasury receives cash forecasts from all of Anglian’s divisions. There are a variety of different mechanisms for capturing forecasts. Some divisions use bespoke systems, and a few still use spreadsheets. “But the key point to know there is that all of those forecasts come centrally to us in treasury, and we put those forecasts into our TMS,” Griffiths said. “We have a central TMS that manages nearly all of the bank accounts, and we have daily forecasts in that TMS from all of the divisions.”
All of Anglian’s bank accounts are structured so that there are pooling arrangements and physical sweeping arrangements within them. That is all represented in the TMS, so treasury can see exactly what is in each bank account individually.
Any one-off payment is controlled centrally in treasury. Griffiths noted that this is one area that decentralized treasury departments would likely struggle to keep track of. All requests for daily payments have to come through treasury. “They may be originated elsewhere, but they have to come through us,” he said. “So very early on in the day, we can see a consolidated position of all of our bank accounts.”
Anglian’s current TMS also gives treasury the ability to have integrated controls. In the past, treasury had a TMS that was primarily used for debt and derivatives, as well as a separate cash process. The two weren’t aligned; the controls were separate. “Now we’ve got one series of controls; the TMS does everything,” Griffiths said.
Underpinning everything, treasury has visibility of the actual cash that goes across a bank account. “We’re part of the management reporting process every month to report cash actuals,” Griffiths said. “So rather than the business looking only at profit and loss reports, there are cash reports that go alongside that every month. So we’re closing the loop in terms of the forecasts and the actuals and making sure all of that’s controlled in one process.”
Making the change
Griffiths explained that it’s taken treasury about two years to get to its current landscape. Getting there was not without its challenges, the most difficult being putting its TMS at the heart of treasury.
As Griffiths had touched on before, when he first joined treasury and Anglian, the TMS was essentially a debt management system. “It looked after debt, it looked after derivatives,” he said. “I was perfectly okay doing my cash management on a spreadsheet.”
Treasury ultimately moved its daily cash management process from spreadsheet into the TMS. That turned out to be a big help to the treasury department. “It’s had a huge benefit in terms of the integrated view of cash, whether it’s business-driven cash flows in terms of customer receipts or supply payments, or it’s debt and interest cash flows and derivative cash flows. They all come through the same place. We get one view of our cash,” Griffiths explained.
Moving from an in-house server to a hosted solution has also been a huge boon for treasury. While this created its own unique challenges, “since we’ve moved to it, the benefits far outweigh the pain we went through in getting there,” Griffiths said. “We have an outsourced IT provider, and for all the right reasons in terms of cost control, they make sure that there are forms for absolutely everything you need to do, and lead times and project managers, even for an upgrade of a TMS.”
Griffiths explained that treasury was getting behind in its operating program; changes needed to be made that weren’t being made. Using a hosted solution not only means that Anglian has the latest version of the TMS—it means that when there’s a problem, treasury can call the provider and the provider can see firsthand the issues that are happening.