When UGI International, a supplier of liquid gases across Europe and in the US, faced challenges in obtaining real-time visibility on its cash positions, they partnered with Zanders to elevate the performance of their Kyriba system. This started with the transition to the Swift banking system.  

A quest for transparency 

UGI International (UGI) is a leading supplier of liquid gases, operating under 6 brands across 16 countries. Every day, the business generates a consistent stream of high value and high volume in-country and cross-border transactions. This feeds into a complex network of disparate, multinational cashflows that the business’ treasury team is responsible for managing. When Nuno Ferreira joined as Head of Treasury in 2021, Kyriba was already in place, but it quickly became apparent that there was considerable scope to increase the use of the treasury management system to tackle persistent inefficiencies in their processes.  

“Lack of visibility was one of our key issues,” says Nuno. “We didn't have access to accurate cash positions or forecasts, so we were lacking visibility on how much cash we had at the end of each specific day. The second thing was that the payment flows were very decentralized. In the majority of countries, payments were still being done manually.” 

Lack of centralization was something that needed to be addressed and this demanded an overhaul of UGI’s approach to bank connectivity. The company’s use of the EBICS (Electronic Banking Internet Communication Standard) protocol had become a significant obstacle to them improving cash transparency and automating more of their payment processes. This was due to EBICS only allowing file exchanges with banks in a limited number of UGI European countries (France). Payments and transactions that extended beyond these geographies had to be managed separately and manually.  

“We had Kyriba but because it was only connected with our French banks with EBICS it wasn’t able to serve all of the countries we operate in,” Nuno explains. “We recognized that going forward, to get the full software benefits from Kyriba, to reduce operational risk, and to get more visibility and control over our cashflows, we needed to connect our treasury management system to all of our main banks. These were the drivers for us to start looking for a new bank connectivity solution.”

The transition to Swift 

The Swift (Society for Worldwide Interbank Financial Telecommunication) banking system offered broader international coverage, supporting connectivity to all of UGI’s core banks across Europe and in the US. But making the transition to Swift was a substantial undertaking, requiring a multi-phased implementation to bring all of the company’s banks and payments onto the new protocol. Recognizing the knowledge of Swift and resource to oversee such a large project wasn’t available in their internal treasury team of 6 people, UGI appointed Zanders to bring the technical knowledge and capacity to support with the project. 

“In this day and age, where a lot of technology is standard technology, what you get out of a TMS system depends on who helps you implement it, how much they listen to you, and how they adapt it to meet your needs,” explains Nuno. “You can find technical people easily now, but what we needed was an advisor that not only provides the technical implementation, but also helps with other areas—even if they are outside of the project. There is a lot of knowledge in Zanders about Swift and Kyriba but also about treasury in general. I knew if there were problems or issues, or even questions that fell outside of what we were implementing, there would always be someone at Zanders with knowledge in that specific area.”  

This access to wider expertise was particularly relevant given there was not only a complex implementation to consider but also the compulsory Swift security attestation and assessment. The Swift Customer Security Controls Framework (CSCF) was first published in 2017 and is updated annually. This outlines a catalogue of mandatory and advisory controls designed to protect the Swift network infrastructure by mitigating specific cybersecurity risks and minimizing the potential for fraud in international transactions. Each year, all applicable users of the banking system must submit an attestation demonstrating their level of compliance with Swift’s latest standards, which must be accompanied by an independent assessment. This spans everything from physical security of IT equipment (e.g., storage lockers for laptops) and policies around processes (e.g., payment authorization) to IT system access (e.g., two-factor authentication) and security (e.g., firewall protection). 

“We were not just talking about technical and system controls—we also needed to ensure that there were process controls in place,” says Nuno.  “We didn’t have the right skillset to undertake this security assessment ourselves and we needed consultants to help us to provide the standalone reports showing that UGI follows best practices and has controls in place. This is where the second project came in. Zanders helped ensure everything was in place - the technical parts and the process parts - for the security assessment.”  

Driving change, unlocking efficiency 

With the migration to Swift, Zanders has been able to work with the UGI team to centralize their treasury processes, unlocking new functionality and elevated performance from their Kyriba system. This has dramatically reduced the manual effort demanded from the team to administer cash management. 

