How SWIFT Changes Treasury Management for Medium-sized Companies

Digital Treasury
Michael Eggers author pictureAuthor: Michael Eggers

The digitization of financial processes and their integration in the web-based and globally deployable treasury management system tm5 are at the heart of Steinhoff’s financial department.  Our aim is to provide our users with an infrastructure that enables them to complete their tasks in one single application without any media breaks, and to provide them with all the data they need to fulfil their financial management activities. A number of these processes are driven by SWIFT.

Michael Eggers, Senior Vice President Treasury, Steinhoff Service GmbH

Initial skepticism towards SWIFT

When we implemented tm5 and rolled it out worldwide we were still convinced that SWIFT only makes sense for large businesses, that it is way too complicated in terms of technology and even more importantly too expensive. As a consequence, we steered clear of SWIFT for a number of years.

SWIFT’s main asset is versatility

During the search for a means of digitizing our processes in connection with import derivatives, guarantees and trade confirmations, we kept coming across SWIFT as a possible communication channel.  Up until this point we were not aware how versatile SWIFT actually is, we’d mainly associated it with payments.

It was the BELLIN-SWIFT cooperation that quickly led us to reconsider our opinion. A fast and lean onboarding process (in our case six weeks) as well as straightforward pricing based on message volumes made the decision for SWIFT easy. In March 2014 Steinhoff Europe AG  became the proud owner of a company-own SWIFT BIC.

SWIFT project I: opening and managing import Letters of Credit

Our first SWIFT project concerned the integration of import Letters of Credit in tm5. We were looking for a solution that would accommodate multiple banks, could be used globally and make data available in tm5 that would normally have to be generated by departments other than the financial department – as most import Letters of Credit are opened by the purchasing department. Thanks to the TTLC module in tm5 and the SWIFT connection, we were able to achieve all this quickly, and to gain visibility of our import Letters of Credit portfolio on a European scale. Processes could be almost entirely digitized and we achieved the required visibility to standardize processes and to manage financial risk associated with Letters of Credit.

SWIFT project II: exchanging and matching trade confirmations

With message-volume based pricing for making use of the SWIFT Network, we had a clear interest in pooling our messages in order to make the most of the pricing and to achieve economies of scale in the long run. This is why we decided to initiate a second SWIFT project focused on the exchange and matching of trade confirmations.

At the time, we were still using the MISYS Matching Service for the confirmation of FX deals, a service that is also charged based on volume. This second SWIFT project allowed us to fully integrate confirmations in tm5 by means of the BELLIN Matching Service and to achieve two things at once: we were able to do away with the media break caused by using the MISYS Matching Service and to optimize costs.

Positive “side effect:” retrieving and distributing account statements, complete for the first time

In addition to the two projects we also changed the process of retrieving account statements: our own SWIFT BIC enabled us to retrieve those account statements that had previously been supplied by third party banks due to the lack of electronic integration. Again, this allowed us to reduce costs. At the same time we could now receive account statements to our SWIFT BIC for accounts where we’d been previously unable to get digital statements.

SWIFT project III: integrating payments

Mid 2016 we started to fully integrate all payment processes worldwide in tm5. Our aim has been to get rid of local communication channels as much as possible and to standardize payment processes. The integration in tm5 allows us to better monitor cash flows worldwide and to minimize cyber risk. Moreover, this gives us more flexibility when it comes to implementing dual approval (the tm5 “four-eyes principle”), in particular in smaller business units.

We use SWIFT Service FileAct for our SWIFT payment projects and count on a standardized payment format, i.e. ISO 20022 XML CGI.  There are always two steps involved: first, we connect to the bank. Then, together with BELLIN and the banks, we test the different payment methods and corresponding processes, such as payment status reports. This enables us to very quickly identify bank or country-specific characteristics in connection with the ISO 20022 XML CGI format – because even though we use a standardized format there are still a number of specifics that make for a much more complex project.

As soon as the payment process works without problem, we hand over to the local units and allow them to use the application to make single payments via tm5. This represents a much optimized process, in particular when it comes to FX deals!

In a second step we integrate bulk payments. Growth, driven by acquisitions, has created a very heterogeneous IT landscape in the group. To avoid complex IT projects for the implementation of the ISO 20022 XML CGI format, and with ERP systems generally able to export .csv files, we decided to convert bulk payment files from .csv files to XML files. Users select an SFTP drive and push the .csv file to a converter, which in turn creates an XML file that, ensuring straight-through processing, is pushed to tm5 thanks to BELLIN Business Process Automation. The bulk payment is authorized as usual and submitted to the bank.

Normally, we also switch account statement reporting to FileAct while we’re implementing the payment project.

Current SWIFT project: creating and managing guarantees

With BELLIN, we’re currently piloting the electronic creation and management of guarantees via SWIFT. As early as 2018, we will be able to electronically commission the first guarantees from our banks.

Summing up: the versatility of SWIFT makes it attractive for medium-sized companies

When we launched the first SWIFT project back in 2014 no one in the Steinhoff Group had any idea in how many different ways we would end up using it. Yet, it is this very versatility that has allowed us to reduce costs and to boost efficiency very quickly.

Every new SWIFT project was completed quicker than the previous one, in parts thanks to ever increasing SWIFT know-how on behalf of BELLIN and Steinhoff, and in part because the BELLIN SWIFT Service has over 100 customers – and it is more or less guaranteed that someone will have already completed a similar project.

We’re excited to see what the future will bring and what else we can achieve with SWIFT. The cooperation with BELLIN and the connection to the SWIFT Network have not only enabled us to make our treasury processes more efficient, more secure and to reduce costs, but also to identify and capitalize on opportunities for growth.

So – depending on their setup – the question medium-sized companies should be asking when it comes to SWIFT should not be “Yes or No?” but “When?”

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