TAKE

CONTROL
In-house bank at the core
of proactive cash
management
The headaches of
multinational cash
management
5 STEPS 5 KEY
TO VISIBILITY BENEFITS OF
AND IN-HOUSE
CONTROL BANKING
Contents
INTRODUCTION: GROUP TREASURY TAKES
CONTROL ..................................................................3

THE HEADACHES OF MULTINATIONAL CASH

MANAGEMENT ..................................................4 5 STEPS TO VISIBILITY AND

CONTROL....................................................................................................7

5 KEY BENEFITS OF IN-HOUSE

BANKING ........................................................................................... 15

SUMMARY: QUESTIONS TO ASK

YOURSELF...................................................................................... 19

PAGE 2 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
CHAPTER
1

INTRODUCTION Group
treasury
takes control
In today’s fast-moving global business environment, corporate treasurers and cash managers feel the
pressure to deliver high-level financial support to the business. Operational excellence is not enough:
corporate management also expects finance leaders to provide them with a constant flow of relevant,
real-time information and insight. Well-oiled financial processes have become increasingly important
in deciding the success of an organization.

“Treasurers and cash

managers in international
corporations need to
maintain both visibility
and a firm grip on the
company-wide cash flows
and working capital.”

The group treasury needs to be able to
steer financial processes efficiently to
enhance business operations and sup-
port needed investments. To this end,
treasurers and cash managers in inter-
national corporations need to maintain
both visibility and a firm grip on the
company-wide cash flows and working
capital. Factors such as uncertainty in
the economic and political landscape
and currency volatility highlight the
importance of comprehensive, infalli-
ble, group-level risk management.
In this whitepaper, we outline the ben-
efits of a modern in-house bank solu-
tion as the basis for transparent group-
level cash management. We discuss
the challenges that treasurers in inter-
national organizations face, and review
the situations where establishing an in-
house bank is a good solution. We also
provide step-by-step instructions for
increasing harmonization and deep-
ening centralization with an in-house
bank solution to give the group trea-
sury the ability to truly control cash and
working capital.

PAGE 3 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
CHAPTER
2
THE HEADACHES
OF
MULTINATIONAL
CASH
Despite the many advances in centralizing financial processes, many cash
MANAGEMENT
managers and group treasurers in multinational corporations are still
struggling with inadequate visibility of group-level cash and exposures.
CAUSES OF SUB-
OPTIMAL CASH
MANAGEMENT
The causes of sub-optimal cash man-
agement are varied. Maybe the organi-
zation has grown through mergers, re-
sulting in a variety of payment systems
and processes in different countries and
subsidiaries. Maybe there is a decentral-
ized business model where locally oper-
ated units use different systems leading
to work-arounds like weekly spread-
sheet reports to the group treasury.
The amount of trading and invoicing be-
tween subsidiaries may be considerable,
while the processes around these internal
transactions may be disparate – leading
to inefficient handling. Or, maybe the
group treasury has visibility over most of
the in- coming and outflowing cash, but
simply lacks the proper tools to control
it and make it truly available for
profitable use.
POOR VISIBILITY
INTO BANK
ACCOUNTS
In practice, a frequent
source of head-
PAGE 4 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH
MANAGEMENT
aches at group treasuries is poor visi-
bility into bank accounts. In a complex
operating environment of multiple
subsidiaries and business units in mul-
tiple countries and dozens of banks, it’s
often the case that no one has a com-
prehensive overview of all the bank ac-
counts and types of transactions they
are used for, let alone an up-to-date
view of the balance on each account.
In such an environment, transparency
and cash forecasting are often hindered
further by the myriad of different bank-
ing, ERP, and financial management
systems. Administering the bank ac-
counts and managing the bank proxies
alone is tedious, and takes time away
from performing value adding treasury
services.
DECENTRALIZED CASH
Another common pain point is decen-
tralized cash, and insufficient means to
collect it. Treasury, who is in charge of
making the most out of the working
Is in-
house
banking
a good
fit?
capital on a group level, is time and
time again faced with the imbalance.
On the one hand are subsidiaries which
hoard cash in their local bank accounts
without submitting it to the treasury.
This leaves the treasury powerless to
mitigate the risk of cash being kept
in a bad bank. On the other hand are
subsidiaries who negotiate loans with
their local banks without the oversight
of the group treasury. These decentral-
ized loans don’t leverage the potential
economies of scale for more attractive
rates.
CURRENCY EXCHANGE FEES
Siloed actions in the subsidiaries easily
lead to unnecessary costs and banking
fees. FX translation is a good example.
When subsidiaries operate in violation
of financial policy best practices and
pay FX invoices from their local curren-
cy bank accounts, the cost of currency
exchange can cause severe leaks in the
treasury’s operational budget.
PAGE 5 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH
MANAGEMENT
THINGS TO
CONSIDER WHEN
DECIDING WHETHER
AN
IN-HOUSE BANK
IS RIGHT FOR
YOU
The higher the number of subsidiaries,
the more value your organization can gain
NUMBER OF
SUBSIDIARIES from an in-house bank, and the greater the
OR ENTITIES improvements in visibility over cash.