“While before I was getting information from all the legal entities over Excel spreadsheets, now we don't need to reach out to our local entities to request this information – this information is centralized and automated,” explains Nuno. “This reduces operational risk because instead of uploading files or creating manual transfers within the online banking systems, it is fully integrated and so fully secured. Which also means we don't need to continuously monitor this process. This also reduces the manual activities and hence the number of FTEs required locally to run daily cash management processes. The intention was to have a secure straight-through processing of payments.” 

The Swift security assessment facilitated by Zanders, not only ensured UGI achieved the baseline standards set by Swift, it also helped to raise awareness of Kyriba and the importance of security protocols both within treasury and in the IT and Security teams. 

“Kyriba isn’t just a system to provide a report - if something goes wrong, it really goes wrong and creating this awareness was an added benefit,” says Nuno. “Doing this assessment forced us to make time to really look at our approach to security in detail. Internally, this prompted us to start discussing points that we would never normally address - simple things like closing your laptop when you’re away from your desk. This then starts to become part of the culture.”  

The initial drivers behind the project were to tackle lack of visibility in UGI’s treasury systems. These outcomes were accomplished. The transition to Swift and the integration with the business’ Kyriba system has provided the accurate, real-time visibility on cash positions Nuno and the wider treasury team needed. 

“When you don't have this visibility, you can’t manage your liquidity properly. There is value leakage and this impacts your P&L negatively on a daily basis,” says Nuno. “I now have this control and my cash position is accurate, so any excess cash or even FX exposure can be properly managed and generate higher yield to our shareholders.”  

There is a lot of knowledge in Zanders about Swift and Kyriba but also about treasury in general. I knew if there were problems or issues, or even questions that fell outside of what we were implementing, there would always be someone at Zanders with knowledge in that specific area.

Nuno Ferreira, Head of Treasury at UGI

Advice delivered with commercial empathy 

Overall, this project underscores the value of having an advisor that not only brings deep technical expertise to a project but also understands the realities of implementing treasury technology in a large, international corporate environment.  

“One of the things I really liked was the flexibility of the Zanders team,” says Nuno. “They have a very structured approach, but it’s still flexible enough to take into account things that you cannot control - the unknown unknowns. They understand that within the corporate space, and with banks, it’s sometimes hard to predict when things are going to happen.” 

This collaborative approach also unlocked additional unexpected benefits for the UGI team that will help them to continue to build on the Kyriba system performance and efficiency improvements achieved. 

“The technical capability of our team has grown with these projects,” says Nuno. “From a technical standpoint, we now understand what we can do ourselves and how to do it, and when we need to go to Zanders for help. This knowledge transfer has enabled us to do a lot of things by ourselves that before we needed to go to an external partner for help with, and at the end of the day, this saves us costs.”  

For more information, please contact our Partner Judith van Paassen. 

There are risks in undertaking any big treasury transformation project, but the risks of not adjusting to the changing world around you can be far bigger. Recognizing the potential pitfalls of relying on an outdated (and soon to be unsupported) SAP ECC system, Alliander embarked on a large-scale, business-wide transition to SAP S/4HANA. Zanders advised on the Central Payments and Treasury phase of this project, which completed in May 2024.

A future-focused perspective

Network company, Alliander, is the Netherlands’ biggest decentralized grid operator, responsible for transporting energy to households and businesses, 24 hours a day, 7 days a week. As a driving force behind the energy transition, the business is committed to investing in innovation - and this extends to how they are future-proofing their business operations as well as their contribution to shaping the sustainable energy agenda.

With their SAP ECC system approaching end of life, Alliander embarked on a company-wide switch to SAP S/4HANA. However, transitioning to SAP’s newest ERP platform is not just another simple upgrade, it’s a completely new system built on top of the software company’s own in-memory database HANA. For a business of Alliander’s size and complexity, this is a huge undertaking and a lengthy process. In order to minimize the disruption and potential risks to mission-critical business systems, Alliander has started the transition early, breaking down the implementation into a series of logically ordered phases. This means individual business areas are migrated to S/4HANA as separate projects.

“In finance, this transition started about four years ago with the transition of Central Finance to S/4—that was the first stepping stone,” says Thijs Lender, Financial Controller and Alliander’s Project Owner for SAP S/4HANA in Finance. “The second major project was Central Payments and Treasury. From a business point of view, this was the first real business finance process that we implemented on S/4.”

