Source: KPMG Corporate Treasury News, Edition 40, February 2015 There are many payment factory projects that have reported an incredible return on investment (ROI), achieving returns of up to 600% ROI in a five-year period. Nevertheless, many treasurers still struggle to get budget approval from the CFO due to non-convincing business cases. This is especially true if a rudimental payment factory has already been set up few years ago without proving all benefits that a state-of-the art payment factory should provide to the treasurer.
Based on my experience from previous projects, the following points are crucial for business case approval and management buy-in.
1. Reflect on the pain points in your daily business
This sounds very obvious but still it is often not done in depth. Taking the time to answer the question “what hurts your department most in daily business?” will help you to quantify any benefits resulting from an implementation.
Typical questions to be considered include the following: Are payment and bank statement processes already automated or is a lot of manual intervention necessary? Are cash pool transactions automatically posted? Which potential compliance and fraud issues need to be addressed?
2. Win over the CEO and CFO
Are you not getting the amount of attention from the CEO or CFO attention that you would like to have? Make sure you understand the priorities of your stakeholders and address their main priorities in the business case.
Many payment factory projects have been successfully conducted under a programme that is overseen by the CEO or CFO. Shared service centre, or even IT harmonisation, programmes frequently serve as a reason for implementation even though the business case has not been highly attractive.
3. Set up an alliance with other departments
While a payment factory mainly serves the treasury department, it also offers advantages to other departments. For example, we have seen corporates that enabled SEPA-readiness in a few weeks just because their underlying payment factory IT landscape allowed a centralised approach for implementation. Not needing to adjust the payment formats locally in every enterprise resource planning and treasury management system can be a huge advantage for the IT department, especially when the common global implementation formats are used.
Other departments that could benefit from a payment factory are the shared service centre or accounting department. By harmonising payment processes across the company, shared service centres can perform major operational parts of the payment processes. Furthermore, payment and bank statement processes can be automated as much as possible. Semi-manual bank statement processing is found more often than one might imagine but is clearly not necessary any longer.
4. Detect hidden costs
Your current payment infrastructure is free? This is one of the predominant misconceptions since banks often do not charge for the use of e-banking systems. There are associated costs, however, whether these are the costs of training people on how to use different e-banking systems or the internal IT costs of maintaining a huge number of interfaces and formats. By leveraging one channel to all banks, connectivity can be simplified and bank dependence can be reduced, at least from a technical point of view.
5. Don’t forget to include qualitative benefits
It is not uncommon for projects to be approved even though the business case was negative for the company. For example, addressing compliance and fraud risks might outweigh any ROI calculation. If your CFO will not look at qualitative benefits, you could look to quantify these security risks even though it is a bit more difficult.
In conclusion, getting a compelling business case and the management buy-in for a payment factory project can be a challenging task that may sometimes demand a lot of patience before the budget approval is given. Including not just the obvious and often cited advantages, but also those that are specific to your own company, can make the difference in convincing the CFO to go ahead with the project.
Remark: This newsletter article has been also published in the December issue of “The Treasurer”, the official magazine from the Association of Corporate Treasurers (ACT).
Author: Thomas Mehlkopf, Manager, firstname.lastname@example.org
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