recent results of my last: international banking & cross border payments stp project by martin...
TRANSCRIPT
Recent Results of my last:
International Banking &Cross Border Payments STP Project
By Martin Jermann – November 2004
2Prepared by: Martin Jermann
Contents Client:
Large UN Agency headquartered in Italy
Overview Actions Taken Achievements Banking Data Analysis Timeline – Project’s Progress STP Data Analysis Payment Volumes Analysis Project’s Effect on Bank Charges Recommendations Conclusions
3Prepared by: Martin Jermann
Overview
In July 2002, management created a Vendor Bank Task Force [VBTF] with the objectives to:
Increase the STP rate [Straight-Through-Processing] Decrease banking charges Normalize/standardize banking data in Oracle Introduce banking standards to the organization
This presentation provides an overview of the accomplishments that the VBTF has achieved and its recommendations to further the success that has been achieved.
4Prepared by: Martin Jermann
Overview
Limited validation
Prior to ERP Implementation and Upgrades
Why was the STP so low?
No Centralized Controls
Lack of Appropriate
StaffingHigh number of untrained data entry clerks
No Standardization
Legacy Systems
Antiquated Bank Research Tools
Why was the STP rate so low?
5Prepared by: Martin Jermann
Actions Taken
Inserted country codes for banks migrating from Oracle 10.7 to 11i
Normalized banking data: Eliminated duplicate banks Determined the “Master Banks” Placed the appropriate data in the appropriate banking
data fields
Created independence from the current banks that were actually being used by the UN organization for disbursement by applying the “Over-population” approach (note : This will allow the UN Organization to be able to make a payment on any banking network from any bank in the world)
Phase I (July 02 to August 02)
Phase II (September 02 to October 04)
6Prepared by: Martin Jermann
Actions Taken
Introduced and applied international banking standards:
CredEuro convention SWIFT MT103 and MT103+ IBAN
Trained staff in the Accounts Payable Group on:
How to research banks How to validate banking data How to set-up vendor records for “cross-border”
payments
7Prepared by: Martin Jermann
Achievements
Increased the STP rate Decreased banking charges Reduced the number of rejected payments Reduced the time it takes to respond and/or
research a rejected payment request Documented procedures Introduced new forms Introduced new software and research tools to
validate banking data Reduced over-time to a minimum
8Prepared by: Martin Jermann
Banking Data AnalysisSegmentation of the banking database As of July 2002 there were approximately 16.000 vendor bank
account records Of these, approximately 13.000 were migrated from Oracle 10.7 to
11i The UN organization established the following criteria to
determine whether a vendor bank record was to be reviewed and updated:
the vendor had payment activity in the last 18 months Approximately 9,000 vendor bank records met the above criteria
Of these: Approximately 6.500 (72%) were researched and updated by
the task force Approximately 2.500 (28%) were not chosen to be researched
and updated by the VBTF• (they were in countries with low payment volume activity or
their STP was deemed to be already satisfactory) As of October 2004 there were approximately 12,300 active
vendor bank accounts in this UN organization’s banking database Note: Approximately 3,400 new vendor bank account records have
been added during the life of this project by this UN organization’s Accounts Payable vendor bank update unit
9Prepared by: Martin Jermann
Banking Data AnalysisSegmentation of the banking database
10Prepared by: Martin Jermann
Banking Data AnalysisBanking database – Strategic approach
Banks in the following geographical regions were researched and updated by the VBTF :
Europe 17 countries
United States Canada Note:Note:
Over 75% of this UN Over 75% of this UN organization’s payment organization’s payment activity was made to activity was made to vendor banks in these vendor banks in these geographical regionsgeographical regionsThe remaining geographical areas were
not researched in a systematic manner as they either had low payment activity or they had acceptable STP rates
11Prepared by: Martin Jermann
Timeline – Project‘s Progress
0100020003000400050006000700080009000
30-Sep-2002
31-Dec-2002
31-Mar-2003
30-Jun-2003
30-Sep-2003
31-Dec-2003
31-Mar-2004
30-Jun-2004
31-Oct-2004
Banks Researched IBAN CalculatedReviewed by Management Updated in Oracle
12Prepared by: Martin Jermann
STP Data Analysis
0%
20%
40%
60%
80%
100%
30-Jun-2002 31-Dec-2002 30-Jun-2003 31-Dec-2003 30-Jun-2004 31-Oct-2004
STP
Rat
e
0%
20%
40%
60%
80%
100%
30-Jun-2002 31-Dec-2002 30-Jun-2003 31-Dec-2003 30-Jun-2004 31-Oct-2004
STP
Rat
e
90%
Compare this UN organization’s obtained STP to the SWIFT Worldwide STP Average
13Prepared by: Martin Jermann
STP Data AnalysisCommon causes why some payments did not STP
ExceptionsExceptions
Use of obsolete SWIFT codes Use of obsolete SWIFT codes (SWIFT codes change on an on-(SWIFT codes change on an on-
going basis)going basis)
Correspondent bank not found Correspondent bank not found by our bankers and were by our bankers and were reported to us as non STP reported to us as non STP
