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Managing Bank Accounts, the Cinderella of Treasury Management

Management the banking relationship and bank accounts is still difficult, manual, poorly coordinated and fragmented. At a time of prescriptive procedures and form, the way bank accounts are managed falls short of requirements, with too little automation. Although the technology may exist, there is too little standardisation, the cornerstone of the much-needed automation and of more efficient and more secure administration. Management of the banking relationship could be improved by using eBAM. This is a modular project that needs to be thought through carefully, so as to decide right from the start on the strategy and targets to be pursued. A worthwhile project, but one that is difficult to "sell" in-house, and one which is often not a priority in spite of all its potential benefits.

Comprehensive overview of your bank accounts

If your treasury management is centralised, or contained in a Shared Service Centre (SSC), automated management of the banking relationship, in the wider sense, is crucial if we want the benefits of efficiency and economies of scale. This is all the more important since the tasks involved are not as interesting as they might be. Furthermore, financial regulations now make them even more unrewarding and tricky than ever. Keeping control over the banking relationship is crucial for the stringent requirements of compliance and financial audit. Better management of this relationship involves automation (i.e. paperless processes), includes having a complete overview of the accounts (in real time), needs strict processes for funds transfers to make them more secure, and finally requires the exchange of information and official data with the banks. As these are modular projects and the eBAM (i.e. Electronic Bank Account Management) part is still in its infancy, it has to be conceded that these are hybrid BAM/eBAM projects with add-ons such as controls over bank charges, lists of bank documents, and management of bank signatory powers. Not all IT suppliers offer the same functionalities. This

means we have to look for the solution that best matches the existing IT architecture, beefing it up appropriately. This is not as simple as it looks.

Bank Account Management, what do we mean then?

"Chitty Chitty BAM BAM"

For some, eBAM is the phantom of treasury, its unattainable dream (or unattainable now, at least). In the book by I. Fleming and K. Hughes, "Chitty Chitty Bang Bang", an eccentric inventor created an extraordinary amphibious flying car. In 1968, Disney made it into a film telling the story of its journey to Vulgaria. Perhaps we could parody this title and render it as "cheaty, cheaty eBAM eBAM"?

However, its travels are nowhere near as imaginary and fantastical as a journey through the world of treasury. Only the very oldest will remember this car that could do everything. Today there are solutions that can do everything involved in managing the banking relationship and streamlining it. No pushbutton solution yet exists, but we are getting there. When all the banks are connected up and agreed on standards, eBAM will then be the Nirvana of treasury and the Valhalla of managing banks. This is where we want to end up, and we can get there in several stages, if we so wish.

An eBAM/BAM project is a little like a Lego set, put together piece by piece.

eBAM project

It it is necessary (but tricky) to prepare a business case to demonstrate the viability and benefits of such a BAM project. Convincing the CFO that this project is necessary (but expensive) is one of the treasurer's main challenges.

Will it be convincing? On the face of it, what purpose does such a project serve? We've always managed without one before, so why do we need one now? Many sceptical treasurers don't even ask themselves that question. Others think that BAM is a pipedream at this stage, and that we have to wait a bit yet. However, who can say that he has a complete overview in real time of all his bank accounts worldwide? Knowing at a click what accounts you have with this or that bank, in this or that country, or even better, where one person or another has signatory powers, is an immense and even unattainable challenge. But nevertheless, is it really so impossible to know this? It is diabolically difficult to know exactly who has signing authorities over bank accounts. There is often no "single source of truth" or common platform. Would you venture to say that you are ready, at the drop of a hat, for an unannounced audit of all your

bank accounts with a review of documents? Probably not.

BAM is one of the most basic and elementary components of the work of treasurers, but is nevertheless so complicated and daunting, chaotic and manual, that it puts people off and fails to arouse any enthusiasm. Everyone detests and loathes it and nobody tries to automate it. However, with a methodical, coordinated and comprehensive approach, we can make it a powerful tool to cope with bankers hungry for side business. We can use it as a bulwark against the risk of fraud which has undeniably been on the rise over the last few years. By managing BAM properly or better we can gain the upper hand over our financial service providers. Why not manage BAM in the same way as cash management? Bank Account Management starts with a full inventory of the information available and the media on which it is held. It is of the utmost importance to use a more robust tool, allowing you to manage all aspects of the accounts and their accessories.

"Know Your Banker" (i.e. KYB) is just as important as KYC is for your banker. Why allow your banker to be in control and pull the wool over your eyes, particularly when it comes to charges and miscellaneous expenses, for example.

