Key factors in the development and implementation of payment factory in IFF : a company project for: IFF, International Flavors & Fragrances Inc.

(1)

1 | P a g e

Key Factors in the Development and Implementation

of Payment Factory in IFF

A Company Project For:

Author: Ruby Song (11404752) Supervisor: Dr. Markus Paukku

Program: Amsterdam MBA (Full Time 2016-17) Date of Submission: 31/8/2017

(2)

2 | P a g e

Abstract

Nowadays, multinational corporations with working in various countries are confronted with a mixed payments landscape. Payment systems are still largely country-specific, each with its own clearing house and independent formats. Often this means the companies have to maintain control of disbursements locally and they have to apply many access for a number of different e-banking systems in order to handle the payments, which is cumbersome and inefficient.

As a result, corporates are looking for solutions which will streamline the corporates’ e-banking business for these different markets, using a direct link to the accounting system. One solution aim at this problem is the Payment Factory: a centralized Accounts Payable (AP) structure that centralizes all the payment activities and standardizes processes that

previously took place at a subsidiary level.

The concept of a Payment Factory comprises advisory, sales and implementation support on bank account structure, system integration, bank connectivity, reporting and smooth/secure execution of all corporates’ payments. However, developing and implementing a successful Payment Factory depends on many factors, such as the centralization vs decentralization strategy choosing, the corporate organization structure, the payment methods of each subsidiary, the ERP and TMS systems used, the team effectiveness etc.

Within this paper, the author is going to analyze the key factors in the development and implementation of Payment Factory in International Flavors & Fragrances (IFF) by applying the Integration-responsiveness framework (Prahalad & Doz, 1987) as well as the human resource management theory of team effectiveness (Cohen & Bailey, 1997).

Key words:

Account Payable (AP) Tata Consultancy Services (TCS) Treasury Management System (TMS)

(3)

3 | P a g e

List of Figures:

Figure 1: F&F market geographical segmentation in 2015... 6

Figure 2: IFF sales geographical segmentation in 2016 ... 8

Figure 3: IFF’s Group Financial team structure ... 9

Figure 4: IFF’s Treasury team structure ... 10

Figure 5: Integration-responsiveness framework (Bartlett & Ghoshal, 1989) ... 21

Figure 6: A Host to Host system illustration ... 26

Figure 7: A Swift based payment hub illustration... 27

Figure 8: A Payment Agent solution illustration ... 28

Figure 9: Project selection decision model (Thamhain ,2013) ... 32

(5)

5 | P a g e

List of Tables:

Table 1: Research resource and information... 15

Table 2: Pressures for global integration/coordination and local responsiveness (Dorrenbacher & Geppert, 2016) ... 22

Table 3: Interview results with the Global Treasury Operational Manager ... 23

Table 4: The evaluation table from the project manager ... 34

(6)

6 | P a g e

I. Introduction

In this chapter, industry background information as well as the business of IFF is provided. The treasury business of IFF is introduced and analyzed, along with the current challenges of the treasury team is facing are presented.

A. Industry Background

Flavors and fragrances are integral components of packaged foods and other consumer goods. Natural and synthetic flavor compositions create the cherry taste of cherry cola, the cinnamon aroma of pumpkin lattes and the cool mint flavor of toothpaste. Fragrance compositions add the fresh scent of pine to household cleaning products and exotic top notes to fine perfumes (IHS Markit, 2014).

The production and use of flavors and fragrances on an industrial scale started in the nineteenth century with the isolation of single chemicals responsible for the characteristic aroma of natural products. The rapid expansion of what is now a $27 billion flavor and fragrance (F&F) industry worldwide (IHS Markit, 2014), however, dates only to the last 100 years, and has been driven by the demand for a broad array of consumer products that contain flavors and fragrances. Global F&F market geographical segmentation is provided in figure 1:

(7)

7 | P a g e Within the Flavor and Fragrance industry, the top 4 companies took around 2/3 of the global market share according the data of 2016, they are:

1. Givaudan, a Swiss manufacturer of flavors, fragrances and active cosmetic ingredients. As of 2008, it is the world’s largest company in the flavor and

fragrance industries. The company has locations in Europe, Africa and the Middle East, North America, Latin America as well as Asia Pacific. In 2016, Givaudan had sales of CHF 4,7 billion with an overall market share of 25% (Wikipedia, 2017).

2. Firmenich SA is a private Swiss company in the perfume and flavor business. It is the largest privately owned company in the field and ranks number two

worldwide. Firmenich employs 6,200 people in 63 countries. The total sales revenue in 2016 was CHF 3.2 billion / $3.1 billion (F&F Leaderboard, 2017).

3. International Flavors & Fragrances is an American corporation. It is a major producer of flavors and fragrances which it markets globally. It is headquartered in New York City and has creative sales, and manufacturing facilities in 29

different countries and is a member of the S&P 500 Index. The total sales revenue of IFF in 2016 was $3.1 billion (F&F Leaderboard, 2017).

4. Symrise is a major producer of flavors and fragrances with sales of €2.903 billion in 2016. It was founded in 2003 by the merger of Haarmann & Reimer (H&R) and Dragoco, both based in Holzminden (Germany) (Wikipedia, 2017).

B. International Flavors & Fragrances (IFF) Introduction

IFF was formed in 1958 by the merger between Polak & Schwarz (P&S) and van Ameringen-Haebler. IFF is a leading innovator of sensorial experiences, co-creating unique products that consumers smell, taste, or feel in fine fragrances and cosmetics, household goods and detergents, and food and beverages (Annual report of IFF, 2016).

Leveraging their international footprint, including 42 manufacturing facilities (of which 11 were acquired since 2014) and 70 creative centers and application laboratories (of which 14 were acquired since 2014) located in 35 different countries, approximately 7,300 employees

(8)

8 | P a g e collaborate with their customers to develop over 35,000 products that they provide to all the customers in approximately 160 countries (Annual report of IFF, 2016).

In 2016, IFF achieved sales of approximately $3.1 billion, making them one of the top four companies in the global flavors and fragrances sub-segment of the broader consumer products ingredients and compounds market. Within the flavors and fragrances sub-segment of this broader market, the top four companies represent approximately two-thirds of the total estimated sales.