Central Payments and Treasury was selected as a critical gateway to moving other business areas to the new target infrastructure, for example, purchasing. It was also an ideal test ground for the migration process from ECC to S/4HANA as Alliander’s cash management processes operate in relative isolation, therefore presenting a lower risk of collateral damage across other business operations when the department moved to the new system. ''Treasury and Central Payments is at end of the of the source-to-pay and order-to-cash process—it’s paying our invoices and collecting money,” explains Guido Tabor, Digital Lead Finance at Alliander. “This means it could be moved to the target architecture without impacting other areas.”

Greenfield or brownfield?

The two most common pathways to SAP S/4HANA are a greenfield approach and a brownfield approach. For a brownfield migration a company’s existing processes are converted into the new architecture. In contrast, the greenfield alternative involves abandoning all existing architecture and starting from scratch. The second is a far more extensive process, requiring a business to often make wide-ranging changes to work practices, reengineering processes in order to optimally standardize their workflows. As Alliander’s business had changed significantly over the period of running SAP ECC, they recognized the benefit of starting from a clean slate, building their new ERP system from scratch to meet their future business needs rather than trying to retro fit their existing system into a new environment.

“We really wanted to bring it back to best practices, challenging them and standardizing our processes in the new system,” adds Thijs. “In the old way, we had some ways of working that were not standard. So, there were sometimes tough discussions, and we had to make choices in order to achieve standard processes.”

A collaborative approach

While the potential benefits of greenfield migrations are substantial, untangling legacy processes and building a new S/4HANA system from scratch is a complex undertaking. Success hinges on the collaboration of various stakeholders, including experts with understanding of the inner workings of the SAP architecture.

“From the very beginning, we didn't see this as an IT project,” Guido says. “IT was involved but also the business - in this case, finance from a functional perspective, and also Zanders and the Alliander technical team. It was really a joint collaboration.”

Zanders worked alongside Alliander right from the early stages of the Central Payments and Treasury project. ­From helping them to strategically assess their treasury processes through to planning and implementing the transition to SAP S/4HANA. Having worked with the business previously on the ECC implementation for Central Payments and Treasury, Zanders’ knowledge of Alliander’s current environments combined with their specialist knowledge of both treasury and SAP S/4HANA meant the team were well placed to guide the team through the migration process. The strength of the partnership was particularly important when the timing of the deployment was brought forward.  

“Initially we wanted to go live shortly before quarter close” Guido recalls “Then at the beginning of January, we had a discussion with our CFO about the deployment. With June 1 being very close to June 30 half year close, we decided we didn't want to take the risk of going live on this date, and he challenged us to move it back to the middle of May.”

What became really important was having a partner [Zanders] who helps you think out of the box. What's the possibility? How can you deal with it? While also being agile in supporting on fast changes and even faster solutions.

Guido Tabor, Digital Lead Finance at Alliander.

Adopting a 'Fix It' mindset

With the new deadline set, the team were encouraged by the CFO to adopt a ‘fix it’ mindset. This empowered them to take a bold, no compromises approach to implementation. For example, they were resolute in insisting on a week-long payment freeze ahead of the transition, despite pleas for leniency from some areas of the business. This confident, no exceptions approach (driven by the ‘fix it’ mentality) ensured the transition was concluded on time leading to a seamless transition of Central Payments and Treasury to the new S/4HANA system.

“This was a totally new perspective for us,” says Guido. “With go live processes or transitions like this, there will be some issues. But it didn't matter what, it didn't matter how, we just had to fix it. What became really important was having a partner [Zanders] who helps you think out of the box. What's the possibility? How can you deal with it? While also being agile in supporting on fast changes and even faster solutions.”

Central Payments and Treasury project went live on S/4HANA in May 2024, on time and with a smooth transition to the new system.

“I was really happy on the first Monday after go-live and in that early week that there weren't big issues,” Guido says. “We had some hiccups, that's normal, but it was manageable and that's what is important.”

This project represented an important milestone in Alliander’s transition to SAP S/4HANA. Successfully and smoothly shifting a core business process into the new architecture clearly progressed the company past the point of turning back. This reinforced momentum for the wider project, laying robust foundations for future phases.

To find out how Zanders could help your treasury make the transition from SAP ECC to SAP S/4HANA, contact our Director Marieke Spenkelink.

Intraday Bank Statements offers a cash manager additional insight in estimated closing balances of external bank accounts and therefore provides the information to manage the cash more tightly on the company’s bank accounts.