The more banking relationships your

organization has, the more your organization
NUMBER OF
BANKING can save on the transaction and management
RELATIONSHIPS
costs with an in-house bank.

The higher the volume of internal invoices,

the more your organization can benefit from
INTERNAL decreasing bank transaction fees or fees
TRANSACTION
VOLUMES from FX deals with an in-house bank.

The more loans your subsidiaries take out locally

to run their operations and projects, the more cost-
SUBSIDIARY
efficiency an in-house bank can bring your
LOANS organization by enabling the distribution of cash
for operations centrally.

PAGE 6 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
CHAPTER
3

5 STEPS TO
VISIBILITY How to
AND CONTROL build
Well-run treasuries in large and mid-sized corporations have an in-house
bank
already embarked on the journey towards deeper centralization of
cash management processes.

PAGE 7 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
Their goal is real-time visibility over
cash. An in-house bank gives the group
treasury the widest set of tools for
managing working capital
efficiently, increasing visibility and
control of the cash flow processes,
and strengthen- ing payment security
and risk manage- ment. The solution
can feature different levels of
harmonization depending on how deep
of an integration between
the group and the subsidiaries is de-
sired, and depending on which func-
tions the treasury wants to control.
The implementation of an in-house
bank structure does not have to be
done all at once. In fact, the full central-
ization of cash and finance processes is
best built step-by-step [as illustrated
in Figure 1].

5 STEPS
TO VISIBILITY AND CONTROL
WITH AN IN-HOUSE BANK

Effective internal financing, decreased

need for external loans.
05 Centralizing control
over financing

04
Improved working capital management,
increased indepence of banks,
Establishing
maximized cost efficiency. Collections on-behalf-of
(COBO)

03
Centralized, controlled and cost-
efficient external payment process, Establishing
increased safety and fraud prevention. Payments on-behalf-of
(POBO)

02
Harmonized and automated internal pay-
ment processes, lower costs from avoiding Streamlining
value date losses and transaction fees. internal payments

01
Visibility to daily balance on company
and subsidiary level, reduced number Managing corporate
of banking partners. bank account structure

Figure 1. The step-by-step approach to centralizing cash and finance processes with a modern in-house bank.

PAGE 8 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
 “Ultimately, a group treasury
can even reach a single-source-
of-contact structure where the
local units only communicate
with the treasury, and the
treasury is the only entity
with direct connections
to external banks.”