IFF operates in two business segments, Flavors and Fragrances. In 2016, their Flavors

business represented 48% of their sales, while their Fragrances business represented 52% of sales (Annual report of IFF, 2016). Its business is geographically diverse, with sales to

customers in the four regions set forth below:

31% 28% 25% 16% EMEA Greater Asia North America Latin America

Figure 2: IFF sales geographical segmentation in 2016 C. IFF’s Financial Structure

IFF’s finance mission is “Drive operational excellence and effective decision making through insightful analysis & planning. Ensure the preservation of our company’s assets & integrity. Thereby maximize shareholder value through long-term profitable growth & cash flow generation”(IFF website). The structure of IFF finance team can be illustrated below:

(9)

9 | P a g e

Figure 3: IFF’s Group Financial team structure

The Financial Accounting and Business Group (BG) Financial teams are working on the country basis. Their main responsibilities including:

 Business analysis, efficient planning and decision-support that pro-actively and collaboratively effect change and enhance the value of the Company.  Ensuring the transparency of business results and the quality and consistency

of the Company’s internal and external financial reporting.

 Establishing efficient and effective financial and internal control processes that contribute to operating effectiveness.

 Providing stewardship and protection of the Company’s assets and the establishment of policies and procedures that support our business and reporting requirements.

IFF's Treasury Group is responsible mainly for cash management, corporate financing and capital structure strategy, working capital and credit control, pension funding management, and risk management.

There are three teams in the Treasury Group: CFO

(10)

10 | P a g e

Figure 4: IFF’s Treasury team structure

The corporate financing function involves working with banks to optimize the balance sheet and model future financial flows.

The Risk management function supports our overall risk management efforts through collaboration with key stakeholders throughout the Company to monitor risks that the Company faces, and identify appropriate mitigation strategies. The risk management function also looks to reduce reasonable risk through the purchase of insurance policies and other risk (including foreign exchange risk and interest rate risk) mitigation activities. The Treasury Daily Operational function oversees day-to-day transactional activities and the movement of money both internal and external to the company.

The Treasurer and the corporate finance team are based in New York. The Treasury Daily Operational team and the risk management team are based in Hilversum, The Netherlands. Since there is no treasury specialist in each entity, so the financial controller of each entity is taking the treasury specialist roles in their country.

As a global company, most of IFF’s daily treasury operational business has been centralized in the Netherlands by the Treasury Daily Operational team. Meanwhile, the basic accounting businesses were outsourced to Tata Consultancy Services (TCS) in India, China and Hungary. IFF’s own accounting teams are responsible for the daily Account payable (AP) and Account Receivable (AR) management, they also take the main responsibility for the monthly closing and audit, compliance issues.

Treasurer Corporate Finance Risk management Working Capital management Credit management Treasury Dialy Operation

(11)

11 | P a g e However, in the current business module, since Account Payable business is decentralized and managed by each local office directly. This kind of decentralization caused a lack of transparency or coordination, unnecessary cost, and poor efficiency to the company. Moreover, inadequate control makes group-wide cash flow management and forecasting impossible, leading to an inability to efficiently manage corporate liquidity across affiliates. Such circumstances also mean increased operational risk for the corporate as a whole. As a result, IFF was keen to look for an ideal solution that can streamline the different E-banking systems in different countries, and centralize all the AP businesses from local

affiliates and use a single portal to build up a bridge between their ERP (SAP system) and the various bank platforms.

(12)

12 | P a g e

II. Case Description

The research is based on IFF, IFF is a leading global creator of flavors and fragrances that are used in the food, beverage, personal care or household products industries. IFF has

approximately 7,300 employees globally, together with 42 manufacturing facilities (of which 11 were acquired since 2014) and 70 creative centers and application laboratories (of which 14 were acquired since 2014) located in 35 different countries. They collaborate with their customers to develop over 35,000 products that they provide to their customers in

approximately 160 countries (Annual report of IFF, 2016).

IFF principally competes in the flavors and fragrances market, which is part of a larger market that suppliers a wide variety of ingredients and compounds used in consumer products. The global market for flavors and fragrances has expanded consistently, primarily as a result of an increase in demand for, and an increase in the variety of, consumer

products containing flavors and fragrances.

Along with the global market expansion of flavors and fragrances, IFF is struggling how to improve their treasury functions to better support the liquidity management requirements on the business expansion. Currently IFF is adopting a decentralized payment system that each affiliates are much more autonomy on their daily payments. With increased

transparency and business intelligence requirements from the group level, IFF’s treasury team was eager to look for an ideal solution that can streamline the current decentralized payment system.

A. The Research Question

As previously stated, the purpose of this project is to identify a solution that can perfectly address the problems that was caused by the decentralized payment system which IFF’s treasury team is facing. Hence the key questions for this research should answer are:

 Is the current decentralized the best option for IFF?

 Centralization vs decentralization, which one is better for IFF’s payment business, how to evaluate it?

(13)

13 | P a g e  What are the key factors may affect the implementation of the new plan?

The author has worked for IFF for 4 months, with the observation during the 4 months as well as the interview results with the Global Operational Treasury Manager, one special area of the research will focus on the team effectiveness, the reason behind it is that the author found the team effectiveness has become a big effect on the implementation of IFF’s treasury plans. It will be good to identify how IFF can take advantages of its team’s collaboration.

B. Framework and Methodology Frameworks

In order to better analyze the current decentralization payment system, and come up a solution to streamline the corporates’ e-banking business for these different markets, standardize the payment processes, and improve the global liquidity transparency and business intelligence level. Following frameworks and tools will be referenced:

“Integration-responsiveness” (I-R) framework, this framework was originally developed by Prahalad (1976) and further refined by, among others, Prahalad and Doz (1987) and Bartlett and Ghoshal (1989). While building on Lawrence and Lorsch’s insights (1967), this model brought the environment into consideration by evaluating factors beyond formal structure to include strategy, structure and management (Kostova, 2013). The core insight was that MNCs need to confront two types of pressures- for local responsiveness and for global integration (Kostovo & Marano & Tallman, 2015).

The framework assumes that international strategies vary in terms of how organizations operate (Harzing, 2000). Since international strategies rely on different types of firm-specific advantages (FSA) to achieve competitive advantage (Verbeke, 2009), organizational

structures enabling FSA development and exploitation will also differ. The importance of aligning strategy and organizational structure is long established in strategic management literature where internal alignment of the two is generally believed to influence

(14)

14 | P a g e Another framework we are going to use is the heuristic framework for analyzing the

effectiveness of team. In this framework, effectiveness is a function of environmental factors, design factors, group processes, and group psychosocial traits. Environmental factors are characteristics of the external environment in which the organization is embedded, such as industry characteristics or turbulence. Design factors refer to those features of the task, group, and organization that can be directly manipulated by managers to create the conditions for effective performance. Examples of task design variables include autonomy and interdependence. Examples of group composition design variables include size, tenure, demographics, and diversity. Examples of organizational context design variables are rewards, supervision, training, and resources. Processes are interactions such as communication and conflict that occur among group members and external others. Group psychosocial traits are shared understandings, beliefs, or emotional tone. Examples include norms, cohesiveness, team mental models, and group affect. (Cohen & Bailey, 1997) Methodology

The research is designed with a mixed approach, combining both quantitative and

qualitative methods in terms of Hans J Thamhain’s Contemporary methods for evaluating complex project proposals (2013).

