By Geri Westphal
The provider of technology solutions for the utility industry solved its visibility problems with a global treasury makeover.
Itron, a global provider of technology solutions for the utility industry, had a problem.With more than 8,000 customers in 100 countries, it had little or no visibility to account balances and transactions, including AP, AR and Payroll transactions. They also had significant FX exposures in 30-plus currencies with no tracking for FX management. The risks were huge and it was time to optimize their structure.
Itron recently showcased its treasury transformation project to fellow members of The NeuGroup’s Global Cash and Banking Peer Group. The company’s evolution to becoming a world-class treasury organization began in 2011 with a systems roadmap that outlined a strategy to “simplify, standardize and centralize.” Itron knew it needed to improve visibility and control across the globe. Its global footprint is expansive and with more than 60 separate instances of legacy ERP in 11 languages, a decentralized financial structure, and bank accounts with nearly 60 different banks, the company knew it was critical to get going on this globalization project ASAP.
Itron began by defining a standard global process for all operating activities with a move toward full visibility and transparency of transactions. It also developed a treasury architecture that would allow full automation, straight-through processing and systematic transaction implementation. It was able to leap-frog some current solutions that may be at the end of their life-cycle and instead jump straight to the latest cutting-edge solutions, including SWIFT, SEPA, and XML. Thus it became Itron’s mission to leverage technology to free people from managing transactions and manual analysis to systematic analytics with standardized financial data. They decided their ultimate footprint would include one TMS with one global ERP.
How do you eat an elephant?
As with any major project, a key to success is to take it one step at a time following a carefully defined project plan and holding key stakeholders accountable for their deliverables. Itron’s Member Showcase highlighted significant key projects includingthe implementation of a global TMS (IT2), the use of SWIFT as the centralized communication channel for all banking data exchange, and the conversion of all supplier/vendor payments to ISO 20022 XML format. Each project followed a carefully defined timeline to ensure successful completion and overall alignment with other initiatives.
The implementation team worked to rationalize and eliminate redundant legal entities, define core banking partners, aggressively close bank accounts with non-relationship banks (where possible), and consolidate multiple instances of banking portal applications to be managed centrally in treasury. The Itron team determined very quickly that by going directly to SWIFT, they would enjoy lower total cost of ownership for communicating with bank partners, with a higher degree of security, scalability, manageability and reliability.
By standardizing the global business process management, they could leverage industry-supported messaging standards and enhanced STP and auto-reconciliation processes with their Oracle ERP leveraging ISO 20022 XML payment file formats supporting SEPA compliance with global BIC and IBAN data validation sourced from SWIFT.
Following the mandate to have one global ERP and one global TMS, Itron quickly engaged with IT2 to roll out its treasury platform globally. This would allow the company to have access to daily transactions and bank account reporting, global cash positioning and cash forecasting, automated data feeds to their Oracle ERP system for daily bank account reconciliation as well as extraction of AP and AR balances.
Itron could also track intercompany loans and netting and debt tracking for global facilities. Itron is now working on an automated journal entry interface for transactions managed in IT2 to the Oracle ERP which will save a significant amount of time and potential error at month-end when manual journal entries are now created. Soon, these month-end activities will be automated.
Defining a Successful Outcome
One major driver to the success of their project is the mandate from senior management and the commitment to keeping such a project at the forefront of everyone’s priority list, which allows everyone to be on the same page and helps to encourage engagement and timeline management. This type of endorsement is critical when embarking on a large corporate-wide initiative. Many will attest to the fact that change management takes much more time than originally scheduled and having senior support can help cut through some of the issues along the way. It is important to take time to listen to the concerns of stakeholders, while at the same time staying focused on the ultimate goal.
A project of this size takes corporate-wide commitment and support. It takes a dedicated team of stakeholders who have the necessary decision making authority to ensure key decisions are made in a timely fashion and to the benefit of the entire project, not just one particular stakeholder. Big goal. Big job. But, as other large multi-national organizations have proven, the project is achievable and the end result of improved efficiencies and reduced expenses is well worth the bumps along the way.
So far so good
An important step in any large corporate-wide initiative is to take a step back and make sure the outcome is delivering the expected results. In Itron’s case, the hard-dollar savings associated with system improvements and bank account reductions, along with the soft-dollar savings associated with FTE efficiencies and overall reporting enhancements, have been significant.
The the company will continue to build on the foundation of system and process improvement as it rolls out future phases in the remainder of 2014.
As of earlier this year, nearly 30 bank partners were reporting via SWIFT covering more than 250 bank accounts and approximately 98 percent of global cash balances.
The Itron treasury team is working to build out cash balance trend reports and analytics from IT2 to even further improve cash forecasting timeliness and accuracy.
Dashboards and management reports are being used daily to highlight the percent of banks reported along with the number of accounts auto-reconciled in Oracle. Itron’s global daily cash position report including graphics that easily and quickly show cash by currency, country and counterparty. The difference between night and day compared to what the team was able to produce and evaluate before the start of this globalization project.