You may also be interested in:

Articles

How One Tech Giant Revamped its Treasury Infrastructure

  • By Jenny Swift
  • Published: 11/23/2015

joburgAllied Electronics Corporation Limited (Altron), a South African tech conglomerate invested in power electronics, telecommunications, multi-media and information technology, has a presence in 17 countries, and employs more than 9,000 people. Its Johannesburg-based centralized treasury operates as an in-house bank to Altron’s 45 operating companies. Treasury maintains Altron’s multiple banking relationships and is responsible for the execution of all foreign and domestic payments. This currently involves activities across more than 385 bank accounts.

With so many bank accounts and treasury outposts, Altron recently decided to change its treasury operating model. The company wanted to implement new and standardized financial messaging, automate processes to increase payment efficiencies, and ensure accurate and timely financial reporting.

In revamping its treasury infrastructure, Altron had a few key goals:

  1. Improving cash visibility to assist with accurate cash forecasting
  2. Automating operations to remove manual processes and gain efficiencies
  3. Standardizing payment formats across the group
  4. Rationalizing enterprise resource planning (ERP) systems
  5. Creating a scalable model to support the organization into the future.

“It was very clear that we had many challenges with multiple operational groups, many were decentralized and using manual processes for gathering and processing our payments,” explained Genny Walsh, group treasurer for Altron, which eventually chose SWIFT and Standard Bank. “After approaching our CFO with a proposal to build a business case for a new and improved treasury operation, we were able to gather the facts, assess the required changes and propose a way forward that would support future growth for the organization. With the green light from our board, we started.”

Transformation of a treasury operation

No small task, the first step was to evaluate the vendors who offered SWIFT connectivity options. Altron chose an indirect connection via a SWIFT service bureau (SSB) to integrate with its treasury management system (TMS) and use middleware to link its various ERP systems to the SWIFT gateway. The SSB had the credentials of SWIFT experience and expertise that Altron could see would be essential to a successful project.

“Embarking on a SWIFT project you have to make IT your new best friend,” commented Debra-Lynn Marais, lead, IT shared services for Altron.

The next phase required building a closer working relationship with Standard Bank to ensure the challenges of processing data from multiple ERP systems, payroll and treasury systems could be overcome. It was clear that automation had to replace manual processes. Additionally, to ensure that information extracted from various sources could be transformed into financial messages that meet the bank’s requirements and enable straight through processing, adopting the proven SWIFT international messaging standards based on ISO 20022 was clearly the best solution.

“SWIFT standards are key to managing 15 ERP iterations. The emergence of new international standards such as ISO 20022 has allowed us to further standardize our messages with our banks with the richer message content ISO 20022 provides,” said Marais.

Standard Bank uses a hub and spoke model, where the hub is the single interaction point for the Altron treasury. When payments are received from Altron, using the standardized message formats, the system can identify exactly where the message needs to go, how to process the message and what to do with the responses.

The first phase of the project has successfully gone live with Bulk MT101 payments for suppliers, and salary payments are being processed via SWIFT. Statements are being delivered using the MT940 format.

The next phase is to implement salary payments through the XML PAIN SWIFT messages with a plan to go live in early December 2015; this will then conclude the domestic payments project.

Lessons learned

The more communication, the better. For Altron, this was a business-led project and communication with all those involved is vital to a project of this nature. Change often creates fear and it was important to ensure that in this case all parties understood that the changes would enhance their working environments.

However inefficient a manual process may appear, taking the plunge to move people to a totally automated process and handing over the responsibility to an unknown quantity can be a scary prospect. It was essential to ensure everyone involved understood the whole process of where their information is going and how they could monitor the progress of payments. Document store and workflow tools have proved to provide a level of comfort for the Altron team, who have real-time visibility of what is happening to their payments.

“Making a mistake and having 1,800 salary records rejected at 3:00 p.m. the day before payday is not a pleasant experience,” added Marais. “With patience, honest, open and timeous communication, it was possible to allay fears of those involved and build confidence in the new process. You can never over-communicate when it comes to ensuring a seamless end-to-end user experience.”

Data integrity is essential. Owning the data is important to Altron; it no longer relies on the bank to fix data errors. This removed an expensive overhead. Implementing SWIFTRef has offered Altron an excellent way of checking data, resolving errors and improving the integrity of its information before it goes to the bank. With just seven returned payments in 18 months, Altron can identify significant savings in both time and money in its new payment processing system.

Just One Day to Spare?
Discover practical knowledge and innovative solutions to bring back to your organization and take advantage of a full day of educational and networking highlights at AFP 2018.
Select your One Day Pass

Copyright © 2018 Association for Financial Professionals, Inc.
All rights reserved.