In a changing global floriculture market, Royal FloraHolland created a new digital platform where buyers and growers can connect internationally. As part of its strategy to offer better international payment solutions, the cooperative of flower growers decided to look for an international cash management bank.

Royal FloraHolland is a cooperative of flower and plant growers. It connects growers and buyers in the international floriculture industry by offering unique combinations of deal-making, logistics, and financial services. Connecting 5,406 suppliers with 2,458 buyers and offering a solid foundation to all these players, Royal FloraHolland is the largest floriculture marketplace in the world.

The company’s turnover reached EUR 4.8 billion (in 2019) with an operating income of EUR 369 million. Yearly, it trades 12.3 billion flowers and plants, with an average of at least 100k transactions a day.

The floriculture cooperative was established 110 years ago, organizing flower auctions via so-called clock sales. During these sales, flowers were offered for a high price first, which lowered once the clock started ticking. The price went down until one of the buyers pushed the buying button, leaving the other buyers with empty hands.

The Floriday platform

Around twenty years ago, the clock sales model started to change. “The floriculture market is changing to trading that increasingly occurs directly between growers and buyers. Our role is therefore changing too,” Wilco van de Wijnboom, Royal FloraHolland’s manager corporate finance, explains. “What we do now is mainly the financing part – the invoices and the daily collection of payments, for example. Our business has developed both geographically and digitally, so we noticed an increased need for a platform for the global flower trade. We therefore developed a new digital platform called Floriday, which enables us to deliver products faster, fresher and in larger amounts to customers worldwide. It is an innovative B2B platform where growers can make their assortment available worldwide, and customers are able to transact in various ways, both nationally and internationally.”

Our business has developed both geographically and digitally, so we noticed an increased need for a platform for the global flower trade

Wilco van de Wijnboom, Royal FloraHolland’s Manager Corporate Finance

The Floriday platform aims to provide a wider range of services to pay and receive funds in euros but also in other currencies and across different jurisdictions. Since it would help treasury to deal with all payments worldwide, Royal FloraHolland needed an international cash management bank too.

Van de Wijnboom: “It has been a process of a few years. As part of our strategy, we wanted to grow internationally, and it was clear we needed an international bank to do so. At the same time, our commercial department had some leads for flower business from Saudi-Arabia and Kenya. Early in 2020, all developments – from the commercial, digital and financing points of view – came together.”

RFP track record

Royal FloraHolland’s financial department decided to contact Zanders for support. “Selecting a cash management bank is not something we do every day, so we needed support to find the right one,” says Pim Zaalberg, treasury consultant at Royal FloraHolland. “We have been working together with Zanders on several projects since 2010 and know which subject matter expertise they can provide. They previously advised us on the capital structure of the company and led the arranging process of the bank financing of the company in 2017. Furthermore, they assisted in the SWIFT connectivity project, introducing payments-on-behalf-of. They are broadly experienced and have a proven track record in drafting an RFP. They exactly know which questions to ask and what is important, so it was a logical step to ask them to support us in the project lead and the contact with the international banks.”

Zanders consultant Michal Zelazko adds: “We use a standardized bank selection methodology at Zanders, but importantly this can be adjusted to the specific needs of projects and clients. This case contained specific geographical jurisdictions and payment methods with respect to the Floriday platform. Other factors were, among others, pre-payments and the consideration to have a separate entity to ensure the safety of all transactions.”

Strategic partner

The project started in June 2020, a period in which the turnover figures managed to rebound significantly, after the initial fall caused by the corona pandemic. Van de Wijnboom: “The impact we currently have is on the flowers coming from overseas, for example from Kenya and Ethiopia. The growers there have really had a difficult time, because the number of flights from those countries has decreased heavily. Meanwhile, many people continued to buy flowers when they were in lockdown, to brighten up their new home offices.”

Together with Zanders, Royal FloraHolland drafted the goals and then started selecting the banks they wanted to invite to find out whether they could meet these goals. All questions for the banks about the cooperative's expected turnover, profit and perspectives could be answered positively. Zaalberg explains that the bank for international cash management was also chosen to be a strategic partner for the company: “We did not choose a bank to do only payments, but we needed a bank to think along with us on our international plans and one that offers innovative solutions in the e-commerce area. The bank we chose, Citibank, is now helping us with our international strategy and is able to propose solutions for our future goals.”