Bank accounts, the source of risk and fraud

In general, when it comes to BAM, few treasurers can boast that they can instantaneously produce a list of all accounts with their respective attendant signatory powers. Similarly, when somebody leaves the business, it is well nigh impossible to produce a complete list of all the accounts on which he has signing powers. It is easy to delete people from account lists in an IT payment tool, but their signatory powers will not be cancelled until the bank has duly been notified in writing. Another example is that the annual review of bank accounts and balance confirmations are very much manual processes. Transmitting information when there is a change in staff, and changes in signatory powers, are also still manual and not very secure processes, done by mail or email. Few applications provide audit trails recording who

amended what and when and most of all why (with documentation explaining and giving reasons for the change). Because they are non-standard and not consolidated, these databases are unreliable and unsatisfactory.

There are, however, tools that can help with this management work, and that can even be grafted onto the existing architecture. At a time when everyone is talking about risk management, surely it is surprising that bank accounts should in general be so badly managed, or at the very least so manually managed? An account is by its very essence a huge tinder box of risk if it is not kept under control. Fraud is on the increase, and compliance is becoming ever stricter and more irksome. Managing your accounts badly can have huge adverse consequences, in terms of cost, reputation, business interruption, etc. Faced with such risks, we need to make bank account management more professional, just as we did for payments, and automate it further. We also often find that MNCs have no clear and specific policy on the principles to be applied to signatory powers. Accounts are all too often managed locally and therefore in a decentralised way even though we are trying to centralise treasury management. We need to know how each subsidiary is asked to handle the management of its signatory powers, the basic

principles by which it must abide, the segregation of duties when these are to be put into practice, etc. This is the starting point to be addressed. There are a great many KYC (Know Your Customer) documents, and it is a good idea to manage them centrally on the same tool. Unfortunately, they are alltoo often managed chaotically and messily. We offer this as a general observation.

ROI and Business Case

How do you demonstrate the value added of a project which, on the face of it, has none or very little? This is the nub of the challenge to be overcome. How do you prove to a CFO that an eBAM project is a key component in treasury management, and that it can bring in money or cut down the risk of losing it? The difficulty often lies in the art of combining what exists with what is wanted in terms of IT sources. We must not start with a blank page. We need to adapt the eBAM module or modules to our ERP, to our TMS, to our payment factory and to the other resources in place. The scale of the task is vast and, for example, we need several tools for signatory powers, ideally adhering to the principle of segregation of duties. Those who have done this find that these tools are sometimes not very user-friendly and are difficult to input in terms of signatory powers. Why not have one single interfaced tool which would feed into all other tools? This is possible, with Hanse Orga for example. In terms of BAM in the wider sense, only a few suppliers can boast of being able to offer everything. Others only offer some of the modules. But you can always tweak your IT architecture to achieve your goal.

To sell this project, you have to combine its quantitative and qualitative benefits. When selling the project, what you need to stress is the features of stronger internal controls, of a lower risk of fraud perpetrated by disgruntled former employees, and of greater efficiency in managing and rationalising the number of accounts. You need to start from quantified assumptions. Surely just one single fraud every ten years is justification for putting a control system in place? Surely just one single bank overcharging for bank fees is justification for setting up controls over bank fees? How you will be able to economise on resources with eBAM, during year end audits for example. It has become difficult to open accounts, and also to operate them. Having your annual financial statements qualified by an auditor because you are not compliant is also harmful, surely?

Multidisciplinary project

Projects such as this are strategically important as a solid foundation for treasury management. eBAM is a method of communication, a protocol to be introduced, even though at first it may look more like BAM that eBAM. Setting up a common and complete register of all your bank accounts worldwide is key. You can add other solutions such as SEPAmail to it later to prevent the now classic IBAN frauds. At a time when the word "fraud" makes people quake in their boots, it would be a good idea to close ranks and prevent this risk, together with the risk of non-compliance.

This is a multidisciplinary project which involves several departments and several IT solutions (possibly). This is undoubtedly today the most manual part of treasury management, or at the very least the least automated part of it. Adding the management of bank charges to this project can lead to substantial savings and help justify the project from a financial standpoint.

The ultimate goal would be to install an all-in-one solution, providing all modules in one single

application (for example SAP Hana, Sungard, or Hanse Orga), but this is not essential. This is perhaps not the most value generating of projects, but nevertheless it is the essential cement that binds together the foundations of state-of-the-art treasury management.

François Masquelier, Chairman of ATEL

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