The table below outlines the sources used for this research and the information gained from each of them:

Research

Resource

Information

Internal reports

By using the annual reports of the last 3 years, and the internal treasury reports, get the information regarding the global accounts, payment volumes, and cooperation banks etc. Internal Case

studies

Collect the related treasury project implementation data by analyzing the other projects

Internal observation

With 4 months learning and working in the treasury team, get the ERP, TMS system, accounting, in-house IT support information as well as the challenges the treasury team is having

(15)

15 | P a g e Practices analysis

Articles and papers published on Payment Factory by researchers and the bank institutions, provide the background and all

necessary information to understand Payment Factory, and its risks, challenges and opportunities etc.

Research Interviews

Collect the managerial belief and desire information by conducting individual interviews with the Global Treasury

Operational Manager, and discussion with working capital teams Table 1: Research resource and information

(16)

16 | P a g e

III. Centralization vs Decentralization Analysis

Within this chapter, the detailed challenges of IFF’s treasury business will be provided and analyzed, the “Integration-responsiveness” (I-R) framework will be applied to analyze which strategy, centralization or decentralization is better for IFF to address the problems of improving the transparence and standardization that IFF is facing with.

A. The Analysis of IFF’s Treasury Challenges

In the first chapter of this paper, we have briefly introduced the financial structure of IFF, below we are going to discuss further about the treasury structure as well as the challenges from the ERP/TMS system, the cooperation banks, the treasury professional, and the in-house IT support perspectives respectively.

1. EPR and Treasury Management System(TMS)

Currently IFF is using SAP as their ERP system, SAP is a German multinational software corporation that makes enterprise software to manage business operations and customer relations. According to its 2016 corporate fact sheet, SAP serves more than 335,000

customers in 190 countries, of which 80% are small and medium sized business. (Definition from WhatIs.com, 2017) The latter fact is a more recent departure from the company’s previous focus on large organizations.

SAP's ERP system enables IFF to run its business processes, be they accounting, sales, production, human resources or payment, in an integrated environment. The integration ensures that information flows from one SAP component to another without the need for redundant data entry, and it helps enforce financial, process and legal controls. SAP's ERP system also facilitates effective utilization of resources, be it machines, production

capacities, manpower or other assets of an enterprise through detailed planning of resources. (Definition from WhatIs.com, 2017)

At the same time, IFF’s treasury management system is also based on SAP, it is a module in SAP called SAP Treasury and Risk Management, there are four sub-modules under it:

 Treasury & Risk Management  Cash & Liquidity Management

(17)

17 | P a g e  In-House Cash

 Bank Communication Management

Due to the less integration of treasury functions, IFF doesn’t use many of the treasury modules so far, the most frequently used module is Cash & Liquidity management. As a standard Cash & Liquidity management module, normally it will enable the company to process following activities in treasury:

 Balance management

 Cash plan and forecast management  Fund transfers management

However, IFF didn’t realize all of these managements in Cash & Liquidity management module.

For the first activity, balance management. IFF relies on the accounting team to download the MT940 from each cooperation banks then import them to SAP, the bank account’s original currency is marked as “Document currency” in SAP, while the entity’s functional currency is marked as “Ledger currency”. All the bank balances will be converted to the ledger currency amounts in SAP with the balance FX rate of the current month. IFF uses Hyperion tool to export the bank balances on the weekly basis, the balances exported are reported as ledger balances, so there are at least two times conversion if you want to get the USD amounts for all the accounts.

First time when the balances were imported to SAP, they were converted to the functional currency, second time, when the balances were extracted from SAP, they were converted to USD again. This manually increased the inaccuracy in the bank balance management, in fact, the weekly balance report is not as accurate as IFF expects, the treasury department is struggling how to improve the transparency and accuracy of the balance report. One more problem regarding the balance management is the dependency on the

accounting team to first download the MT940 and then import it to SAP, if there is a delay on the downloading or the importing, the balance will be not accurate as it is.

Another problem IFF is facing to for the better balance management is the less control on the local banks, IFF has 72 entities 460 accounts in total, 37 of them are not in SAP, for the

(18)

18 | P a g e rest accounts, around 70 accounts are not in the scope of daily downloading and importing. We will explain more in the cooperation banks analysis.

Second, the cash plan and forecast management, a well cash plan and forecast management is strongly based on a better balance management, due to the poor balance management in the previous part we have explained, IFF is having a weak control on the cash plan and forecast. From the group level, the treasury department only makes the forecast when there is an external loan is going to be due. From the subsidiary level, each financial controller checks their own bank balances and arrange their payments by outsourced accounting team TCS. If there is lack of funds, they choose to overdrawn it from Cash pool. For the third activity, the fund transfers, currently IFF leave the fund transfer authorization to each of the subsidiaries, they can arrange the funds within the same entity, or if there is an invoice need to cleared, they are also authorized to initial the inter-company fund transfers. Moreover, IFF makes the inter-company netting on the monthly basis, on the netting date, TCS will export all the due invoices from SAP, then upload the payments on E-banking, each financial controller of the subsidiaries then approve them on E-E-banking, after the treasury department reviewed the data, it will be sent to the bank, compared with the normal payments, netting helps IFF to save the transaction costs as well as avoid as may FX deals as possible.

In summary, the current problems that IFF has on the SAP and treasury management system is poor transparency on the bank balances, complexity on getting all the bank balances timely and accurately, moreover, due to the poor transparency on the bank balances, IFF is suffering the weak control on the cash plan and forecast management.

2. Cooperation banks

IFF has two main cooperation banks, Bank Mendes Gans (BMG for short) and BNP Paribas Fortis (Fortis for short). BMG is Dutch bank specializing in international cash

management services. Founded in 1883 and located in the central of Amsterdam,

the Netherlands, BMG is an independently operated subsidiary of the ING Group (Wikipedia, 2017). While Fortis is an international bank based in Belgium and it is a subsidiary of BNP Paribas. Fortis is the largest bank in Belgium. It offers a full range of financial services to private and corporate clients, wealthy individuals, companies, public and financial

(19)

19 | P a g e institutions. The activities are divided into four business lines: Retail & Private Banking, Corporate & Public Banking, Corporate & Investment Banking and Investment Solutions (Wikipedia, 2017).