STEP 1 MANAGE CORPORATE BANK ACCOUNT STRUCTURE

A good way to start the centralization
ex- ercise is to collect all the account
balance information from all the group
compa- nies in one place. International
compa- nies tend to have many
country-specific or bank-specific
account structures in use. Typically, the
cash is centralized at a group level with
zero balance accounts: at the end of
each banking day, a sweep occurs and
the cash balances of the units’ bank
accounts are transferred to the parent
company’s account. The chal- lenge
with these cash pool structures is that
the subsidiaries’ real balances be-
come blurry in the process.
PAGE 9 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH
MANAGEMENT
With an in-house bank, the manage-
ment of the group’s balances hap-
pens in a similar, but internal, account
structure. The sweep/top transactions of
the zero-balance accounts can be
automated so that the transfers are
allocated correctly to the subsidiaries’
internal accounts. This allows visibility
of the up-to-date company or unit-spe-
cific balance. In addition, sweep/top
transactions from several external bank
accounts can be allocated to a single
internal account. As a result, the struc-
ture enables a single, daily balance per
subsidiary.
Creating an in-house bank to man-
age the corporate account structure
can replace a multitude of external
bank accounts, making it possible to
reduce the number of banking part-
ners at a corporate level. Ultimately, a
group treasury can even reach a single-
source-of-contact structure where the
local units only communicate with the
treasury, and the treasury is the only
entity with direct connections to exter-
nal banks.
 STEP 2 STREAMLINE INTERNAL PAYMENTS

The next step in centralization is to ex-
pand the use of the internal accounts
from managing the business units’ bal-
ances to making internal payments.
Typical questions that arise at this point
relate to the payment process: subsidi-
aries might fear losing automation and
control of their payment flows, for in-
stance, while the group treasury might
be concerned about compliance and
bookkeeping in the new setup.
Harmonized processes: The payment
process for internal payments can be
exactly the same as for external pay-
ments. Let’s take as an example a sim-
ple scenario where subsidiary 1 pays
an invoice of 150 euros to subsidiary 2
[described in Figure 2]. In the in-
house bank set-up, the subsidiaries’
internal bank accounts have the same
struc- ture as external bank accounts,
which means that no changes are
required to ERP systems, for instance.
Quite often, companies choose to
name the inter-
nal member accounts differently for
the sake of clarity [e.g. IHB-EUR-
SUB1 and IHB-EUR-SUB2].
Faster payments & no fees: The inter-
nal payment can be automatically pro-
cessed in the in-house bank based on
pre-set rules. Usually, acceptance pro-
cesses are more simple in internal vs.
external payments, and thus companies
are able to streamline their internal pro-
cess with a high (Straight-Through-Pro-
cessing) STP-rate. Another benefit is that
internal transfers are made on the same
value date, so the payee avoids value
date losses. Companies using in-house
banks also avoid paying transaction
fees as the internal transactions don’t
have to go through external banks.
Mirror accounts: After the payment
is made, the in-house bank creates an
account statement for both subsidiar-
ies. In order to manage the subsidiar-
ies debt/credit-relation properly, the
group mirrors all the transactions into
the group’s mirror accounts. Depend-
ing on the company’s situation, it is
possible to set up a mirror account for
each subsidiary or for each currency
[e.g. IHB-EUR-GRT-SUB1 and IHB-
EUR-
GRT-SUB2]. An in-house bank gives
the group treasury powerful tools to
fol- low the balance or debt
development of each subsidiary. The
generation of the account statements,
mirroring the transactions, and postings
to the mirror accounts’ general ledger
accounts can all be fully automated.
No changes to general ledger post-
ings: Subsidiaries can handle their gen-
eral ledger postings in the same way as
they do with their external statements.
For maximum efficiency, these actions
can be fully automated on both sides of
the internal payment by using creditor
reference and interim accounts pay-
able (AP) and accounts receivable
(AR) accounts.

