eBAM Top of Emerging Trends, Finds AFP Benchmarking Survey

08 Nov 2011

The AFP 2011 Treasury Benchmarking Survey identifies emerging trends and Microsoft's director of finance leads a session on shaping the supply chain.

Nearly seven out of 10 survey respondents from the middle market companies (less than US$1bn in revenue) have indicated that electronic bank account management (eBAM) is a valuable emerging trend, according to the 2011 Association for Financial Professionals (AFP) Treasury Benchmarking Survey. More than half of the large corporate respondents also felt the same.

The survey, sponsored by PNC, also identified cross-bank zero balance accounts (ZBA) as another important development.

More than 700 organisations participated in the survey, which evaluates operational issues for treasury departments that directly impact an organisation’s success. In its three-year lifespan, this is the first time the survey has emphasised bank relationship management. The main findings were:

• Large corporates have an average of 16 bank relationships, compared to between four to eight relationships for middle corporates (US$1-5bn) and mid-market companies.
• The average length of banking relationships is approximately 10 years.
• Eighty-five percent of large corporates has a credit facility; this is true for 82% of mid-corporates and 73% of mid-market companies.
• The average number of banks participating in the facility is 13 for large corporates, three and two for mid-corps and middle market companies, respectively.
• Companies put great value on the stability of their bank group - six out of seven say that maintaining a stable bank group is important.
• Over 70% of corporate treasurers consider a bank’s health to be a significant factor in initiating or maintaining a business relationship, and 19% changed banks last year due to concerns about a bank’s health.

Support for developments around bank agnostic facilitation through SWIFT also saw some traction, which saw an average of 22% picking this as an important trend. According to Robert Eimers, associate partner, IBM Global Business Services, who presented the results in a morning session, corporates are looking for the ability to change banks. Eimers warned that if a company is not connecting through SWIFT, or even looking into it, then it should be. He argued that SWIFT can reduce the cost of ownership by up to 80%.

Shaping the Supply Chain for Xbox’s Success

In the afternoon session Michael Trzupek, senior director of finance operations, Microsoft, went through step-by-step how he transformed the Microsoft finance department’s role from that of an accounting function, where its main function was finance reporting at the base level, to one that provides financial analysis and insight and helps to drive the business strategy.

Microsoft has a broad product portfolio. It has six operation centres in five countries, 10 Tier 1 manufacturers, 15 supply chain partners and 640 suppliers. It supplies more than 50,000 retail outlets and has 300 retail partners. It developed an integrated supply chain management programme.

Trzupek explained that the ability to sell its product to customers digitally - i.e. Xbox Live service - was changing the dynamics of the supply chain and would continue to be a challenge in the future to deliver a rich consumer experience. In 2005, Microsoft moved all manufacturing to China but maintained a hands-on factory management programme. It consolidated its supply chain.

The company believe in building and sustaining a world-class manufacturing and supply chain operation, which requires a focus on cash management, said Trzupek. He explained that the Microsoft finance team focused on:

• Taking the cost out - looking at total cost of ownership (TCO).
• Proactive cost curve management.
• Optimal product lifecycle management.
• Manage both risks and opportunities.
• Terms, conditions and balance sheet.

After joining Microsoft from Intel, Trzupek set up to evolve the finance department into a partner for the business by:

• Negotiating a seat at the table and increase the finance department’s influence.
• Provide valued insight by prioritising easy-to-win victories.
• Acting as an key contributor for the business – develop a strong partnership to deliver financial results.

Trzupek also highlighted some lessons learned, such as:

• Outsourcing is not abdication.
• Alignment in not consensus.
• Scaling is more than building and selling more units.
• Risk versus reward is exactly that – focus on risk, not reward.
• Architecture is more than just process and tools but also strategy, people, networks, processes, tools and systems must all align.

“The finance department must have a clear vision that everyone can snap to,” said Trzupek. “This is where leadership comes into play.”

First published on www.gtnews.com