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Sunday, 8 November 2009

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Cash Management and Global Recession



Palan Rajanathan

The global recession changed the thinking of corporates and individuals and today unlike before cash management plays a key role in any company as companies as well as individuals are feeling the pinch of the crisis.

Head of Global payments and Cash Management HSBC Palan Rajanathan spoke on cash management and its benefits to the Bank as well as the customers. Here are the excerpts of the interview

What is Payments and cash management

HSBC's Global Payments and Cash Management team is committed to helping companies realise working capital efficiencies management and improve visibility and control over their cashflow.

As cash is the lifeblood of any company, optimising internal processes is key to the long-term success of any business.

HSBC works alongside Fortune 500 multinational companies, top-tier local corporates, middle market companies, SMEs, financial institutions and government bodies to provide customised integrated payments, receivables, and liquidity solutions.

In addition to offering customers access to on the ground expertise in 86 countries, as one of the largest transaction banks HSBC has various systems that can match with the different technology platforms of our customers.

What does it mean for the bank?

Cash Management continues to be a core component of HSBC's global transaction banking business.

The financial markets turmoil has enabled us to deepen our relationships with our clients as we have worked together to review and improve cash and risk management policies to take advantage of current economic conditions.

Our commitment to partnering with clients to streamline business processes and realise efficiencies has never been more evident.

In Sri Lanka and across other markets, companies are paying greater attention to cash management and treasury services and we expect this will continue.

How does it benefit the customer?

The long term success of any business depends on efficient management of cashflow and working capital. Partnership with a trusted banking partner that has the range of cash management solutions required to optimally

manage collections, payments and liquidity is therefore proving to be vital.

For example, HSBCs Payables Financing is a unique proposition that addresses customer needs in relation to their payment cycle, namely their order to cash requirements.

HSBC understands that maintaining strategic relationships, managing risk and developing a competitive edge are key to cash management.

What is a consultative approach to cash management?

HSBC believes engaging clients and understanding their needs is where the differentiator lies.

HSBC has pioneered a consultative approach to cash management, ensuring a more collaborative process in which the customer needs are the main focus in delivering tailor made cash management solutions.

In addition, HSBC Global Payments and Cash Management is not focused on selling a particular product or service.

HSBC offers an integrated approach to ensure all aspects of clients' "receivables", "payments" and "liquidity" processes are addressed, rather than just attaching individual products to each area.

By adopting an end to end focus, we are able to nurture a holistic understanding of clients receivables and/or payments requirements, thereby offering a full service solution, rather than merely a virtual account product or a branch collection product.

In terms of payments how is HSBC assisting companies Under the current environment, customers will need to put additional focus into improving their working capital management to remain competitive.

As it stands, optimisation in working capital management is becoming particularly tough with the recent credit crunch.

Most companies are still doing their local payments via manual cheques.

When we show companies the time and effort spent on reconciliation and in manual cheque handling they have been inclined to move towards bank to bank electronic transfers (SLIPS). The process efficiency achieved releases capacity for finance staff to work on core functions.

An alternative option would be for companies to take the cheque Outsourcing facility where the bank prints and delivers the cheques. This takes out The administrative workload in cheque handling at a company level.

Tools that could be used to generate further efficiency include sms advising and e-mail advising to suppliers which minimises incoming payment queries from suppliers.

There is also an increasing importance put into the condition of strategic suppliers. HSBC Payables Financing demonstrates our intention to support the strategic intentions of our customers. Payables Financing enables buyers to provide early payment to key suppliers, thus helping them to convert their outstanding payables into cash more quickly.

Payables financing enables these companies to benefit from preferential interest rates whilst enabling them to convert their outstanding payables into cash more quickly. What are the emerging trends Companies are demanding a greater amount and higher level of information from their banks.

The challenge is to be able to effectively and efficiently convert the sea of data into a useful and well structured stream of information that supports the payments process and provides information to facilitate reconciliation. ERP integration has been a significant feature of the cash management industry. HSBC has integrated with a number of different ERP systems and companies are increasingly looking for integrations with even basic accounting systems.

The payment files are extracted from these ERP systems to be uploaded to the bank and reconciliation reports are integrated back to the ERP to increase automation.

Shared Services centres enables the streamlining of an organization functions to ensure that they deliver to the organisation the services required effectively and efficiently.

Shared services means the centralisation of similar activities in one location and running these service like a business unit, delivering services to internal customers at a cost, quality and timeliness that is better than other alternatives. HSBC is highly experienced in working with Shared Services Centres and can add significant value.

SG

 

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