The Royal FloraHolland team involved in the selection process now look back confidently on the process and choice. Zaalberg: “We are very proud of the short timelines of this project, starting in June and selecting the bank in September – all done virtually and by phone. It was quite a precedent to do it this way. You have to work with a clear plan and be very strict in presentation and input gathering. I hope it is not the new normal, but it worked well and was quite efficient too. We met banks from Paris and Dublin on the same day without moving from our desks.”

You only have one chance – when choosing an international bank for cash management it will be a collaboration for the next couple of years

Wilco van de Wijnboom, Royal FloraHolland’s Manager Corporate Finance

Van de Wijnboom agrees and stresses the importance of a well-managed process: “You only have one chance – when choosing an international bank for cash management it will be a collaboration for the next couple of years.”

Future plans

The future plans of the company are focused on venturing out to new jurisdictions, specifically in the finance space, to offer more currencies for both growers and buyers. “This could go as far as paying growers in their local currency,” says Zaalberg.

“Now we only use euros and US dollars, but we look at ways to accommodate payments in other currencies too. We look at our cash pool structure too. We made sure that, in the RFP, we asked the banks whether they could provide cash pooling in a way that was able to use more currencies. We started simple but have chosen the bank that can support more complex setups of cash management structures as well.” Zelazko adds: “It is an ambitious goal but very much in line with what we see in other companies.”

Also, in the longer term, Royal FloraHolland is considering connecting the Floriday platform to its treasury management system. Van de Wijnboom: “Currently, these two systems are not directly connected, but we could do this in the future. When we had the selection interviews with the banks, we discussed the prepayments situation - how do we make sure that the platform is immediately updated when there is a prepayment? If it is not connected, someone needs to take care of the reconciliation.”

There are some new markets and trade lanes to enter, as Van de Wijnboom concludes: ”We now see some trade lanes between Kenya and The Middle East. The flower farmers indicate that we can play an intermediate role if it is at low costs and if payments occur in US dollars. So, it helps us to have an international cash management bank that can easily do the transactions in US dollars.”

The pricing of intercompany treasury transactions is subject to transfer pricing regulation. In essence, treasury and tax professionals need to ensure that the pricing of these transactions is in line with market conditions, also known as the arm’s length principle, thereby avoiding unwarranted profit shifting.

British American Tobacco (BAT), headquartered in the UK and listed on the London Stock Exchange, is well known as the manufacturer of traditional cigarette brands as well as next generation products such as e-cigarettes. The company, which had a gross turnover of £42 billion in 2015 and employs 50,000 people across its manufacturing operations in 41 countries, is known for its commitment to operating responsibly and with transparency.

BAT recently completed the deployment of project ‘TaO’ which introduced a new target operating model enabled by one instance of SAP across all markets within the group. TaO is the enabler to migrate more processes to financial shared service centers and for the operation of a more centralized treasury function, resulting in greater visibility and control over the group’s cash resources.

Throughout the TaO project, Zanders advised BAT on how to restructure its treasury processes, which were overhauled and pushed towards a centralized model. And, as the company invested in its treasury and cash management infrastructure, the logical next step was to build on the foundation TaO provided to move from elements of best practice to world class cash management.

The TaO project highlighted the potential to increase efficiencies in payables and receivables by channeling payments through ‘on behalf of’ (OBO) structures, Phil Stewart, global head of cash and banking at BAT, says: “The ‘payments/receivables on behalf of’ (POBO/ROBO) structure was a key component of the cash management optimization initiative. These structures leveraged the in-house bank implemented during TaO, allowing for greater transparency, control and risk management while using established SAP channels for the most efficient and cost effective transaction routing.”

The ROBO challenge

BAT is an early adopter for best practices in the cash management and payments space, and in the case of OBO, BAT needed a bank that supported them in this relatively new area. Zanders director Arn Knol says: “POBO isn’t a new concept but this project focused on using virtual accounts to enable ROBO, replacing actual bank accounts with virtual accounts. This meant that each customer had to be assigned a unique virtual account – enabling BAT to see exactly when customers have paid and to replace physical bank accounts with virtual ones.”

One benefit of a ROBO structure is a clear reference for each receivable in central treasury, with data about the payment, which smooths the reconciliation process for receivables. The company also drastically reduces the number of bank accounts for further cost savings and more efficient use of staff time. The efficient processing and reconciliation of receivables also improves the day’s sales outstanding (DSO) process.