IFF has two Cash pools in these two banks respectively. A cash pool is a banking structure which allows the company to treat the balances on a number of separate accounts to be collectively. This concentration of balances optimizes the amount of interest companies both pay and receive, as the bank will consider the pooled balance when calculating interest. Use of a cash pool not only helps the company to save the interest but also helps the

company to improve its liquidity management, as total cash balances are managed centrally rather than locally.

There are many different types of cash pooling arrangement available, such as physical pooling, multicurrency notional pooling etc. IFF is having both the multicurrency notional pooling in these two banks. By using a multicurrency notional pooling, the balances of participant accounts are theoretically concentrated for the purposes optimization, no physical movement of cash takes place, the bank organizing the cash pool offsets the debit and credit balances of the accounts in the cash pool and calculates the interest to be paid or charged on a net basis. This arrangement is also called interest compensation.

In fact, IFF not only uses multicurrency cash pool to compensate the interest, but also uses it to offset the overall FX exposures of each entity. If certain entity has a positive balance on certain currencies before the month end, the treasury department will choose overdrawn certain amount of cash from the cash pool and sell it to the master company to keep a low level of foreign currency balance.

Besides two main cooperation banks, IFF has other cooperation banks around 40 globally, 30 of them are the local banks and IFF negotiate with these banks to send the MT940 to BMG on the daily basis, but still have around 15 banks they are not able to do that due to their system limitation or the very high cost. It is clearly that these local banks increased the difficulties for the cash management of IFF, so how to manage those local banks is also a key challenge for the treasury team.

(20)

20 | P a g e As we have mentioned before, there are 3 teams in the treasury department, 11 persons in total, but only 2 of them are responsible for the daily treasury operations. On the subsidiary level, there are total 72 entities but only 43 financial controllers, each of them needs to take care of 2 entities on average.

A small team of treasury professionals makes IFF can only focus on the treasury strategy plans, the FX exposure management, the cash pool daily management as well as the FX deals management. For the third party payment, which is currently decentralized in each subsidiary, IFF has no enough human resources to centralize it without optimizing the current payment procedures.

4. In-house IT support

IFF’s IT team provides technical expertise to all the employees around the world, there are four IT support teams geographically, they are responsible for providing the IT services to North America, LATAM, EMEA and Greater Asia respectively. There is one IT team who is specifically support on the financial systems IT problems, but so far we don’t have an IT support particularly focus on the treasury business.

In summary, IFF’s global expansion and current decentralized payment structure have resulted in greater complexity in its internal treasury management and bank connectivity requirements. The overall challenges can be summarized as:

 Poor control on the global payment procedures, high transaction cost of the daily payments

 Invisibility on the global liquidity management as well as the cash plan and forecast management.

 Numerous banking communication portals running up fees and expenses

 Lack of treasury professional and in-house IT support to manage the decentralized payment system

 Low integration level between SAP and TMS system B. Centralized Payment Solution

(21)

21 | P a g e As we have stated previously, most of the challenges the IFF’s treasury team is having are from the decentralized payment system, it may offer a degree of flexibility, at the same time it can offer result in poor visibility and high maintenance costs. Multiple systems, banking relationships and processes tend to introduce higher costs, lack of visibility into cash flows, complex approval processes, and reporting challenges.

In order to better analyze the centralized and decentralized payment system which fit more about IFF’s overall treasury strategy, we are going to apply the “Integration-responsiveness” (I-R) framework here.

Figure 5: Integration-responsiveness framework (Bartlett & Ghoshal, 1989) Numerous empirical studies have tested the alignment of strategy and corresponding organizational characteristics in multinational corporations (MNCs), yielding inconclusive results. Variations have largely been attributed internal differentiation in organizations triggered by different pressures in the foreign subsidiaries’’ local context. (Grogaard, 2012)

(22)

22 | P a g e The characteristics of a business are made up by a number of economic, technological and competitive conditions that either translates into pressures for global integration and coordination or into pressure for local responsiveness. Prahalad and Doz (1987:23) list altogether seven conditions that work in the direction of pressures for global integration and coordination and five conditions that work in the direction of local responsiveness. (Dorrenbacher & Geppert, 2016)

Table 2: Pressures for global integration/coordination and local responsiveness (Dorrenbacher & Geppert, 2016)

Based on the different dimensions of pressures for global integration/coordination and local responsiveness, the author conducted the interview with the Global Treasury Operational Manager with following question:

 How do you rate the pressures from the following perspectives?  What is the reason to rate like that?

(23)

23 | P a g e

Table 3: Interview results with the Global Treasury Operational Manager

According to the interview results, it is clearly that a centralized payment system will benefit more for the treasury business of IFF from many perspectives. In fact, IFF has launched the Payment Factory plan since the middle of 2016.

A Payment Factory refers to an organization establishing a central hub to gain a degree of central control and management over the processing of previously decentralized payment flows. A centralized approach to payment activities can help IFF achieve benefits in a number of areas:

Type Pressures High Medium Low Explanation

Cost saving through

economies of scale √

Saving cost is one of the core strategy of IFF in recent years. By centralizing the payment system, IFF can benefit from the SEPA payments, which can significantly reduce the transaction cost.

Enhance transparency and liquidity across all cash positions

√

How to enhance the transparency and

liquidity across all entities is a key challenge of IFF treasury, we aim to achieve it

Improve efficiency and

control √

The treasury team is struggling with how to improve the efficiency and control on the daily operational business

Harmonized, centrally-managed and

automated processes

√ It is one of the key objectives of the treasury team of IFF

Reduce number of necessary bank account and banking

relationships

√ It would be good if we can reduce the number of bank accounts and banking relationships

Payment Security √ Payment Security is the top priority of IFF's treasury team

Business intelligence

level √

A better business intelligence will help on the decision making

Convenience in communicating with local banks

√

Language is not a big issue since most of the local banks speak English, besides, we rarely need to communicate with local banks regarding the payment issues.

Paper payments √ We do have some paperwork connected to AP but all payments are digitally

Local

regulation/compliance √

We do have to compline with the local regulations, but not so many regarding AP Quick responsiveness on

the payments √

With improved transparency on the payments, the responsiveness will be enhanced.

