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The Advantages of an Integrated Netting Tool
For a number of years now, the corporate world has been going global. This goes hand in hand with a need for reconciliation with subsidiaries worldwide as well intercompany trade. It seems obvious that a good reconciliation and netting process is key here, something we’ve already discussed in connection with netting processes, regulations, technical questions and dispute management. A term that has come up again and again in this context is “integrated system.” It’s therefore definitely worth having a look at the differences to a stand-alone tool and the advantages integration has for corporates.
One obvious advantage of an integrated netting system is that per definition it combines several functionalities in one tool. Businesses can profit from this in more than one way. For one, a single system means less effort. Data only has to be entered and maintained in one place and everything can be managed with the same tool. This is not only much more efficient and economical but also a lot less error-prone. The more interfaces – e.g. with ERP systems – the higher the likelihood that something will go wrong somewhere along the line. Moreover, having an integrated tool means you’re familiar with the system and its user interface and applications, so you don’t have to familiarize yourself with yet another system.
An integrated tool also allows you to do much more netting. Payments can be processed or contracts and treasury deals entered and maintained, be it FX deals or intercompany financing. Core data is accessible from anywhere in the system and can be used for various activities, including netting. Let’s take the example of a company which is unable to pay its receipt following a netting run. Thanks to the integrated link, the netting center can provide the necessary financing via the trading platform at the touch of a button; in another simple, integrated step the company can then process their payment directly in the system.
In tm5 such contracts are maintained in the TT module and you’ve got access to the data that’s been entered from anywhere in the system. A direct link to LMPayment allows you to process your payment directly in the system after having received your netting receipt. You even get to choose if you wish to pay directly, i.e. physically or settle via a settlement account.
Ideally, the integrated netting system also offers more than simply entering and confirming receipts but includes a companywide reconciliation process that precedes this. You can find a detailed account of the advantages of such a process in my colleague Andreas Buech’s article “Working From the Roots Up: Managing Disagreements.”
Overall, we can say that integrated netting systems allow corporates to save a lot of time and make their processes much more efficient. On top of the netting process, they also support the management of all other treasury activities, whereas a stand-alone netting tool is just that: a netting tool. Treasurers are already familiar with the integrated system, and it is efficient and comprehensive – a tool serving all functionalities for a treasury that meets all requirements.
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