Case Study: Optimising BT Global's Cash Management

BT Global Services has a very aggressive plan to grow the business in Asia Pacific. However, we have so many legal entities using different processes, different ERP systems, different banking platforms and non-standardised reporting practices that it has become very difficult to maintain visibility into financial information.

 
In order to ensure that we have steady cash flow to develop the business, our goals must not only be focused on profit generation, but also on working capital management. It has become clear that we need to implement unified financial standards and systems across the whole region to achieve our business goals.
 
We know that the effectiveness of working capital management will impact our business in two important ways: 
  • It will allow the company to transform profits into cash in a quicker manner, which in turn could be used to fund other initiatives 
  • It will provide senior management with improved data on company finances and enable them to make timely decisions 

 

Our move to focus on working capital management also coincides with a top-down message from the BT CFO, which was shared with all functions: ‘Cash is King.’
 
Uniform KPI
To achieve our mission of improving working capital management, it is important to have solid infrastructure from which we can achieve maximum efficiency. This efficiency would be driven by implementing an effective cash management information system.
 
When we started planning the project about three years ago, we applied a metric system to quantify improvements in working capital management on inventory, prepayment, accrued revenue, receivables, payables, accrual and deferred revenue. The typical key performance indicator (KPI) of days sales outstanding (DSO) on accounts receivables – a measurement of the average collection period for receivables – was applied to track the effectiveness of debt collection and credit management.
 
In a company with many different stakeholders, it can be hard for the message to take full effect. Although having a steady supply of cash in the bank is a constant concern for a treasurer, it might not mean the same for employees in other roles, especially for staff whose performance is measured on the basis of their ability to increase profits or bring in revenue.
 
We found that the existence of a uniform KPI helped encourage employees to work together towards a shared goal.
 
Setting Standards
To put in place a standardised process across all entities, we carried out a series of inter-related projects that shared the aim of unifying diverse practices into standardised procedures. These are:
 
Business Process Outsourcing: Day-to-day transaction work, such as accounting transactions and payroll processing, were outsourced to our BPO partner. Before the work is to be migrated, we first implemented a uniform approach for these routine transactions, so that the outsourcing process itself could be streamlined across the region.
 
Bank Rationalisation: An integral part of the infrastructure improvement was bank rationalisation – transferring our numerous bank accounts into one bankfor the region. The bank rationalisation project consisted of two phases, with all regional entities migrating their accounts to HSBC as our selected regional partner. The ultimate objectives were to: 
  • Optimise liquidity management to minimise the amount of cash in Asia and reduce unnecessary funding
  • Automate processes and improve efficiencies through improved cash flow forecasting, better control of payments, and speeding up of collections
  • Migrate manual to electronic payments
  • Achieve complete visibility on all bank accounts
 
Choosing the right banking partner for us in the region was important. After conducting a thorough analysis of potential banks based on a number of factors, including geographic presence, cash management capability, industry experience and past performance, we chose HSBC to be our banking partner. In the exercise, thorough in-country reviews were conducted by HSBC, providing valuable recommendations to our working capital and liquidity management processes.
 
The advantage of consolidating accounts together into one bank was apparent to us. We expected significant results from having enhanced visibility over our cash in the region. This visibility, delivered via a single online banking platform accessible anytime and anywhere, would be a vast improvement on our antiquated method of manual consolidation and calculation, thereby helping us achieve the aim of reducing the amount of cash sitting in Asia.
 
Shared Service Centre (SSC): While we outsourced transactional tasks, we kept finance work related to reporting, review, and analysis in house. One option was to have these tasks conducted independently in each entity. But this has the drawback of having several operations unnecessarily duplicated in the region.
 
By setting up an SSC, we hoped to maximise efficiency by eliminating duplicative operations and ensure uniform standard of work. Our SSC staff would be dedicated to looking after 70 bank accounts in the region and see to the cash position of any of the group’s entities.
 
Global Finance Platform (GFP): To underpin our project, we wanted a unified internal financial platform that would be used not just by us, but ultimately by BT Group worldwide. This system would have a data hub to access information from any of the group entities. Bringing all of this data together will provide a powerful tool for stakeholders throughout the company: for example, the CFO in London will be able to access financial information about the business in Asia-Pacific.
 
The GFP would help implement process improvement by gathering a broad range of business data from procure-to-pay, order-to-cash, cash management, accounting-to-reporting and from management accounts to statutory accounts. The value in having such a system is in analysing the links between data points – such as providing a bridge between the budget and balance sheet.
 