IN-HOUSE BANKING: INTERNAL PAYMENTS

Invoices the subsidiary

150

Receives
payment with
Processes a reference to
payment automatic AR
from member reconciliation
account IHB- In-house Bank to member
EUR-SUB1 (2) GRT dept/credit GRT dept/credit account (2)
Subsidiary 1 Subsidiary 2
SUB1 GL account SUB2 GL
SUB1-AP SUB1 IHB account Debit Credit Debit
SUB2-AR SUB2 IHB
(Liabil- ity) AP member account Credit
(Asset) member account
interim account 150(7) AR account Debit Credit
Debit Credit Debit Credit 150(7) Debit
150(1) 150(6)
Credit
150(5) 150(6) GRT GL
Interim 150(1)
account 150(6)
Debit
Automated posting and account
IHB-EUR-SUB1 statement generation for IHB-EUR-SUB2
Credit
-150 (3) member account IHB-EUR-SUB2 +150 (3)
150(7 (3&6)
)
150(7)
IHB-EUR-GRT-SUB1 IHB-EUR-GRT-SUB2
150 (4) -150
(4)

Figure 2. Subsidiary 1 pays subsidiary 2 an invoice of 150 euros through the in-house bank structure.

PAGE 10 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
 STEP 3 TAKE ADVANTAGE OF PAYMENTS ON-BEHALF-OF (POBO)

The next step to centralization is to ex-

tend the in-house bank functionalities
to external payments. Payments on-be-
half-of (POBO) will deepen the integra-
tion. They reduce the need for external
accounts from the subsidiaries as all
the external payments can be directed
through the parent company’s account.
In the POBO model, the subsidiaries
process the payment data in their sys-
tems according to internally harmo-
nized processes, and the group trea-
sury decides on the most cost-efficient
payment method and banking connec-
tion. The group treasury is able to cen-
tralize cash outflows, which significant-
ly enhances the safety of and control
over the payment process.
Let’s take a situation where a subsidiary
receives an invoice of 300 euros from
an external creditor [illustrated in the
Figure 3]. After the invoice is
processed, the subsidiary uses its
internal account
[e.g. IHB-EUR-SUB1] to initiate the
pay- ment. In in-house-bank settings,
“The group treasury
there are rules set by companies or is able to centralize
currencies (or both) to automate the
selection of the external account from
cash outflows, which
which the pay- ment will be paid. If the significantly
currency of the payment differs from
account currency, FX is managed inside
enhances the safety of
the in-house bank. The information and
about the ultimate debt- or on the
transaction data is maintained so that the control over the
external creditor will be able to see the payment process.”
actual payment originator and also any
additional data on the payment.
Once the account statements for the
group’s external bank account are re-
ceived, the transactions are automatical-
ly allocated in the in-house bank to the
appropriate internal member accounts,
and mirrored into in-house-bank mirror
accounts to maintain subsidiary debt.
The transactions in the in-house bank
account are posted for bookkeeping just
as account statement transactions from
external bank accounts.

IN-HOUSE BANKING: PAYMENTS ON-BEHALF-OF (POBO)

Invoices the subsidiary

300
Creditor

Processes
payment
from member
account IHB- In-house Bank Member
EUR-SUB1 account
Subsidiary GRT dept/credit switched
(2) GRT GL to group’s
SUB1-AP SUB1 IHB interim SUB1 GL account external bank
(Liabil- ity) AP member account account (3)
interim account
Debit Credit Debit Credit account
Debit Credit
300(1) Debit
Banks
300(7) 300(7) Credit

300(8)
Automated allocation and posting from 300(9) 300(9)
IHB-EUR-SUB1 group’s bank account to
-300 (5) member account IHB-EUR-SUB1 (5&7) GRT bank account Account statement delivered
GL account for the external bank account
Debit Credit FIXX1234567890XX (4)
300(8)
IHB-EUR-GRT- FIXX1234567890XX
SUB1 -300 (4)
300 (6)

Figure 3. In the POBO (payments on-behalf-of) model, a subsidiary receives an invoice, which gets paid from the group’s external bank account.