There was, however, a challenging aspect to the project: not all banks BAT spoke to were ready to meet the company’s requirements. Stewart says: “One of the challenges we faced was that the banks’ virtual account offerings were at different stages of maturity with very few able to support the model we wanted to deploy. We were able to overcome this to achieve a bespoke solution that worked for us on a consistent basis across all markets in scope. The virtual account space continues to evolve at pace, it is worth noting that a number of banks have made significant strides and are now better placed to meet our requirements.”

Concept and implementation

BAT started the OBO project in January 2016, initially working on a conceptual design for a number of pilot markets. The company’s Asia-Pacific business took on the pilot phase and chose to implement OBO in Hong Kong, Singapore, Australia and New Zealand. These countries had already rolled out the TaO project successfully and, from a regulatory perspective, had few barriers to adopting the structure.

BAT had already carried out due diligence in these markets prior to the start of the TaO project, including in-depth discussions with tax and legal experts, as well as with central banks. During the impact analysis for the OBO project, the company built on this knowledge, adding further technical analysis to identify what information SAP needed. Stewart says: “The conversations we had with Zanders at this stage were invaluable in shaping how BAT wanted to use virtual accounts to simplify account structure and enhance receivables process. They provided a high level of expertise, which enabled us to finalize the design at an early stage. This was key to the project’s success and timely implementation.”

BAT chose Deutsche Bank as the main banking partner for the Asia-Pacific pilot project. Communication between the company and the bank was crucial at this stage and facilitated the discussions. Knol explains: “The onsite meetings during the pilot phase helped to make sure that Deutsche Bank really understood what BAT wanted from a technical perspective. We played an important role in bridging any gaps between the bank and BAT.” Once the team was satisfied that the pilot phase was a success, they implemented the OBO structure with Deutsche Bank in Western Europe in the second half of 2016. Stewart says: “SEPA was the catalyst to effectively deploy OBO across Western Europe and, while the payments environment is more standardized than Asia-Pacific, the number of countries involved in the roll-out brought additional complexity to the project. We had to be clear in communicating the change in conjunction with getting the necessary legal and tax sign off from all markets. Although it’s to be expected that there will be some challenges, particularly from an IT point of view, all areas of the company were actually very supportive and fully bought into the new way of working.”

Business case for OBO

The business drivers for the project were centralization, simplification through standardization, rationalization, transparency, consistency and cost/risk reduction. The OBO structure supports treasury by increasing shared service efficiency and enhancing reconciliation processes, improving bank relationship management, consolidating banks and bank accounts, reducing fees, increasing yields and simplifying liquidity structures.

“The end result surpassed our expectations,” says Stewart. “One key factor was that our stakeholders were very aware of what impact the project would have from the outset. We ensured that our treasury, procure-to-pay and order-to-cash objectives were fully aligned. All corners of the business understood the benefits of the implementation and rather than wondering why we were doing it, they actually wondered why we hadn’t done it sooner.”

Working with the business units enabled the various stakeholders within BAT to understand the value of the project. According to Knol, BAT explored additional opportunities because it was clear that treasury was a valued partner for parts of the organization, such as procurement and the financial shared service center.

This acceptance allowed BAT to continue with the OBO project and roll it out in other markets. Stewart adds: “We certainly saw this as a wider cross-functional project supporting a number of other group wide centralization and working capital initiatives, rather than looking at it solely through a treasury lens.”

Handling complexity

BAT is a large organization; to affect change within the complexity of the OBO structure meant that the team had to cooperate closely with internal BAT business units and external players. Stewart says: “There was a huge collaborative effort from Zanders, Deutsche Bank and BAT. From the bank’s point of view, it was a particularly challenging project but they did a fantastic job in making it happen. We made it clear at the outset that we needed a bank that could effectively partner and deliver to our aggressive timelines. They were able to fulfil this and benefited as the project demonstrated what could be achieved; BAT became a showcase for them. What you need is a bank that’s able to think globally, building relationships with the shared service center in Bucharest, as well as with the team in London and to coordinate across borders.”