Global integration /coordinati on Local responsive ness

(24)

24 | P a g e  Gain consistency in payment process enabling automation, less manual activity and

resultant cost reduction

 Ability to Reduce number of necessary bank accounts and banking relationships  Standardize payment formats and documentation across partner banks

 Enhance efficiency of internal cash and treasury management processes  Streamline bank communication through a single, robust channel

 Visibility over internal payment and control over funding arrangement leading to optimization of liquidity

(25)

25 | P a g e

IV. Analysis of the Current Payment Factory Practices

Within in this chapter, the current payment factory practices in the treasury fields will be introduced and compared, a series of analyses will be conducted to reach out a best fit solution for IFF based on the specific activities and cash management strategies of IFF.

A. Practices in the Treasury fields

The journey towards centralization and payment efficiency is often fraught with challenges, difficulties, just as there are no two identical leaves in the world, no two companies are likely to have exactly the same issues. Each business may have their unique situation based on their size and scale, geographic footprint, organization structure, the company culture, technological sophistication and more. As a result, there are a number of developed

centralized structures in the treasury industry, each was designed to help meet the different objectives and vary degrees of efficiencies in payments processing. The most common types of specialized structures that drive payments efficiency can be illustrated as below:

1. Host to Host (HTH)

A Host to Host connection allows clients to send and receive data in an automated and secure manner. When companies are looking to carry out the heavy lifting of processing their payment activities within their own ERP or their Treasury Management System, completing the entire authorization and release processes, payments need to be sent quickly to their bank for automatic processing to avoid tedious manual upload processes or the re-verifying or re-authorizing of payments through various E-banking platforms. Besides, the companies expect confirmations from the bank for successful transactions to update their internal systems automatically.

A Host to Host system perfectly met the requirements we have mentioned above, it

supports various communication protocols, encryption standards and compression options. Another advantage of a H2H connect is that is supports the automated authorization of transaction files on the basis of a corporate stamp. This corporate stamp or seal represents an automated, non-personalized signature, which is integrated into the technical data transfer process.

(26)

26 | P a g e However, the Host to Host system has a huge downside which is it requires the specific connection to each of the cooperation banks, if a company has more than 5 main

cooperation banks, then they need to negotiate with each of these banks to build up the connection first, since different banks may use different portal and payment files, the company also needs to create different Front-end Serves with different banks, this certainly will increase the security risks to the company’s payments, ERP or the treasury management system.

One more downside of the Hots to Host system is the different payment languages the banks may use, for each payment files, there are many fields, for each fields, the bank can have different explanation or preference, the company will need to negotiate with the banks for each specific format this bank is using, and finalize the meaning of each payment fields. This certainly will cost a lot of efforts and fund investment.

Figure 6: A Host to Host system illustration 2. Swift based Payment Hub

A Swift based Payment Hub requires the company to first apply for a Swift code from Swift organization, after having the swift code, the company is allowed to connect to Swiftnet and all your bank connectivity problems are solved. This connection replaces multiple bank channels with a single, secure and standardized window to more than 10,000 banks and financial institution members on the Swift network (CTMfile, 2017). Moreover, by

(27)

27 | P a g e processing through the utilization of SEPA credit transfers, harmonize of bank connectivity and file formats by utilizing Swift and ISO 20022 XML.

Figure 7: A Swift based payment hub illustration

A Swift connection certainly simplifies connectivity to much of the financial services industry and can be operationally more cost-effective for many companies. However, there are certain disadvantages that we shouldn’t ignore:

 A Swift connection is relatively expensive and is not a necessarily beneficial for all company users, no matter applying for a Swift code or maintaining the Swift front-end, it costs the company a lot of investment first. After the company implemented the Swift system, it still has to work with each of the cooperation banks to finalize the details of each kind of payments. Furthermore, the company will pay the maintenance fee as well as service fee each month based on the payments volume. In fact, direct Swift connection is typically used by global corporations with $25bn annual turnover and millions of payment per year.

 A Swift connection is not easy to implement, it can take 3 to 5 years to implement, and the company needs to input not only a lot of cash but also lots of employees, efforts to finalize it.

 Not all banks and financial institutions and the dealing platforms are connected to Swift, which means even through the company implemented Swift, they still cannot get rid of some local bank accounts.

(28)

28 | P a g e  Different banks use the fields in Swift messages slightly differently, this requires a lot

of input in negotiating with different banks for different payment types, moreover, all the E-banking access, tokens have to be saved as a backup plan in case the Swift system is down.

3. Payment Agent

Considering the complexity of Host to Host and the heavy investment requirement of Swift based payment hub. Payment Agent is a comprised product that has been developed in recent years.

The Payment Agent offers one-stop service that the company can plug in or connect it to their ERP system or Treasury Management System, all payments related information is centralized and automated into one single platform, afterwards it will be processed through STP (Straight Through Process).

Here is a STP solution provided by TIS (Treasury Intelligence System), as it illustrates, no matter what kind of ERP system the customer may use, either SAP or Oracle, The STP system can plugin or use an agent to connect with customer’s ERP system, with a single point of contact, TIS is able to gather all the related payment information from ERP, then it will release the payments either through Host to Host or Swift to the different banks.

(29)

29 | P a g e

Figure 8: A Payment Agent solution illustration A Payment Agent solution helps the customer from five perspectives:

1) Reduce errors and error rates

One big headache the treasury departments always have is the potential errors the

employees may create by manually extract payment files, convert formats and upload these files into different E-banking system. Manual entries often result in increased cost,

increased chances for errors or delays in information. Moreover, in order to upload the payment files into the e-banking systems, the employees need to carry around several tokens with them, and grant the right access to the right persons always will create the extra works to the treasury department.

With the Payment Agent, all payments related information is centralized and automated into one single platform, no manual intervention is required, employee can just press one single button to finish it. This not only help to provide the user with accurate real time payment information, but also significantly reduce the interfaces with different e-banking system, what the customer need to have is an user name and a password to log in the Payment Agent’s platform, all the banking connectivity is made by the STP.

2) Better control of liquidity and more transparency

A Payment Agent collects all the financial information of your organization into one central dashboard. This allows the customer to have a better overview of the current liquidity, How much cash do we have now, what is the outflow of tomorrow or even the whole week, how much cash gap do we have, since all the data is centralized in one dashboard, all of these answers can be easily found via it. Besides creating better governance and more

transparency, treasurers also gain more control over their payment processes. Without a centralized overview, it is nearly impossible to easily find out who approved which payment. By using a Payment Agent that provides a centralized dashboard for all your financial

information, this is becoming much easier. Treasury department can now monitor signatories and authorizations and easily find out how much money was actually paid to which supplier, when were they paid, creating a traceable audit trail. An extensive authorizations module supporting multiple authorization mechanisms allows treasurer department to easily manage users and configure to your company’s requirements.

