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CASHMEASURY

Treasury Technology Consulting

Optimizing Cash Flow with POBO

Client overview

Our client, a multinational company, manages hundreds of operating companies (opcos) across diverse sectors.

Each opco operates independent bank accounts for various cash management activities including incoming and outgoing cash flows and cash reservations.

The complex financing structure of the conglomerate ruled out the possibility of utilizing physical cash pooling solutions.

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Challenge

The decentralized nature of the client's operations led to significant inefficiencies in cash management, including excessive idle cash across opco accounts, high operational activities for funding opco accounts, and increased banking fees for cash management services.

Solution by CashMeasury

CashMeasury, in collaboration with the client's ERP team, spearheaded the implementation of a Payment-On-Behalf-Of (POBO) solution, integrated with the Treasury Management System (TMS). This innovative approach allowed for:

  • Consolidation of payment processes, with payment files from the ERP being transmitted via the TMS to the banks.

  • Debiting parent accounts for opco payments, thus centralizing cash outflows.

  • Initiation of cash sweeps to and from opcos, factoring in cash forecasts for optimal liquidity management.

  • Booking of POBO payments and cash sweeps in the TMS inhouse bank accounts, enhancing transparency and control.

  • Support for foreign currency payments, leveraging applicable FX rates for accuracy in cross-border transactions.

Benefits achieved

The deployment of the POBO solution via the TMS transformed the client's treasury operations:

  • Centralized cash management resulted in a significant reduction in idle cash across opco accounts.

  • Payments were streamlined through parent accounts, reducing the need for individual opco funding.

  • The operational burden on the treasury team was minimized, allowing for a more strategic focus.

  • The client observed a substantial reduction in banking fees, eliminating the costs associated with physical cash pooling services.

Conclusion

CashMeasury's expertise in treasury technology consulting and deep understanding of the client's unique operational challenges enabled the design and implementation of a tailored POBO solution.

This strategic initiative not only optimized the client's cash management practices but also set a new standard for efficiency and cost savings in its treasury operations.

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