Is there any advice BAT would give to companies considering a similar POBO transformation? Stewart says: “Companies have to decide if the structure is right for them, what are they hoping to achieve and does it fit into company-wide objectives, is the technical infrastructure robust and secure enough to support? Is the relevant technical expertise available in-house or are consultants required? In addition, it is important to have buy-in from key stakeholders from the outset particularly from a tax and legal perspective. They need to ensure they have banking partners able to effectively support a project of this scale. It’s a huge step from conducting a request for proposal (RFP) to actually implementing the OBO structure, so choose a bank with some experience in this field. A project of this scope can seem daunting but don’t be put off by complexity: in many ways, the more complex the project, the greater the benefits.”

Future plans

BAT completed the POBO/ROBO implementation at the end of 2016 and is now looking to extend the structure to other markets where there is a solid business case to do so. They intend to roll out the project in Malaysia and they are currently in discussions with the Malaysian authorities and central bank to finalize approval. In Africa and the Americas, BAT is also looking to achieve a more streamlined bank account structure using virtual accounts on a non-OBO basis. Stewart concludes: “Overall, virtual accounts have brought us huge benefits and they would also work well in the payments space particularly for payroll and tax. Considering the progress we’ve made with OBO and the TaO project, BAT is now in a very strong position from a cash management perspective to enter a cycle of continuous improvement with simplified and efficient structures providing sufficient flexibility to adapt as technology develops and the business and regulatory requirements dictate.”

Would you like to know more about treasury transformation or virtual accounts? Contact us.

When the multinational pharma company Sanofi set out to implement a global payment factory based on SAP, the sheer size and scope of the project made it seem a Herculean task. But with meticulous planning, the right expertise and skilled team-building, the treasury team achieved a very successful outcome.

After a decade of expansion through M&A, Sanofi, the pharmaceuticals company headquartered in Paris, France, with part of its group treasury – the in-house bank team – based in Brussels, decided it was time to bring greater centralization to its payments function. With sales of €37 billion in 2015 and operations in more than 100 countries, the company, active in the research & development, manufacturing, and marketing of pharmaceutical drugs, vaccines, and animal health products, began its journey towards a global payment factory based on SAP.

Need for control and security

This decision was part of an overall initiative to increase centralization in the finance function, according to the company’s head of in-house bank, finance & treasury, Wolfgang Weber. He says: “The reasons for the project went beyond the pharmaceutical industry – the need for control over cash flow, greater security and the pressure for increased efficiency are global trends.”

He explains that Sanofi hoped to gain several benefits from the centralization project, including: lower bank fees and bank connectivity cost; greater transparency over outgoing payments; and an increased level of compliance and control.

Following a selection process to appoint an external consultant, Zanders was asked to work on the SAP global payment factory project at the end of 2012. Mark van Ommen, director at Zanders, explains that the firm used its proprietary design methodology, based on best market practices and years of implementation experience, to design the global payment factory, which included a ‘payments on behalf of’ (PoBo) structure.

Sanofi’s decentralized payments structure presented risks that required attention. The company operated with multiple payment processes, leading to inefficiencies and potential security vulnerabilities. This highlighted the need for global standards and a centralized, harmonized payments system. The project involved issuing a request for proposals (RfP) to select four banking partners.

PoBo and PiNo

The global SAP-based payment factory, currently implemented in the largest countries in Europe and with roll-out almost complete in the US, includes PoBo functionality. This allows Sanofi to channel its payments through a single legal entity, which has obvious benefits for a multinational with a presence in numerous countries. The structure enables treasury to rationalize its bank accounts and simplify cash management structures. Zanders consultant Pieter Sermeus explains that PoBo was a key factor for Sanofi in achieving efficiency and business security. He says: “Payments are now routed to one or (in the case of the euro) very few centralized bank accounts, which are mostly in-country so that cross-border fees can be avoided.”

However, PoBo isn’t practical or possible in some jurisdictions with more complex payments environments, so another solution was needed. Together, Sanofi and Zanders worked on what was internally known as the ‘central forwarding model’, which in effect was a ‘Payments in the Name of’ (PiNo) structure. This model is mainly used in countries with monetary restrictions, such as China, Malaysia and Thailand, as well as in African and Latin American and some eastern European countries. Such countries require the payee to initiate payments from its own bank account. While this does not result in a reduction in the number of bank accounts, the company is able to process payments through a single platform, which brings compliance/security benefits and also allows the harmonization of processes to an extent that makes them more efficient.