PAGE 11 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
PAGE 12 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH
MANAGEMENT
 STEP 4 REACH FURTHER WITH COLLECTION ON-BEHALF-OF
(COBO)

Collection on-behalf-of (COBO) makes it
possible for the group to reach the high-
est level of independence from banks
and maximize cost efficiency. Payments
arriving to subsidiaries can be received
through the group’s external bank ac-
count if there is a way to identify which
subsidiary actually owns the cash arriv-
ing in the group’s account.
Let’s look at an example: In the COBO
model, the subsidiary sends out an in-
voice of 500 euros to their customer,
who settles the payment to the group’s
external bank account [as illustrated
in figure 4]. In the in-house bank, the
pay- ment transaction is visible in the
ex- ternal bank account statement, and
is automatically allocated to the
original collector’s member account.
In countries where the payment dis-
cipline is high, and the use of creditor
reference is the norm, COBO becomes
as simple as setting up POBO. Another
easy way to arrange COBO is to set up a
virtual bank account structure with the
external bank. In this case, the transac-
tions are all routed to the top account
owned by the group treasury, and the
subsidiaries’ virtual bank account num-
bers are used to allocate the cash ap-
propriately in the in-house bank.
The centralized collection of receivables
is usually the most challenging part of
in-house bank implementation. The
lack of good uniform practices for the
remittance information on the incom-
ing transactions makes it difficult to re-
liably identify the original creditor and
reconcile the incoming transactions.
Global standards have been established
for the creditor reference, but they are
not widely used except in the Nordics.
In the USA, lock box files are commonly
used to simplify collection. Alternative-
ly, you can build your own identification
mechanics. New intelligent automation
technologies such as machine learning
will provide new ways to automate rec-
onciliation of incoming cash in interna-
tional corporations.
Centralizing the collection of receiv-
ables at a group level can have a for-
midable impact on the working capital
management of the entire organiza-
tion. In most cases, it is wise to set up
at least external collection accounts
with zero balance structure for the sub-
sidiaries. These accounts can be either
owned and maintained by the group
treasury – in which case all the account
statement transactions are allocated to
the right subsidiary – or they can be
owned by the subsidiaries themselves,
with agreed daily or weekly sweeps to
the group treasury account.

IN-HOUSE BANKING: COLLECTIONS ON-BEHALF-OF (COBO)

Subsidiary sends an invoice

500
Debtor

Payment to GRT’s
In-house Bank External account

GRT dept/credit GRT GL interim

Subsidiary
SUB1 GL account account
Debit Credit Debit
SUB1-AR (rec) SUB1 IHB
Credit
AR member account
interim account Debit 500(8)
Debit 300(9) 500(9)
500(1) Credit Banks
Credit 500(7) GRT bank account
GL account
500(7) Debit Credit
500(8)
Automated allocation and posting
IHB-EUR-SUB1 from group’s bank account to
+500 (5) member account IHB-EUR-SUB1 (5&7) Account statement delivered
for the external bank account
FIXX1234567890XX (4)

IHB-EUR-GRT- FIXX1234567890XX
SUB1 +500 (4)
-500 (6)
Figure 4. In the COBO (Collection on-behalf-of) model, when a subsidiary sends an invoice, it gets paid to the group’s external bank account.

