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2 Cash Flows Management 2024 Partiel
2 Cash Flows Management 2024 Partiel
2 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
The Cash Flow process
▪ This analysis will dictate the choice of the appropriate tool set to be used
– Maximize end to end efficiency of the collection or disbursement process
– Minimize TCO (Total Cost of Operations)
© Alain Rividi
3 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Payments and Collection
Instruments
© Alain Rividi
5 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Instruments for payment or collection
▪ A payment instrument is any instrument allowing to use one’s money to settle a debt or
make a payment.
▪ Note that a payment instrument issued by you becomes a collection instrument from the
counterparty.
▪ There are a large number of different payment instruments available that differ by
– Their scope: some are limited to a country other can be used across many countries
– Their nature: some are embodied in a physical media like cash or cheques, others are immaterial
traces in a computer.
– Their cost
– Their automation potential.
▪ We will just give a high-level overview of the payment instrument scene,and concentrate on
the most widely used ones.
© Alain Rividi
6 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Payment Instruments
▪ Other key issue is integration of the payment instrument with the internal environment of the
Company
– Disbursement management tools
– Accounting system
– CRM
© Alain Rividi
7 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
© Alain Rividi
8 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
A Typology of Payment Instruments
9 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Cash
▪ Cash is still a widely used payment instrument
with very significant country differences
▪ In France cash represents only around 5% of the
total of transactions in value (10% in number)
▪ Studies concluded that the “cash threshold” was
between 15 and 20 Euros and decreasing
▪ Retailers experience shows, payments in cash
represent 1/3 of transactions but only 15% of
amounts
▪ Monetary circulation in France was centered on
lower amount bills compared to other countries.
▪ Use of cash may be limited by local laws (EUR
1000 in France)
© Alain Rividi
10 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Cash
▪ Cash usage is impacted heavily by political decisions and environmental factors
▪ Some examples
– Covid >> strong decrease in usage driven by
▪ Fear of contagion through notes
▪ Increase in the maximum amount of contactless transactions
▪ Decision by stores to agree to smaller amounts
– Invasion of Ukraine
▪ Rush to get cash especially in the European countries closer to the front
▪ Increase in demand for Euros outside of Eurozone
© Alain Rividi
Source:L’avenir des moyens de paiement en France - Mars 2012 (Rapport commandé par le Ministère des Finances)
Georges Pauget, Emmanuel Constans, Rapporteur: Jean-Marc Lherm
11 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Payment Instruments (except cash) in France in 2022
© Alain Rividi
12 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Payment instruments (except cash) in France in 2022
© Alain Rividi
13 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Significant geographical discrepancies
© Alain Rividi
14 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Significant geographical discrepancies
© Alain Rividi
15 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Also in other geographical areas
© Alain Rividi
16 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
A Changing Landscape
New Trends driven by circumstances
18.3 billion card payments in 2022.
746 billion euros.
o/w 9 billion contactless for 148 Billion euros
>20 euros: the average amount of a
transaction.
18 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
New trends in Payment Instruments
19 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Document Analysis
Documents in context
21 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Factors of Choices
and Integration
© Alain Rividi
23 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Factor of choice of collection instruments
▪ Transaction value
– Local laws, or payment instrument rules may limit possibility to use certain instrument above certain
amount.
© Alain Rividi
24 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Factors of choice of disbursement instruments
▪ Vendors
– Impact of Purchasing Terms and Conditions
– Market practice
– Domestic or cross border
– Trade finance impact
▪ Taxes
© Alain Rividi
– In many countries payment procedures for different types of Taxes are mandated by law
25 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Payment Instruments Logistics
© Alain Rividi
27 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Credit / Debit /Charge cards
▪ Cardholder
– This is a person holding a debit, credit or charge
card issued by a financial institution.
▪ Retailer / Merchant
– A merchant sells goods or services to their
customer (the cardholder)
▪ Acquirer
– A merchant will have negotiated a merchant
service agreement with its acquirer to process
payment card transactions on its behalf.
▪ Card Scheme
– Card schemes are organizations that manage
and control the operation and clearing of card
payment transactions according to card scheme
rules.
▪ Issuer
– The issuer is the bank, building society or
© Alain Rividi
29 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
The Bank Transfer
The main transaction instrument Bank Transfer
▪ International transfers
– Used for all types of transactions involving cross border or cross currency
– Information transmitted through SWIFT
– Settled via bilateral mechanism
© Alain Rividi
▪ Names will vary from country to country: Giro, CHIPS, CHAPS, BACS
33 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Net and Gross Settlements
RTGS systems are significantly more expensive than Net systems (5 EUR vs 0,05 EUR)
© Alain Rividi
so they are usually limited to large amount transactions requiring immediate final
execution.
34 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Transfer process: Domestic
▪ Clearing System
– Where banks exchange and settle
transactions between their customers
Issuer Issuer Bank – STET, EQUENS, BACS, CHIPS, EBA, Target
▪ Net Settlement:
– All transactions during the day are summed
up
Clearing – Settlement takes place at the end of the day
System
▪ Gross Settlement
– Each transaction is settled real time
▪ Impact
– Banks need to have the funds available
Receiver – Therefore higher cost
Receiver
Bank
– Immediate conclusion of the transaction
© Alain Rividi
35 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
International Transfers: Information and Funds
Issuer Receiver
Forex
Markets
Credit to DB’s LORO account with
Financial Counterparty currency
Currency Currency seller
© Alain Rividi
transaction
36 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Internationl transfer: A simplified view
A transfer from a EUR Account in Germany to a JPY account in Japan
1. The Payer sends the Payment Instruction to its Banker (Deutsche Bank)
2. As the transaction requires a purchase of foreign currency in order to convert EUR to JPY, the bank
enters into a Foreign Exchange (FX) transaction on the market.
3. The FX counterparty receives the EUR and
4. Remits to Yen to the “Loro” account held by DB with Mizuho Bank in Japan. Major banks have
accounts opened for this purpose with their major correspondents in other countries. If the target bank
is not a direct correspondent, the local correspondent of the issuing bank will act as an intermediary.
5. DB sends Mizuho an MT202 payment order advising them of the transaction, and availability of funds
on the DB “Nostro” account
6. Mizuho answers with a debit advice, confirming they have taken the funds from DB’s account
7. Mizuho executes the payment using the local clearing system, and advise the beneficiary through a
credit advise
© Alain Rividi
37 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
The European Example and SEPA
▪ When EURO was introduced, payment clearing remained national
– Paying EUR from France to Germany was similar to any international payment
– Created important costs and complexity
38 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
The European Example and SEPA
▪ SEPA relies on a set of agreed technical guidelines
– the “rulebooks” periodically updated define the operating rules that all participants
should respect.
– Message formats are defined by the stakeholders but should respect the rules of ISO
(International Standards Organisation)
39 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Payment and Collection Factories
41 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Intercompany aspects
The internal aspects of cash flows
46 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Intercompany optimization
– Simplify transactions
– Facilitate reconciliation on the receiving end
47 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024
Netting ?
48 A. Rividi, Corporate Liquidity Management 2 Cash Flows Management Neoma BS Jan 2024