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A New Approach to an Agile Corporate Treasury

by Uwe Erdtmann | SAPinsider

July 1, 2013

Corporate treasuries face many challenges in today’s market, including financial crisis, globalization, new technology trends, and an increasingly complex regulatory environment. Perhaps one of the most complex challenges corporate treasuries face, however, is the corporate-to-bank relationship. Read this article to see how the SAP Financial Services Network, which is built on SAP HANA Cloud Platform, helps financial institutions and corporate customers meet these challenges.
 

Corporate treasuries are facing tough challenges in an uncertain environment. Not only must they cope with financial crisis, globalization, and regulation changes — which range from global ISO 20022 standards, to the Single Euro Payments Area (SEPA) initiative, to the European Market Infrastructure Regulation (EMIR) — they must also adapt to new technology trends, all while focusing on cost reduction and operational efficiency.

One area in particular where corporate treasuries struggle is the corporate-to-bank relationship. This area is complex — technically as well as operationally — and the implementation of the relationship between financial institutions and their corporate customers is costly. Payment integration between ERP and treasury systems requires broker cost and expertise, and multiple proprietary bank formats often require manual uploads and conversion steps. And when this relationship is implemented badly, it can lead to poor cash management, incorrect remittance information, costly payment rejections, and manual reconciliations — costs and risks that companies can ill afford.

To help financial institutions and corporate customers meet these challenges, SAP has introduced SAP Financial Services Network, which is built on SAP HANA Cloud Platform (formerly known as SAP NetWeaver Cloud). This solution supports new business initiatives by enabling banks to transact, manage, and deliver a variety of corporate-to-bank services. Available since March 2013, SAP Financial Services Network was developed using a customer co-innovation initiative, including solution validation by major banks, to ensure that it provides the business value and functionality that customers truly need.

What Do Corporate Treasurers Really Want?

To help make sure that SAP Financial Services Network met the needs of corporate treasurers, SAP commissioned CFO Research to look into what CFOs and corporate treasurers want to be able to do to improve their performance within the business. According to the survey results,1 corporate treasurers want enhanced services to help them overcome existing shortcomings and facilitate treasury management interactions with their banks (see Figure 1). These treasurers not only are looking for better risk management and enhanced funding options that respond to a complex global environment, they are demanding better, more integrated solutions to achieve these and other goals. 

Top priorities for corporate treasurers
Figure 1 Top priorities for corporate treasurers

An integrated solution that meets these requirements must support interoperability, scalability, standardization, and process integration (see sidebar on the next page). It needs to be easily implemented, highly automated, and bank-agnostic. Corporate bank customers need flexibility to establish relationships with multiple financial institutions while managing cash and liquidity more effectively and reducing counter-party risk. Financial institutions need simplified connections with their corporate customers that lower operational costs. Both would benefit from standardized integration that minimizes on-boarding costs, onsite hardware, and lengthy development projects.

Fortunately, SAP Financial Services Network meets all of these criteria.

An Integrated Solution: SAP Financial Services Network

SAP Financial Services Network is an on-demand, cloud-based solution that connects banks and other financial institutions with their corporate customers on a secure network that is owned and managed by SAP. The network offers multiple standard services, such as payment processing, over a single channel, while also supporting the deployment of new, custom services. This solution helps banks and their corporate customers streamline key processes, such as collections, reconciliations, settlement updates, and financial reporting, and manage their banking landscapes by automating financial transactions, reducing payment rejection rates, easing reconciliation, and providing enhanced visibility into the corporate treasury.

The key features of SAP Financial Services Network include:

  • A zero-footprint connection between corporate customers and multiple financial institutions on a single channel, with easy on-boarding through predefined rapid-deployment solutions (RDSs)
  • Automation of financial transactions, even in complex system landscapes with multiple banks, countries, and currencies, with support for the most commonly used payment methods
  • Reduced payment rejection rates due to full vendor master data synchronization
  • Quick and easy reconciliation with minimal maintenance effort based on up-to-date ERP data and the latest bank statement information
  • Improved visibility into payment transactions, which enables enhanced security and visibility into global cash

How Does SAP Financial Services Network Work?

SAP Financial Services Network is one of the first applications built on SAP HANA Cloud Platform, and is compatible with systems on the bank side and with SAP ERP in the corporate customer back end. When a financial institution and corporate customer want to connect via SAP Financial Services Network, they first register to the network, complete the on-boarding process, and then activate the connection. Once the connection is established, the bank and corporate customer can exchange financial messages — including payments, payment status, and statements — across the network to run payment processes and services with no additional onsite infrastructure or maintenance required.

SAP Financial Services Network is designed to target one of the most important aspects of corporate treasury: bank-agnostic operation. Traditionally, businesses had to maintain a number of single connections with various banks using different connection types — for example, host-to-host, one-off portals, or service bureaus — which meant using a number of non-uniform processes with multiple points of failure. SAP Financial Services Network serves as a connection hub between corporate customers and their banks, so there is just one connection, one connection type, and one source of truth, which means better reliability, operational harmony, and lower costs due to upgrade- and maintenance-free operation.

SAP Financial Services Network also automates accounts payable and accounts receivable operations with a tight integration of all corporate treasury, accounts payable, and accounts receivable processes into the corporate back-end SAP ERP system. All payment or receipt types are supported, and there is just one sender. Formats are flexible and the straight-through processing allows full visibility into and control over payments, corporate credit cards, remittance data, and other services with real-time status updates.

Future scenarios will allow vendors (the banks’ corporate customers) to proactively update bank account data, tax information, and remittance data, which will automatically synchronize with the vendors’ underlying SAP ERP system. SAP Financial Services Network will compare billing documents with the appropriate payment medium collectors (for example, bank statements, credit card company statements, and cash collectors) and ease accounts receivable reconciliation with an automated background process that flags only exceptions for further processing — turning the once heavy and expensive manual process of matching incoming payments against SAP ERP sales and distribution billing documents into a highly automated process. Centralized, consolidated business monitoring will allow treasurers to access real-time business information with detailed transaction and remittance data in a single location.

A Win-Win for Banks and Their Customers

Harmonized integration of business processes with corporate banking services is crucial for any corporate finance department. Integration between bank and corporate processes is also essential as banks seek to broaden corporate relationships and minimize costs.

With SAP Financial Services Network, SAP’s expertise in cloud-based solutions, applications, analytics, mobile and database technology, and in-memory computing enables deep integration of key bank and corporate processes with minimal up-front investment, reducing operational risk on both ends while increasing control and visibility. The SAP-hosted network not only streamlines these processes, it enables banks and their corporate customers to benefit from additional SAP functionality — the in-memory processing capabilities of SAP HANA Cloud Platform enable new insights and analysis with SAP Cash Forecasting by handling huge data volumes at high speed, and extensive mobile scenarios open up new ways of working with increased efficiency and accessibility.

And by running these processes on a secure network owned and managed by SAP, banks and their customers stay current with the latest software releases, legal requirements, and payment transactions. They also have access to state-of-the-art best practices and security protection without the burden of additional infrastructure and maintenance costs, lowering total cost of ownership and accelerating time to value.

To learn more about SAP Financial Services Network, visit www.sap.com/fsn

Uwe E

Uwe Erdtmann (uwe.erdtmann@sap.com) leads product marketing for SAP Financial Services Network. With SAP since 2004, Uwe has a background of business studies and computer sciences, which has helped him bridge the gap between market reality and development theory.

1 SAP Center for Business Insight, “Ascent to Power: Corporate Treasury’s New Role in the Business” (2013; http://bit.ly/15ISChM). [back]

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