Special feature: Cash management now highly commoditized in the region

( Conclusion ) The Asia-Pacific challenge

In the Asia-Pacific region, the re-engineering of the collections process is the vital first step to unlocking liquidity and taking control of working capital to start to product immediate gains. This is because, in many of the countries in the region, the collection and reconciliation processes are largely paper-based. This is particularly true in emerging markets, for example in Thailand and India.

Companies in the region need in-country collection solutions to set the stage for the implementation of a regional solution at a later date. This can be achieved by re-engineering the collections process and automating receivables matching across a corporation, with the target benefits of streamlined administration, the full exploitation of IT assets, reduced inventory and optimized liquidity.

As cash management is becoming an increasingly commoditized product, financial service providers can offer advisory skills and better processing expertise and scale, which adds value to a client’s business through improved liquidity management and reduced costs.

Typical problems. By looking at the ordering and accounts receivables processes for a typical distribution company in the Asia Pacific region with multiple clients paying by different channels, the benefits of the solution become clear.

A review of the company may reveal multiple cashiers at separate distribution facilities, a lack of segmentation for client and payment types, and a clear need for improvement in processing and reconciliation. A collections solution developed by a bank providing receivables matching and reconciliation could help solve this issue.

Before the implementation of the solution, this type of company would be faced with a number of inefficient processes. These could include the intermingling of the wholesale and retail customer invoicing process, the replication of the cashier function at various depots, multiple payment methods throughout, decentralized collection sites, and high staff costs with cashier, sales staff and even truck drivers involved in the banking process.

All of these elements result in reconciliation challenges, leading to slow processing, a high administrative overhead and excessive demand on liquidity. The four critical components are clearly not working together. By employing the approach suggested, a list of priorities would be drawn up that includes:

• the centralization of collections sites within clearing zones;

• outsourcing the matching of receipts to invoice, thereby reducing costs;

• improving monitoring and control by streamlining; and

• improving management information systems without further investment by utilizing the bank’s systems.

Financial service providers can assist in the implementation of this type of solution. The benefits enjoyed would include improved liquidity, reduction in the costs associated with reconciliation, and a reduction of full-time employee costs related to banking functions.

Conclusion

If a company wants to significantly improve the efficiency of its working capital, re-engineering processes in the areas of liquidity, inventory management, information preparation and IT infrastructure are all starting points. When facing difficult market conditions that make achieving revenue targets increasingly difficult, companies can turn to their treasury departments for innovative solutions to cut costs, make their cash work harder and, ultimately, increase shareholder value. One of the most efficient ways of doing this is to leverage the infrastructure and solutions of banking partners, wherever and whenever possible.