(30)

30 | P a g e Moreover, since the bank will return the payment status to the Payment Agent on the real time basis, you can see the exact status of payments and configure more efficient workflows across banking systems, from one central location, creating one holistic overview of all the cash in the organization.

3) Reduce the danger of Fraud

By implementing a Payment Agent, it also helps the customer on the better access management, a central solution enables the efficient administration and management of authorized signatories and the responsible account managers – to the benefit of greater legal security and a reduced risk of fraud – and not least, it makes the adherence to compliance regulations easier, since unitary processes and workflows are defined at the central location and do not have to be individually executed a hundred times for each and every account.(Resources | Thalesesecurity)

Moreover, this is not just about transparency, legal and compliance considerations, a central solution reduces the waiting time for the entire payment transaction process enormously and leads directly to cost reductions. Until now each individual branch or subsidiary had to set up and maintain its own interfaces to the various finance institutes with different payment and data exchange formats – almost always involving elaborate authorization procedures and often a considerable effort for the IT department. With a central payments system all of these tasks must be done just once, instead of in every branch. As a central administration and process tool it makes all of these functions for executing payments available and increases the efficiency, transparency and security of all payment procedures. This relieves the burden on in-house IT departments and releases their capacity for the actual core business of the company. (Resources | Thalesesecurity)

4) Better levels of business intelligence

Making better, more informed and faster decisions based on holistic real-time insights that improve performance is one of the key elements that many treasury departments currently miss. Since treasurers do not dispose of this holistic overview, they are not able to use the most accurate financial data to make the best informed decisions. Treasurers need this real-time holistic information in order to deliver insights to the business that is meaningful and actionable. (Global Banking & Finance Review, 2017)

(31)

31 | P a g e A Payment Agent helps treasury department make more informed decisions by providing reliable and real time payment data in one overview. Centralizing all payments information via a centralized dashboard allows complete visibility of all outgoing cash flows so that treasury can optimize cash balances and make effective decisions of where to deploy cash and liquidity. In this way, the treasury department can save a lot of time on gathering the bank balance data and real-time data, which creates better reporting capabilities and higher levels of business intelligence for more informed and faster decision making.

5) Saving the cost

The savings that result from the implementation of a one-stop Straight Through Process payment solution for a multi-international active medium-sized company can run to around one million euros per year. Of course, this sum will vary depending upon the specific

situation. Nevertheless the potential savings can be roughly estimated on the basis of a sample calculation for a typical scenario. In a typical scenario a multi-international active mid-sized company maintains about 400 bank accounts worldwide and deploys around 20 different e-banking tools. By using a standardized, unitary, automated and ERP-integrated payment solution across the enterprise, the company will realize the savings from 250,000 Euro to 300,000 Euro totally. (Banking Briefs 2008)

With an ERP rollout, further considerable savings arise: the company avoids external consultancy costs for the configuration of payment formats, the creation of middleware, communication with the banks as well as systems testing and configurations. As the operator of the payment solution, the payment agent takes responsibility for

communication and creates the bank and country-specific payment formats and types. In the case of a rollout in 20 countries with two banks per country, around 600 consultancy days’ effort is saved (Banking Briefs 2008). Not included in this sample calculation are the additional returns brought by real-time overview into cash positions and cash flows or the evaluation and analytical functions. In any case, these are the basis for better business decisions and are therefore virtually impossible to quantify in monetary terms.

In conclusion, there are several options the company can choose when they are considering to implement a payment factory, each option has their own advantages and disadvantages,

(32)

32 | P a g e how to make a decision heavily based on the company’s size, their current ERP and Treasury management systems, the budget on the investment, and the risk preferences.

B. Comparison of different Practices

In order to better compare the different Payment Factory practices and figure out which one will best fit the business of IFF, we are going to apply qualitative approach to make the analysis.

According to the key findings of “contemporary methods for evaluating complex project proposals” (Thamhain ,2013). Project opportunities must be analyzed relative to their potential value, strength, and importance to the enterprise. Four major dimensions should be considered for project evaluation and compared to available alternatives as graphically shown in Figure 9:

1. Added value of the new project, consistent with the organizational objectives 2. Resource requests such as cost, personal, and facilities needed to complete the new

project

3. Readiness and ability of the enterprise to execute the project 4. Managerial belief and desire (Thamhain ,2013):

(33)

33 | P a g e Moreover, studies of collective multifunctional assessment practices show that simple scales are most effective for leading to actionable team decisions, the four most popular and robust scales for judging situational outcomes are shown below (Thamhain ,2013):

1. Ten-point judgment scale: This scale ranges from +5 (most favorable) to -5 (most unfavorable)

2. Three-point judgment scale: +1 (favorable), 0 (neutral or cannot judge), -1 (unfavorable)

3. Five-point judgment scale: A (highly favorable), B (favorable), C (marginally favorable), D (most likely unfavorable), F (definitely unfavorable)

4. Five-point like scale: 1 (strongly agree), 2 (agree), 3 (neutral), 4 (disagree), 5 (strongly disagree)

The qualitative approach relies on subject experts from various functional areas for

collectively defining and evaluating broad project success criteria. The first step is to define the specific organizational areas critical to project success and to assign expert evaluators. The evaluators should have the full support from the senior management and should be the core team ultimately responsible for project implementation (Thamhain ,2013).

Since there is a small treasury team in IFF, the Global Treasury Operational Manager and the Risk Manager are assigned as the expert evaluators for the Payment Factory project, and they are also the main responsible persons for this project. Based on the four evaluation criteria we have mentioned in Figure 9, by applying the ten-point judgment scale, (+5 means highest benefit and easiest readiness, -5 means most cost and biggest risk). They made several discussions and finalized the evaluation table as below:

(34)

34 | P a g e

Table 4: The evaluation table from the project manager C. IFF’s Decision Making

As the comparison result shows, the Host to Host option got the lowest score, Swift based payment hub got the middle, Payment Agent got the highest score, which shows the

Payment Agent will be the best solution for IFF. This is in line with analysis we have made in the three practices introduction chapter.