PAGE 13 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT

STEP 5
An in-house bank also provides effec-
tive tools for internal financing. For in-
stance, short-term financing needs can
easily be covered by internal account
balances and credit limits. An in-house
bank simplifies the otherwise complex
process of lending and depositing cash
between parent company and its sub-
sidiaries – no more arranging and man-
aging loan agreements for each debt.
When the margins, interest rates, and
credit limits have been agreed on in
the in-house bank account contract,
there is no need to create separate loan
agreements. Nowadays, organizations
are subject to manifold transfer pricing
PAGE 14 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH
MANAGEMENT
BENEFIT OF INTERNAL FINANCING
regulations to ensure profits are treat-
ed using fair tax principles. An in-house
bank brings transparency and automa-
tion to contracts, and helps to docu-
ment and control the rules of transfer
pricing.
Management of internal financing
in the in-house bank also eases
book- keeping procedures and
speeds up the month-end
reconciliation activ- ities. Calculating
interest is a basic functionality of an
in-house bank, and it eliminates the
need to process the accumulated
interest for each internal short-term
loan. Instead, the interest is simply
calculated and booked to the
“An in-house bank
decreases the need
for lending, as the
net cash of the whole
group can be used
for payments and
investments. ”
internal account at the end of each
month. Centralizing internal financing
with an in-house bank provides an easy
way to document the processes for
regulatory compliance.
From a group perspective, the in-house
bank setup provides visibility of the
aggregated cash of the entire organi-
zation, eliminating the all too common
situation where one subsidiary is forced
to use its account credit limits while an-
other subsidiary has surplus cash lying
idle in its account. An in-house bank
decreases the need for lending, as the
net cash of the whole group can be
used for payments and investments.
CHAPTER
4

KEY Engage in
BENEFITS proactive
OF IN- cash
HOUSE management
BANKING
Setting up an in-house bank has both operational and strategic benefits. In today’s complex
business environment, the strategic benefits that are gained from centralized management of cash
flows, giving a full transparency and visibility over group-level liquidity, are starting to overtake the
operational benefits that result from cost and process efficiency.

PAGE 15 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
 B E N E F I T #1 GAIN VISIBILITY AND CONTROL OVER CASH

MORE EFFICIENT CASH FLOWS: A
well set-up in-house bank will improve
the efficiency of both internal and ex-
ternal cash flows. This, in turn, will en-
able optimal liquidity management
and better cash forecasting. Reliable
cash forecasts are a powerful tool for
group treasuries who are looking to get
the most out of their working capital.
BETTER BUSINESS DECISION-MAK-
ING: With the in-house bank structures
for concentrating external payments
and internal financing, the treasury has
the control needed to make the most of
the group’s cash assets. Clear visi-
bility of cash flows supports not only
financial but also business operations
and decision-making. Having direct in-
put from each subsidiary in the group
allows the management to evaluate
the performance of each unit individ-
ually, and to adjust development initia-
tives or budgeting accordingly.
FREE UP WORKING CAPITAL: Cor-
porations are usually surprised when
they realize how much cash is trapped
in local functions and bank accounts in
a decentralized financial and corporate
structure. Our experience has shown
that by increasing visibility and con-
trol, the share of working capital tied to
operations can be reduced from 10%
to approximately 1% of net sales [as
illustrated in figure 5]. The liquidity
the company needs for investments
may have been hiding in the non-
transpar- ent processes all along.

TH E EFFECT OF CENTRALIZING CASH

FLOWS

AS IMPROVE
■ Decentralized corporate IS D t
■ Centralized cash
structure
GROUP GROUP en management
■ Plenty of subsidiaries estm ■ Full visibility and
■ Local cash management 1 1 Inv control of all cash flows
■ Local business in all subsidiaries
processes Group Treasury Group Treasury ■ Option to optimize the
■ The lack of integration working capital
leads to suboptimization ■ The freed working capital
creates the opportunity
to invest
Report and forecast once
a week (spreadsheet)

Unit Unit Unit Unit Unit Unit Unit Unit

€Xm €Xm €Xm €Xm €Xm €Xm €Xm €Xm

Working capital EUR 30 million Working capital EUR 3 million

(10% of revenue) (1% of revenue)

Figure 5. An example of the effect of centralizing cash flows on working capital. The illustration describes a company making EUR 300
million in revenue, “as is” and “improved”. The figures are based on several OpusCapita customer cases.

