Leveraging Technology to become a “Smart Treasury”

In 2014, A. Schulman made the decision to embark on a global treasury transformation project to support the company’s evolving business needs in a rapidly changing market and regulatory environment. A. Schulman’s treasury team worked with PwC to design a new framework that included centralizing treasury activities and reviewing every aspect of its business across technology, banking, liquidity and risk, to help achieve best-in-class processes and decision-making.

Positioning treasury for success
The aim of A. Schulman’s global transformation was not simply to replace its systems or processes, but to demonstrate best-in-class processes and controls, according to Nicolas Tusseau, Global In-House Bank Manager. The company therefore needed to determine whether it could achieve these objectives using existing infrastructure. The company issued a detailed request for proposal (RFP) to its existing treasury management system (TMS) provider and other leading vendors to ensure that it had the right capabilities to underpin current and future treasury needs. Following a rigorous evaluation, the company opted to replace its existing TMS with Kyriba for a variety of reasons. Kyriba is delivered on a software-as-aservice (SaaS) basis, which would simplify ongoing maintenance and upgrades, as well as streamline the introduction of new functionality, Tusseau said. A. Schulman was also impressed by Kyriba’s depth of expertise and presence in both the United States and Europe, and the company’s proven experience in working with partner banks it had already targeted as part of its transformation.

From a functional perspective, the company recognized that a new TMS was instrumental in supporting a new treasury strategy to support best practices for cash and liquidity management, including using XML to exchange payment and account statement information with its banks, and CAMT.086 for bank services billing. It also wanted a single system across both cash and risk management, which needed to be intuitive, easy to use and cost effective. Furthermore, the company evaluated potential systems based not only on current needs, but also on the system’s flexibility, breadth and depth of capability to support future needs. Kyriba was able to support these requirements, giving the treasury team a high degree of confidence in being able to deliver on its transformation project.

Cash and liquidity management transformation
As part of the project, A. Schulman reduced its cash management banks from around 30 globally to three partner banks: Bank of America Merrill Lynch, Citi and JPMorgan Chase, each of which were connected to Kyriba for payments and account statement reporting using XML formats. By rationalizing its cash management banking panel, and streamlining the way that it communicated with these banks, A. Schulman achieved far better visibility and control over cash and risk, and was able to standardize and improve control over treasury processes. Not only was the company able to manage cash and risk with greater confidence, it was also able to respond quickly to changes in market conditions and group cash and risk positions. According to Tusseau, the company has around 124 bank accounts globally across three banks. It has also set up set up zero balancing in nine currencies in 15 countries with three partner banks, supported by a multi-currency notional pool. This is managed automatically in Kyriba, including posting to the relevant intercompany accounts, producing intercompany statements for each business unit, allocating intercompany interest and withholding tax, and last but not least, automatically sending and posting treasury-related accounting entries to its ERP. This has been a major step toward becoming a ‘smart treasury’ – leveraging technology to reduce manual processing and introduce intelligent automation wherever possible.

Project outcomes and benefits
A. Schulman’s treasury transformation project, including the implementation of Kyriba, has resulted in significant benefits. By improving efficiency and automation, it has made substantial time and resource savings. Cash pools and in-house banking has enabled the company to reduce bank charges, lower borrowing costs and achieve tax efficiencies. In summary, A. Schulman captured $91M of cash within its in-house bank, closed 84 external bank accounts and decreased total bank systems from 28 to three globally. Overall, A. Schulman has calculated these savings to be $2.5M per year. In addition, by implementing cash pooling together with an in-house bank and multilateral netting process using Kyriba, it has reduced the number of physical transfers between entities and replaced them with intercompany flows, reducing intercompany payments by $500M per year, while also eliminating associated banking (wires and FX hedging) costs. These cost efficiencies are not restricted to treasury. Thanks to the general ledger postings automated within Kyriba, A. Schulman’s shared service center has generated efficiencies amounting to 1-1.5 full time equivalents.

Sharing experiences
A. Schulman’s initial system implementation took around six months to complete, including cash pooling, and has continued to expand its use of the system ever since. As a $2.5B group operating globally, with a high level of complexity, the company has sophisticated and diverse treasury requirements, but lacks the resources of larger corporations.

By implementing Kyriba, A. Schulman has been able to achieve a greater level of sophistication, depth and scalability in its treasury operations, but with lower cost and resource overheads. Tusseau said Kyriba has also proved adaptable to specific needs, such as modifying XML formats to meet individual banks’ requirements, and supporting local payment formats in countries such as Romania, Poland and Hungary.