From the added value perspective, Host to Host shared most limited flexibility as well as the scalability compared with the other two options. Moreover, from the Business intelligence and Ease of use aspects, Host to Host scored the lowest level since it needs a specific serve to connect with each of the banks. In the contrary, Payment Agent shows the best flexibility

Dimensions Evaluation Criteria Host to Host Swift based

payment hub Payment Agent

Global Coverage (one-stop-shop

solution) 1 3 3

Scalability 1 2 3

Flexibility of system 1 2 3

Ease of use (authorizations,

approve by mobile) 1 3 3

Business intelligence (file formatting for AR reconciliation, sanction controls, bank account validation, dashboards, email triggers, etc.)

1 2 4

Total annual saving compared

with current approach 2 2 2

Human resource (Required FTE in

IT, Finance, Treasury) -4 -5 -3

Implementation cost -4 -5 -4

Implementation timeline -4 -5 -3

Total annual maintenance cost

(license, support item based fees) -3 -4 -4

level of innovation 2 3 4

level of system integration: SAP +

Agent + Bank connectivity 3 4 4

Operational risk (maintenance,

support, fraud etc.) -4 -1 -3

Counterparty risk (level of

dependency on external parties) -3 -1 -5

Availability of back-up functionality 0 0 0 Total -10 0 4 Managerial belief and desire Readiness and ability to implement Resource requests Added value

(35)

35 | P a g e and scalability compared with the other two options. These advantages mainly attributed by the one-stop service that they provided.

In terms of the resource requests, Swift based payment hub got the highest score, this is also align with people’s perception of Swift, direct Swift connection is typically used by global corporations with $25bn annual turnover and millions of payment per year. From the readiness and ability to implement perspective, Swift based payment hub and Payment Agent both can have a great integration with the SAP and the banking system. Due to the complexity on the one to one connection of Host to Host, it scores the lowest level. Regarding managerial belief and desire, Swift shows the biggest advantage in post go-live maintenance, and Payment Agent shows the biggest risk on the level of dependency on external parties.

However, overall Payment Agent still shows an advantage compared with the other two options due to its flexibility and ease to use strong points. Hence IFF decided to choose Payment Agent as their Payment Factory solution.

(36)

36 | P a g e

V. Challenges of Implementation of Payment Factory

IFF’s global expansion and current decentralized payment structure have resulted in greater complexity in its internal treasury management and bank connectivity requirements. As such, IFF’s corporate financial group decided to embark on a treasury technology

transformation project. In particular, the project team defined the following objectives for this:

 Centralize payments through a global payments hub  Achieve visibility and control over all accounts globally.

 Enhance efficiency of internal cash and treasury management processes  Streamline bank communication through a single, robust channel  Standardize payment formats and documentation across partner banks

Table 5: Payment Factory Project brief introduction

Since the project was kicked off in the middle of 2016, it has been more than 12 months so far, overall it runs well. However, the project team did encounter some problems during decision making as well as the implementation period. The two main challenges in are the project team effectiveness as well as the management on diversity.

A. Team Effectiveness

Project name: Payment Factory Implementation

Project sponsor: Treasurer

Project manager: Global Treasury Operations Manager

Project member:

Global Treasury Operations Analyst, Financial controllers of each affiliate, Tata consultancy service (TCS), IFF IT support team

External vender: XXX Payment Agent

(37)

37 | P a g e A team is a collection of individuals who are interdependent in their tasks, who share responsibility for outcomes, who see themselves and who are seen by others as an intact social entity embedded in one or more larger social systems, and who manage their relationships across organizational boundaries (Cohen & Bailey, 1997).

In fact, based on the different forms/objectives of the team, a team can be further identified as 1) work teams, 2) parallel teams, 3) project teams, 4) management teams. As we have introduced above, IFF’s Payment Factory implementation team can be defined as a project team.

There are certain characteristics of a project team compared with other teams. Firstly, project teams are time-limited. They produce one-time outputs, such as a new product or service to be marketed by the company, a new information system, or a new plant. For the most part, project team tasks are non-repetitive in nature and involve considerable

application of knowledge, judgement, and expertise. Secondly, the work that a project team performs may represent either an incremental improvement over an existing concept or a radically different new idea. Lastly, project teams draw their members from different disciplines and functional units, so that specialized expertise can be applied to the project at hand. For example, new product development teams often draw their members from marketing, engineering, and manufacturing. When a project is completed, the members either return to their functional units or move on to the next project (Cohen & Bailey, 1997). All of these characteristics perfectly applied to IFF’s Payment Factory project team. The project team has two and a half year to implement the payment factory, and except two people are from the treasury department, all the accounting teams are from either the affiliates or the outsourced service (TCS), while all the IT support are from IFF’s own IT team or the payment agent. All of the team members work together aim to centralize the

payments into the payment hub.

Since the team was established in middle of 2016, even though the treasury team has been trying their best to push all the team members to work together, the project didn’t run as smooth as expected. The difficulties they have been facing including:

(38)

38 | P a g e 1. The delay on the output, in order to analyze the current payment method, the bank

account usage information of each affiliate, the treasury team asked each of the financial controller to collect their payment types, the current payment accounts, the payment method as well as the payment allocation within one month. Most of the affiliates can output the data on time, but still there are some affiliates delayed the hand in time.

2. The low quality on the data provided, regarding to the basic data of the current payment situation, the treasury team send out a template and ask each affiliate to feedback by using the template, however, some of the affiliates refuses to use the template, or they changed the template by their preference, the data provided are either incomplete or in not we expected.

3. Unwilling to share some information, some of the affiliates are reluctant to share their current work division among the team members, and their payment process for some local payments. Same for the TCS team, currently TCS are responsible for the accounting entries in SAP, and the uploading for the payments to the E-banking systems, but if you go to details and tried to gather the data of the current process and the time spent on each of the process, they are unwilling to provide.

4. The communication, since there are five stakeholders in the project team, and each are from the different department, it is difficult to communicate among the different stakeholders sometimes. IFF’s IT has more concern on the system security by

connecting company’s SAP to the Payment Agent, while the Payment Agent tried to simplify the setting up since it can save some time on it, the treasury team

concerned more on the centralization effectiveness, whether the system is stable to support the future payments. Due to the different concerns from the different stakeholder, sometimes there may be conflicts when all involved in a discussion. All of these issues can be categorized into three major dimensions of team effectiveness according to the team’s impact on: 1) performance effectiveness assessed in terms of

quantity and quality of outputs, 2) member attitudes, and 3) behavioral outcomes. Examples of performance effectiveness measures include efficiency, productivity, response times, quality, customer satisfaction, and innovation. Examples of attitudinal measures include

(39)

39 | P a g e employee satisfaction, commitment, and trust in management. Examples of behavioral measures include absenteeism, turnover, and safety (Cohen & Bailey, 1997).