B E N E F I T #2 DETECT AND PREVENT FRAUD

PREVENT PAYMENT MISUSE: Fraud
prevention is high on the agenda of
many group treasurers as international
cybercriminals are increasingly targeting
the payment processes of companies.
Centralization of outgoing payments
and harmonization of all related process
helps to prevent payment misuse, and
gives the group treasury the right van-
tage point to keep a close eye on the
actual cash outflows of the organization.
LOWER RISKS: The in-house bank
structure can replace a myriad of exter-
nal bank accounts and banking connec-
tions, even up to the point where there
is no local access to external banks. The
risks related to data security and han-
dling of payment files are mitigated
when treasury is in control. The auto-
mated internal payment management
adds to the security, as does the internal
compliance enforced through a unified
payment processes.

PAGE 16 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
 B E N E F I T #3 STREAMLINE WITH AUTOMATION
Centralizing cash management in the
group treasury opens up the possibili-
ty to further boost and streamline the
cash flow processes with automation.
AUTOMATE WORKFLOWS & INTEREST
CALCULATIONS: For instance, replac-
ing subsidiaries’ multiple external bank
accounts with an internal account
structure tailored to the group’s needs
allows for fully automated cash flows
between subsidiaries, decreasing the
B E N E F I T #4 INCREASE INDEPENDENCY FROM BANKS
INDEPENDENCE: With in-house bank
services available to subsidiaries, the
group treasury can choose a few key
banking partners to provide the need-
ed external financial services. As the
structure is maintained by the treasury,
the group is free to change banks if
they want to. If the solution is built in a
modern multi-banking environment –
utilizing for instance integrated single-
point-of-entry solution to the SWIFT
Network – the company is, technically,
independent of banks.
LEVERAGE: When banking relation-
ship management is centralized to the
treasury, it will add to its negotiation
PAGE 17 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH
MANAGEMENT
work involved in internal payment
management. If the subsidiaries short-
term financing needs are covered with
credit limits within the in-house bank,
interest calculations can also be auto-
mated, and the management of trans-
fer pricing documentation, for instance,
can be substantially simplified.
FREE UP STAFF TO DO MORE VALUE-
ADDING WORK: With an in-house
bank, all the posting and bookkeep-
power. The aggregated payment vol-
umes and currency balances improve
the corporation’s bargaining position
over the pricing with the commercial
banks. On the other hand, even short-
term investments of assets can be ne-
gotiated profitably using economies of
scale.
COST REDUCTION: In addition, mak-
ing extensive use of the on-behalf-of
functionalities and internal payment
structure of the in-house bank, exter-
nal banking costs can be reduced con-
siderably, and, furthermore, value day
losses can be avoided.
ing for the subsidiaries’ in-house bank
accounts can be automated. Even in
a multi-ERP and multi-bank environ-
ment, the group treasury can automate
balance reporting for up-to-date infor-
mation. Removing manual steps from
the financial processes not only speeds
up the month-end activities and frees
up the human resources for more val-
ue-adding tasks, but also helps to avoid
unwanted mistakes that are laborious
to correct.
“If the subsidiaries
short-term financing
needs are covered
with credit limits
within the in-house
bank, interest
calculations can also
be automated ”
 B E N E F I T #5 IMPROVE CURRENCY RISK MANAGEMENT

HEDGE FX RISK EFFICIENTLY: With
efficient and reliable cash forecasts, the
group treasury can also take responsi-
bility for currency risk management. A
clear overview of the company’s for-
eign exchange exposure and currency
position enables group treasury to take
the necessary actions to hedge the
FX risk at a group level. The in-house
bank accounts can be multi-currency
accounts. This eliminates the need for
separate currency accounts in the sub-
sidiaries. Internal multi-currency pay-
ments also means savings in currency
exchange costs.
REMOVE OVERLAPPING WORK: The
group-level oversight removes over-
lapping work as the currency risk man-
agement for a single currency might
have been previously done in several
subsidiaries. In addition, group trea-
suries with the aggregated transaction
volumes are usually in a better position
to negotiate with banks over the hedg-
ing prices than the individual subsidi-
aries are.