(this functionality is coming soon)(this functionality is coming soon)
Certain cover SWIFT / ABA Certain cover SWIFT / ABA codes missingcodes missing
(not at present communicated to our (not at present communicated to our bankers)bankers)
Incorrect formatting of the Incorrect formatting of the beneficiary bank account beneficiary bank account number due to human error number due to human error
% Straight through processing% Straight through processing
% Exceptions% Exceptions
11%
14Prepared by: Martin Jermann
Payment Volumes Analysis
Average number of monthly payments made per month from bank accounts were: 2.000 payments
1.100 were monthly payments made by Accounts Payable 900 were monthly payments made by Payroll
As of October 2004 950 payments STP’d that were made by Accounts
Payable 150 payments did not STP that were made by Accounts
Payable 460 payments STP’d that were made by Payroll 440 payments did not STP that were made by Payroll
15Prepared by: Martin Jermann
Payment Volumes Analysis
0
200400
600
8001,000
1,200
1,400
1,6001,800
2,000
2,2002,400
2,600
31-Jan-2003 30-Jun-2003 31-Dec-2003 30-Jun-2004 31-Oct-2004
Nu
mb
er
of
Pa
ym
en
ts M
ad
e
0
200400
600
8001,000
1,200
1,400
1,6001,800
2,000
2,2002,400
2,600
31-Jan-2003 30-Jun-2003 31-Dec-2003 30-Jun-2004 31-Oct-2004
Nu
mb
er
of
Pa
ym
en
ts M
ad
e
16Prepared by: Martin Jermann
Project‘s Effect on Bank Charges
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Jun-02 Dec-02 Jun-03 Dec-03 Jun-04
Co
st
in D
olla
rs
Average Cost to make a Payment Repair Portion
Average Cost tomake a Payment
9.30 8.25 7.90 7.25
Repair Portion 4.30 3.25 2.90 2.25
Jun-02 Dec-02 Dec-03 Oct-04
The repair portion of the bank charges has decreased by over 47% since Jun-2002
17Prepared by: Martin Jermann
Project‘s Effect on Bank Charges
Bank charges have decreased by approximately 22% since 30-June-2002
The repair portion of the bank charges has decreased by over 47% since June 2002
As of:30-June 2002
As of:31-October 2004
PercentChange
Average MonthlyBank Charge $18.600 $14.500 (22.0%)
Average MonthlyPayment RepairCharge
$8.600 $4.500 (47.7%)
18Prepared by: Martin Jermann
Steps the organization is going to take to maintain and increase thier STP rates
Publish their bank master file requirements on their internal intranet homepage in order to:
Communicate what is now required to make an effective payment
Communicate the international banking standards that they are using
Implement and make use of their new forms:
Consultant and staff member bank update form External vendor bank update form
19Prepared by: Martin Jermann
Steps the organization is going to take to maintain and increase thier STP rates
Continue the active management of the Accounts Payable Bank Update Group:
Ensure that they have the established staff to carry out the vendor bank update function
Keep abreast of changes in the external banking environment
Analyze / Review errors reported in the monthly bank STP report as furnished by their bankers
Query the AP Oracle vendor bank database for discrepancies and/or errors
Pre-validation – require the manager of the group to pre-validate all incoming data prior to its entry into Oracle
20Prepared by: Martin Jermann
Steps the organization is going to take to maintain and increase thier STP rates
Continuously review their bank research subscription services to ensure that they are the most relevant to use:
SWIFT – BIC Database Plus Thomson – The Global Banking Resource [TGBR] IBAN Calculator by AlMiSoft
Link their Oracle AP Vendor Bank database with the SWIFT database
Further enhance the Oracle bank module to : Make the beneficiary bank account number field link to
country specific validation Transmit the beneficiary’s legal bank account holder
name Transmit correspondent bank information Transmit “pay through bank” / “cover bank”
information
21Prepared by: Martin Jermann
Conclusion - Benefits
Non-quantifiable benefits: By having good vendor bank records, the UN
organization is no longer locked into its current banking relationships [it is free to move]
Fewer payments are rejected Less time is spent on payment query research Staff members, consultants and vendors are happier Payments are made more quickly
22Prepared by: Martin Jermann
Conclusion – next steps
They will extend this project / exercise to review and update their Payroll bank records
The STP for this group is extremely low They were able to determine the service levels that
they will expect from their banks (they will be built into their future bank contracts)
STP reports : to be provided on a monthly basis SLAs (Service Level Agreements) : Structured and
well defined They will continue to monitor and report internally their
STP rates and compare it to the internationally accepted banking benchmarks
They will ensure that they will have the established resources to enter and maintain the banking database
23Prepared by: Martin Jermann
Contact Information
To discuss this presentation or my services, I can be contacted at:
Martin Jermann Via Anastasio II, 321 00165 Rome, Italy Mobile: +39 3479946432 Email: [email protected] http://xoomer.virgilio.it/mfj_consulting/