The additional security provided by the PiNo structure means there are compelling reasons to extend the use of the payment factory to more countries. Sanofi is currently working on implementing a pilot PiNo structure in Turkey. Weber adds: “Based on Zanders expertise they were well equipped to help us on setting up and designing the PiNo structure.”

Knowledge tranfer and team building

One of the key parts of the project was the transfer of knowledge from the small group of consultants appointed to work on the project to the members of staff in Sanofi’s central treasury and IT departments. Laurens Tijdhof, a partner at Zanders, explains: “Our main goal was to transfer knowledge to key members of staff. We set up training sessions and provided training on the job. This enabled them to really develop their in-house capabilities.”

During the project, there was an emphasis on collaboration between the consultant and the client and preparing Sanofi to become self-sufficient.

Zanders used a ‘train the trainer’ approach, providing training in this way for upwards of 30 key members of staff. The training aspect of the project was a success – an outcome that Weber ascribes in part to the expertise and teaching methods and in part to having the ‘right people’ on Sanofi’s team. He points out that the timing of the training was also important: “We needed to transfer knowledge and IT/SAP expertise to the different departments. This was valuable from two angles: it guarantees stability of the operations and reduces consulting costs over time. The timing of this was crucial because, in a project of this size and scope, you spend a lot of time simply ‘firefighting’ – and you forget about the training. This didn’t happen and Zanders did a good job.” While training was an important part of the project, Sanofi also had to focus on building up its internal team. Weber says: “When hiring for the project, we looked for project management skills and SAP In-House Cash technical skills. We found some very good people. We looked internally – Sanofi has 110,000 employees – as well as externally. We now have a team of 22 hard-working, committed experts. It took a while to get the right team together but I am very pleased with the result.”

Handling the complexity

The nature of the project and the sheer size of Sanofi’s organization meant that planning and coordinating the approach to the global payment factory implementation was no mean feat. Weber says: “It’s easy to underestimate the complexity and size of such a project in such a large organization. The major difficulty is to coordinate internal resources so that people don’t get lost in the complexity of the project.”

There were three defining factors to the project, namely: the size of Sanofi’s organization; the geographical scope of the project (worldwide); and the complexity of Sanofi’s requirements.

Weber underlines that, along with meticulous planning and a very capable team, a flexible approach is also needed to manage an endeavor of this size: “The initial roadmap needs to be adjustable because you may have to reset priorities. Resources may have to be shifted to another area of the project.”

Van Ommen agrees that taking care of the details can be one of the most important aspects of such a complex project: “Sanofi did this really well and they recognized their need for change management – they took a realistic view on the planning and timelines. Wolfgang and his colleague Isabelle really brought the project to the ground, providing a lot of practical input.”

Weber adds: “It’s important to have proper project governance, including senior management support up to board level, in our case represented by the group CFO.”

Security and compliance

The implementation of the payment factory also enables Sanofi to keep tighter control and visibility over its global payments. Regulations around payments are continually changing as problems and conflicts arise or dissipate in different parts of the world. Companies need to be able to react to the ever-evolving regulatory environment. Having a global payment factory in place helps to address these challenges. Cybercrime is also an increasing problem for treasury and the payment factory enables corporates to react quickly, with a centralized, secure platform.

Weber notes that the project will also help his company to keep abreast of regulatory requirements for monitoring third parties: “The implementation of ‘restricted party screening’ – an essential compliance requirement to ensure that Sanofi does not make payments to blacklisted parties – was added to the team’s responsibilities in late 2014. Although it covers master data screening and therefore is only partly related to the payment factory activities, in the Sanofi context the in-house bank team has been identified as the most appropriate place in the organization to both implement the screening as well as carry out the ongoing operations. I believe that we will hear a lot more about restricted party screening in the corporate world going forward.”

Successful outcome

Since the global payment factory was rolled out in Europe and the US, it now processes more than 30,000 fully automated payments each month, from more than 50 affiliates, with an equivalent value of more than €1 billion per month, in 30 different currencies. To help reduce the number of payment rejections, Sanofi also centralized the management of the bank key tables: the master data is constantly updated to avoid rejection due to wrong bank master data.

Weber concludes by expressing his satisfaction with the outcome of the project: “We have really succeeded in implementing a sustainable process that is safer, cheaper, more efficient, providing higher transparency, and which we can roll out across our different areas of operation.”

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