TH E BENEFITS OF IN-HOUSE
BANKING
Benefits
Features
Internal Visibility over both internal and
& external cash flows
External
Payments
Centralized control over financing,
Interest On-Behalf-Of investments, FX risk and hedging
Calculation POBO/COBO

Harmonized payment process for internal,

Automated external and on-behalf-of payments
Zero Balance Internal
Balance
Accounts Financing
Reconciliation
Automated bookkeeping and month
end process activities

Lower costs from reduced number of external

banking partners and transaction volumes
SWIFT-ready cloud solution powered by thousands
of bank connections and ERP format integrations

Figure 6. The features and benefits of a modern in-house bank set-up.

PAGE 18 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
CHAPTER
5

SUMMAR Questions to
Y ask
yourself
For a long time, doing more with less has been a key driver for group treasurers and cash managers.
Their focus has been on examining and optimizing corporations’ financial processes. In the coming
years, international corporations’ finance organizations will need to tackle the challenge of supporting
the company operations and growth strategy, while bringing increasingly insightful in-depth
information and forecasts to the table. All this with ever shrinking budgets, and limited resources.

PAGE 19 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
“The difference between a company that is at
the median level – in terms of cash and working
capital management – and a top performer can
be surprisingly large. This difference may even
decide the future success of the companies.”

Given these challenges, the difference
between a company that is at the me-
dian level – in terms of cash and work-
ing capital management – and a top
performer can be surprisingly large.
This difference may even decide the fu-
ture success of the companies.
To secure a place among the successful
companies, the group treasury should
first take a comprehensive look at the
organization’s finance, risk and cash
man- agement, and payments processes.

Questions to ask
What are the effects of the existing structure on the overall financial performance of the corporation?

How are the financing needs of the subsidiaries met? What happens to
the cash surplus of the units in different countries?

Who is in charge of preventing fraud and cybercrime, and eliminating FX

risk? Do the subsidiaries/units actually need relationships with local banks?

Are internal and external payment processes harmonized? Are they cost-
efficient?

And, most importantly, what is needed to have the level of visibility and control that are needed to
optimize working capital and achieve a new level of cash management?

Contact us to discuss your organization’s situation, and to find out how OpusCapita's
cash management solutions can help you to take the next steps.
www.opuscapita.com/contact-sales

Learn more about proactive cash management at

www.opuscapita.com/solutions/cash-management

PAGE 20 | IN-HOUSE BANK AT THE CORE OF PROACTIVE CASH

MANAGEMENT
 Writers
JAAKKO KILPINEN has over 15 years of experience in corporate cash
management and has deep expertise in cash forecasting, netting, and
in-house banking. Jaakko has previously held e.g. a position as Group
Treasurer in a publicly listed Finnish company.
Currently Jaakko works as a Solution Manager at OpusCapita.
CONTAC T jaakko.kilpinen@opuscapita.com

JUKKA SALLINEN is a cash management domain expert with a strong

hands on background from international and complex payment factory
and SWIFT projects. Previously Jukka has been working in various
R&D roles, focusing on bank and ERP integrations and security topics.
Currently Jukka is the Head of Cash Management at OpusCapita.
CONTAC T jukka.sallinen@opuscapita.com

OpusCapita helps organizations sell, buy and pay more effectively by providing them with extended purchase-to-pay and cash management solutions. With €100 Billion in
payments processed annually by over 800 customers across more than 100 countries, we have created a global ecosystem where buyers, suppliers, banks and other parties
connect, transact and grow. Our secure, cloud-based solution enables Treasury and Finance professionals to harmonize global processes, centralize Treasury management, and
reduce complexity. This brings full visibility to cash positions while reducing the risk of fraud. To learn more about how proactive cash management can help your company,
please visit www.opuscapita.com/solutions/cash-management

Founded in 1984, OpusCapita is headquartered in Helsinki, Finland.