Japanese-owned glassmaker NSG Group had a set of issues that will be familiar to many treasurers: multiple subsidiaries and currencies, an urgent need for greater visibility over cash and more control over payments. The solution lay in an initiative to automate payments, introduce SWIFT connectivity and feed better-quality data back into the business. A four-year project – one that was maturing just as the pandemic would place greater demands on the business – has streamlined the cash management and payments infrastructure and given more insight to the group.
Andrea Feay, NSG group treasury operations manager, takes up the tale.
I joined global glass manufacturer Pilkington, as it was at the time, in 1996 as the treasury accountant. I have had a number of roles over the years covering different aspects of treasury and am currently the treasury operations manager. The group manufactures glass products for both the automotive and architectural markets and since 2006, when Pilkington was taken over by NSG (Nippon Sheet Glass), we’ve added more specialised products – notably, NSG’s ultra-thin glass and glass cord. NSG Group has a head office in Japan, where we’re listed, and operates with two treasury centres, one in the UK and one at the head office in Tokyo. We currently have sales in more than 100 countries.
Being a global business that has many subsidiaries with their own particular needs and time differences to factor in, we have always worked with quite a sprawling cash management structure. So, when we first started to review our existing arrangements and payments processes, our main aim was to find a solution to increase our cash visibility. We were only able to see how much cash was held in many of our subsidiaries on a monthly basis, when reporting was submitted to a consolidation system, a process that was slow and unwieldy. We’d reached the point where effective daily cash management was quite difficult to maintain.
Several times over the years we’d considered introducing SWIFT connectivity in order to be more bank agnostic and to remove the online banking packages we were working with, but always concluded that it would be technically challenging and relatively expensive. In 2015, though, we found a solution that we believed could offer what we needed and we decided to connect to SWIFT directly, using an Alliance Lite2 solution offered by AccessPay.
We configured the SWIFT connectivity initially for treasury payments. Our treasury team regularly transacts in 16 different currencies to hedge exposures and fund our subsidiaries across the globe. Previously, this was all managed using online banking portals and could be fairly time-consuming, so we implemented a new fully automated system bringing payment approvals into our treasury management system (TMS), so our transactions now flow straight through to settlement. Daily settlements are processed by the back office team with payment approvers able to log in to release payments electronically. Once approved, payments are encrypted and transferred securely to AccessPay for delivery via SWIFT directly to our banks. We have found significant efficiency savings, improved controls and the information available within the TMS, including audit trail, is so much better.
Having successfully implemented the solution, we wanted to build on that SWIFT connectivity, and we had a few ideas about the direction we could take. In 2017, after speaking to various partners, banks and other treasurers, we decided to set up a payment factory. Initially, we wanted to tackle payments on behalf of, but we ambitiously decided to cover receipts on behalf of as well, using a structure of virtual bank accounts.
We used consultants to help us design our solution and it was decided to implement using SAP S/4 HANA. We connect to the local SAP installations so businesses are able to submit payment requests and view customer collections and intragroup statements directly. We now have 17 subsidiaries using the solution across Europe and the UK, covering sterling and euro transactions, and plan to include more countries and more currencies over the next few years.
We were also able to implement robotics to upload incoming daily bank statements for a number of subsidiaries outside of the payment factory, so there have been efficiencies introduced that were a by-product of setting up the payment factory and working towards a new structure that would enhance our treasury activities. But it is obvious now that the project has also been massively beneficial to the business.
The payment factory really came into its own as COVID-19 hit. Where previously we had a lot of manual and office-based controls, with a significant paper trail, the new payments process provides a full electronic audit trail, including payment approvals, and users are able to carry out all activities remotely, so working from home was no longer an issue.
In 2019, we heard of the SWIFT gpi for Corporates (g4C) project and joined the early adopter group for the Pay and Trace functionality and the pilot phase for Inbound Tracking. We are now live with both elements with one of our key banks. That was quite a technical project for us compared to past projects, and we are very pleased with the level of information and the visibility gained on our treasury payments and receipts.
For treasury transactions, we frequently have settlement issues with certain currencies, particularly Mexican peso, Polish złoty and Romanian leu, so we tend to operate with a significant buffer in our accounts for cover. Some are just timing differences, but occasionally we need to work with our bank and counterparty to trace funds. With the SWIFT gpi solution, we now have greater visibility of outgoing payments and real-time tracking information is available to us throughout the payment journey. A similar level of information is now available to us for funds being received; tracking information is available as soon as the instruction referencing our BIC is entered into the SWIFT network.
In the treasury department, the level of automation we have now means that things are generally processed more quickly, more effectively and more securely, and the information we have at our fingertips is accurate and more relevant.
The automation of the treasury payment process felt quite significant at the time, but once we got into designing the payments factory, it swamped anything we’d ever tackled before, as it was so big and complex. We spent a lot of time designing it, consulting with subsidiaries across a number of jurisdictions and taking account of local regulations.
Implementing the payments factory also took considerable in-house resource. We took just a small number of company codes as a pilot, but as this was the first time treasury had worked with SAP, this element was a lot bigger than we thought and that it took a lot longer to arrive at something that was fully functioning. Communication was very important at every stage of the project. We came across a strong resistance to change in business areas, especially during the pilot phase, but once we were live with the various elements and able to demonstrate that the process would deliver the anticipated benefits, things were considerably easier.
Our pilot project was designed to cover a small number of company codes in three different countries with two currencies. We hoped that after the initial pilot any future rollouts would be done using our internal SAP team without external consultants, so we took a ‘train the trainer’ approach. As the consultants implemented one company code, our own team would then replicate this across the project.
This did take longer to implement, but it means we now have significant knowledge internally, which has allowed us to roll out to additional countries and company codes at our own pace and also allowed our SAP team to provide effective technical support for the live processes. Due to some local legal discussions and a couple of technical issues with the existing SAP installations, we did find it difficult to keep to our original timescale. However, we found that regular project team calls helped to minimise delays.
The two deciding factors for success would be collaboration and perseverance. We learnt a great deal working alongside our information systems department and local finance teams, who are also small teams like us, and hadn’t previously used SAP S/4 HANA. It has taken a while to achieve the efficiencies we have today, but I think more importantly our businesses now appreciate that we may have the solutions they’ve been looking for, for quite a while.
At the planning stage of the project, we had held two face-to-face workshops in the UK, with the external consultants bringing together different internal expertise, including project management, various aspects of SAP – such as server support and programme interface – members of local finance teams and treasury. Most people travelled from overseas to join, so it was a significant commitment of time from people who were already busy with their day-to-day jobs, but it was invaluable. By pooling significant business experience and technical knowledge at such an early stage, we were able to design a robust solution that will be implemented as a new group standard across all of our business lines and is already bringing significant benefits to the group.
Liz Loxton is editor of The Treasurer