Preparing for the Change
In order to lay the foundation for implementing these projects, it was essential to have a well thought out plan. I highlight some of our key learnings:
 
Win buy-in. Firstly, we needed to gain initial sponsorship from different stakeholders. Not only was it necessary to have senior management support; staff at every level needed to understand the benefits of improving financial processes as well.
 
For colleagues in front-office positions, our aim was to help them understand that the initiative was more than just finance-related, but could actually help increase revenue. We successfully obtained buy-in from stakeholders by reviewing the business processes country by country in Asia Pacific.
 
We also engaged external stakeholders when appropriate. For example, for the Bank Rationalisation Project and Cash Management components in the GFP rollout, we worked closely with HSBC in identifying areas of change in account structures, AP & AR processes and liquidity management. HSBC also proposed customised solutions that fit our local offices’ business requirement and enabled us to efficiently and effectively manage our idle funds across the region.
 
It was also important to keep lines of communication open with staff at all levels. Junior members of the finance department may interpret the new system as a threat to their job security. It was therefore crucial to reinforce the message that the outsourcing and automation of transaction processing would not put their job security at risk, but rather allow them to allocate time to other value-added tasks.
 
Form a project team. The next step was to establish a project team. We discovered that it was more effective to assemble a team that consisted of representatives from a variety of areas within and outside the business to foster new ideas and fresh ways of thinking. Thus, our transition management working group consisted of members from Finance, IT and HR to BPO partners and our bank partner.
 
Everyone had a role to play, from the HR professionals who were there to manage any staffing changes that arose from automating processes, to the IT and finance partners who contributed their unique perspectives to the project.
 
Establish a timeline. The final step was to put together the project timeline. Since the initiatives were inter-related projects, the blueprint for their implementation could not be static. Instead, it was a dynamic process that constantly assessed the risks and business advantages of every stage. Throughout the undertaking, we held monthly meetings with the regional CFO to ensure that each step was the right one, demonstrating the importance of having senior management actively involved.
 
Putting the Plan Into Action
After we had established a project timeline, the next challenge was how to effectively monitor the integration of the finances of the different entities in Asia Pacific and ensure all the tasks are systematically carried out, while keeping senior management teams in the UK and US informed of our progress.
 
For some of the projects, we had our own project management tools to track the progress. For the Bank Rationalisation Project, we leveraged on HSBC’s project management expertise, which added significant value. HSBC also assisted in following through with implementation tasks and coordinating the representatives of local HSBC and BT for seamless delivery of solutions.
 
HSBC’s efforts were supported by an online platform that provided a single hub of information and communication which all parties, regardless of location, could access. The platform allowed everyone to track project status and documentation. As each task was completed, the system was updated in real-time. It was an ideal way for our team to stay on track, for senior management overseas to monitor our progress, and for the time spent on status updates to be reduced.
 
Normally, we would adopt a “big-bang” approach when implementing new systems, meaning that the changeover between systems occurs all at once, in contrast to a more gradual “phased” approach. With the Asia-Pacific rollout, however, the transition could not be a big-bang – there were just too many entities and the market landscape was too diverse.
 
Instead, we adopted a customized approach for each entity – applying slightly different methodology taking into account its size, as well as local factors such as the different tax regimes. For instance, the phased approach was adopted for newly acquired entities where integration of internal processes were still under transition and banking activities were still routed through local banks. Their bank accounts were first rationalised to HSBC for easy visibility. Migration to the GFP and automation of AP and AR processes followed later. 
 
A “big-bang” approach was adopted for entities with similar business processes and IT infrastructure where onboarding was a more straightforward process, based on past experience.
 
Conclusion
Over a 12-month period, our team has undertaken an ambitious project to improve our cash management processes by streamlining operations and implementing new technology. Although it is still a work in progress, our experience so far has revealed that communication is key.
 
But a balance must also be maintained in order to avoid over communicating. Our aim was to maintain a consistent message to all stakeholders about the purpose of our project and the anticipated benefits; however, we were careful to keep the message realistic, timely and relevant.  
 
We also took advantage of the latest technology to facilitate our internal project updates, which was a particular challenge given the geographic spread of our teams as well as senior management,   
 
As the measures were gradually implemented, we started to notice quantifiable results. Over 18 months to March 31, 2010, we increased Asia Pacific’s working capital by £33 million (US$51 million). This is no small achievement, with borrowing significantly more expensive than it was before the global financial crisis.  
 
About the Author
Catherine Yu is Regional Controller, Asia Pacific, for BT Global Services, a subsidiary of London-listed BT Group. BT Global Services has more than 70 legal entities in some ten key Asia Pacific markets whose core offerings include network services, contact centre solutions, customer relationship management, unified communications, and security and conferencing.

 

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