Tedious manual entries, many reconciliation processes, and convoluted structures in the payment process – in the long run, this was too cumbersome for the sparkling wine producer Henkell Freixenet. With the help of the tool Ltc|bank in SAP, the company was able to reduce the effort involved in payment processes by more than two-thirds.
On the way to an optimized treasury, Henkell Freixenet reorganized its payment process. As a result, the effort involved in the entire payment process was significantly reduced, reports Martin Smolka, who works in the “Finance Germany Payment Transactions” department at the sparkling wine producer.
Until the end of 2017, the Wiesbaden-based company had a payment process that involved various decentralized e-banking systems. This was risky, error-prone, costly and maintenance-intensive because Henkell employees had to enter data manually. The sparkling wine producer also lacked an overview of group-wide payment flows because the various branches handled approval processes differently. In addition, there was a lack of uniform reporting options for the 30 subsidiaries. This meant that treasury staff had to carry out the workflows manually, which was very time-consuming.
Integrating payment transactions into the ERP system
Smolka’s goal was to integrate payment transactions into the company-wide ERP system from SAP and thus simplify the structures. First, the company took care of bank statement processing, which was implemented in SAP at the end of 2017. Since then, the account statements have been retrieved electronically from various banks on a daily basis via the integrated web service. After the initial considerations of a merger with Freixenet (Henkell made the acquisition in August 2018) came the second step: a reorganization of bank payment transactions. “The merger with Freixenet did not trigger the changeover, but it accelerated it,” Smolka looks back. Henkell found support in the reorganization of the payment process from Litreca AG.
As part of the “Treasury Optimization of Bank Payment Transactions” project, Henkell Freixenet first analyzed the current situation of the banking system: various external banking systems in Germany and shared service centers, system breaks and thus no automatic interfaces to SAP, as well as a high manual processing effort. In addition, Smolka reports, Henkell was dealing with a “partially optimized banking landscape”: two main banks in Germany – Deutsche Bank and Commerzbank – as well as various secondary banks in Germany and abroad.
Preliminary work is the be-all and end-all
Before the Ltc|bank in SAP software could be integrated, Smolka and his department had to do a lot of preliminary work. “It was more work than expected,” Smolka sums up. A number of questions had to be clarified: Which bank connection types are particularly important? Which accounts are still needed? Which banks can we part with to streamline the process? And what volume of financing is affected?
As a result, the decision was made to part with the various secondary banks and to continue working domestically only with the two main banks already in place. “This meant new EBIT scans, but in return we avoided too many troublesome interfaces,” says Smolka.
Likewise, it was necessary to clarify: Which payment formats are available and needed? What is the status with regard to the ISO 20022/XML – CGI message standard? What strategy is needed for the format conversion: should it be done in-house (IT) or outsourced? “Before the conversion, we had all files in a Windows directory and had to upload them manually to different systems with different permissions,” says Smolka.
This task is now taken over by a so-called communication server, which controls the data exchange with the house banks. The sparkling wine producer can thus track all payment transactions seamlessly throughout the entire process cycle. The introduction of the “distributed electronic signature”, which allows payment orders to be authorized regardless of time and place, also makes things easier. In this process, a payment is created and signed (initial signature) at a company location and sent to the bank computer.
This in turn forwards the payment orders to Henkell Freixenet’s corporate headquarters, where they are approved by second signature. If the bank computer recognizes both signatures as authorized, the payment is triggered. For Smolka, the clear advantage of the new, simplified communication is an “enormous time saving in bank administration”.
Nordic countries still need to be converted
Henkell Freixenet has set up its new payment process not only for Germany, but also for its international operations. European locations will also benefi: “Only three Nordic countries are still to go. They will be integrated into the Ltc|bank tool in SAP in early 2020,” Smolka envisioned. Henkell is additionally still working abroad with the major Swedish bank SEB, which provides good coverage of the Scandinavian market in particular.
All in all, with Ltc|bank in SAP, Smolka has found a solution for Henkell that is bank-independent: “We can now integrate users, new accounts and banks into the system much faster than before. Predefined approvals make for an easier workflow, files can be forwarded directly to downstream systems such as Ltc|treasury or Ltc|accountbook if necessary, interfaces are reduced, and we work with straight through processing and direct connection with upstream and downstream systems (booking system, treasury management system, SAP, etc.). In the process, we will not only save a lot of costs, but also a lot of work,” says Smolka. Bank statement processing alone, i.e. automatic posting, achieves a success rate of 85 percent. The remaining 15 percent are special cases that still have to be processed manually.
The most important prior knowledge
How many banks? Which connection types? How much volume for payment transactions?
- Source system
Which system or how many?
Which ZV formats? What format conversion strategy?
How will the interfaces be designed? Number of users and authorization types?
Less effort, less risk
Henkell Freixenet also benefits from the conversion of the payment process in terms of transparency and compliance, as Christian Studt, Key Account Manager at Litreca AG, explains. For him, the advantages are obvious: “There are no media breaks or opportunities for manipulation, documentation of all processes is seamless, and all data is stored in SAP. The program is audit-proof and meets the highest quality standards for security and compliance.”
However, the improvements in Henkell Freixenet’s treasury are not over with the new set-up in payment transactions and automated bank statement processing. There is also a lot on the agenda for the next few years, including the integration of reporting and receivables and liquidity management into the Litreca tool.