In line with the categories of team effectiveness we have mentioned above, the delay on the output and the low quality on the data provided are the performance effectiveness, while the unwilling to share the information is the member attitude effectiveness, while the poor communication is the behavioral outcome effectiveness. If we go further to analyze the reasons that caused the current situation, we can apply the IMOI model here.

Below figure presents a heuristic framework for analyzing the effectiveness of team, in this framework, effectiveness is a function of environmental factors, design factors, group processes, and group psychosocial traits (Cohen & Bailey, 1997). All of these factors may have different weight on impacting the team effectiveness based on the different types of the teams. Here we will focus on how these factors impact on the project team to analyze the difficulties IFF’s Payment Factory team is facing.

Figure 10: IMOI model (Cohen & Bailey, 1997) 1. Contextual factors

(40)

40 | P a g e The Payment Factory project is sponsored by the Group Treasurer, since the Group

Treasurer join IFF just for a few month, while the Global Treasury Operations Manager who is assigned as the project manager has been in IFF for over 15 years, moreover, he has very broad knowledge and experience on treasury management and IFF’s treasury business. Hence for this specific project, the Group Treasurer grants the project manager with high autonomy. Take into consideration of the geographic location as well as the time difference of the treasurer and the project manager (treasurer is based in New York and the project manager and the treasury analyst are based in the Netherlands). This is very efficient for the project team to make any non-significant decisions. Even for the eventful decisions, the treasury manager can always have a smooth and effective communication with the treasurer. So the autonomy granted to the project manager is a positive predictor of the project team performance.

However, when the treasury team granted the same level of autonomy to the different team members at the beginning stage of the project, it caused the problems such as feedback the data in their own ways, and refuses to provide some payment process details regarding their local payments. Here the autonomy plays a negative factor for the project team performance. It seems there is a conflict of autonomy on the impact of the project team performance. Actually it is in line with the key findings of determinants of team

effectiveness: The highest performing teams were those in which managers retained control over assigning specific work assignments to team members and developing task procedures. Professionals who typically populate project teams enjoy discretion in other aspects of their work, while lower-level employees generally found on work teams do not. Perhaps project team autonomy is only important to the project leader, whose name may be prominently associated with the project’s success or failure (Cohen & Bailey, 1997).

Besides the autonomy, the other factors such as group composition, organization structures also have an impact on the project team’s performance. Tenure diversity was positively related to internal task processes, which in turn were positively related to team member’s ratings of their won performance. Functional diversity was positively related to external communications, which in turn was positively related to managers’ ratings of team innovation (Cohen & Bailey, 1997). This also is proved in IFF’s project team performance analysis. IFF has many experienced employee, they have worked for IFF for many years.

(41)

41 | P a g e Meanwhile, they also have many new employees in different departments. The project team benefits a lot from the tenure diversity since they can always combine the new ideas with the rich experience of IFF and make the best solution for all the encountered problems.

2. Team mechanism

Knowledge sharing, conflict handling, internal communication and external communication also play a key role on the project team performance. The Payment Factory is a cross-functional project, as a treasury team, we heavily rely on the TCS team as well as the local affiliate financial team to provide the current third party payments information. As we have mentioned before, during the collection of the payment data, there was some unwilling on sharing the knowledge. However, a proper communication helped a lot on solving this problem, for instance, due to the big time difference, Australia affiliate always have difficulties to hand in the data on time even though the treasury team has sent several emails to follow up, so the treasury team changed the communication method, they called Australia office and try to understand their difficulties and concerns on providing the data. It turns out it is not because they don’t want to provide on time, they were facing a lot of pressure on the annual audit, hence they delayed the data collection for the project. In fact, teams high in cooperation relied more heavily on informal modes of communication than did low cooperation teams. And this kind of informal communication boosted the

cooperation, and the cooperation positively predicted both task and psychosocial outcomes/member satisfaction.

Moreover, external communication is also very important when implement a project, the project manager did a good job on periodic reporting the project progress to the Group Treasurer and CFO. The whole project team benefits a lot from the frequent communication with managers above the team in the organizational hierarchy as the team lobbies for resources and seeks protection and support.

B. Managing diversity

Groups in organizations have become increasingly diverse over the years and will continue to become more diverse in years to come (Guillaume, Dawson, Otaye-Ebede, Woods, & West, 2014). IFF is not an exception, with more than 7,000 employees in markets across the world, IFF hires and retains a workforce that reflects the global population it serves. IFF

(42)

42 | P a g e continuously identifies and develops compelling, qualified employees from diverse

backgrounds and cultivates an inclusive environment in which everyone can thrive. The vast range of voices and viewpoints throughout the company in turn drive IFF’s creativity and, ultimately, their success.

This diversity also reflects to the Payment Factory project team. First, it is a cross-functional project team, which means the team members are from different departments: treasury, finance, outsourced accounting and IT, different teams have different background and business understanding. Second, the whole project team members vary from age, ethnicity, tenure, nationality, culture and educational background. Due to the diversity across the whole project team, how to properly manage the diversity has been a serious challenge in front of the project manager.

1. Functional diversity

The biggest difficulty that the entire project team was facing is the better understand of the businesses from each department. The current AP process determined that for the affiliates, they only collect and review the payment invoices from the venders, after the payment invoices are reviewed, TCS will process it in SAP accounting module. Every Tuesday, TCS will export the invoices that have been due till Tuesday and send it to the local affiliates for the actual payments. While for some invoices, TCS will help to upload it to the E-banking system directly, and affiliates only need to approve it in E-banking system. For the treasury team, they are responsible for the sufficient liquidity will always in place for the payments to be release successfully.

However, how the treasury team manages the cash plan, how the funds were arranged cross different affiliates or with the master entities, it is unclear for the TCS team as well as the accounting team. Especially the Payment Factory plan, how does it affect the current payment access, what kind of payments will be centralized while what kind of payments will be kept in the local affiliates, if this project will affect affiliate’s daily operational works. With all of these concerns from TCS and local affiliates, it makes a hard time for the project team to implement. In order to address this problem that caused by the cross-functional diversity, the treasury team organized several trainings to the different team members, these trainings aim to help each team members to better understand the current process of

Key factors in the development and implementation of payment factory in IFF : a company project for: IFF, International Flavors & Fragrances Inc.