Streamlining payment processes to reach standardization and economies of scale for a rapidly growing airline company.
BRIEF
A regional airline company had grown rapidly in the Latin America region with operations in more than 6 countries. Each country had its own treasury area taking individual decisions on the cash management strategy as well as its operation. The client needed to streamline the way to process the payments and have more visibility on cash surplus generated in each country in a centralized mode as cash flows were managed very inefficiently.
SOLUTION
The proposed solution was to review and analyze the treasury flows (re-engineering process) in each country and define the best practices for the company on the payment process. The goal was to reach standardization and economies of scale by streamlining the process.
In parallel, we recommended centralizing certain treasury activities (regionalization) in the head office where it should be responsible to manage payment authorization from all the countries where the company operated and to define the liquidity management policy for the working capital managed in each country. All the suggested changes were supported technologically by an ERP acquired by the client with instances implemented in each of the countries.
Results & Recommendations
The client improved their day-to-day operation cost in the payments process by reducing it 25%. As visibility improved, the regional treasurer was able to reduce the cost of funding by taking the right decision to use the banks credit lines when they were really needed. The cost of funding reduction reached was around $1.1 million dollars (annual basis).
As second phase, bank account rationalization (the customer had more than 100 accounts in all the region in +20 banks), and bank statements standardization (i.e. MT940 messages) was recommended to keep improving the goals established by the regional treasurer (cost reduction in operating the treasury areas).