Re-inventing Global Liquidity Management:
Can a multinational operate with minimal bank
accounts?
Jim Scurlock
Senior Manager
Parimal Hemkar
Director
Agenda
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Microsoft Overview
Life Cycle of the $
In House Cash Center
Pay on Behalf
Multi-country ZBA
Bank Rationalization
Summary
Microsoft
 120K+ employees
 $86B+ in annual revenue
 $86B+ in cash & Investments
 300+ operational subsidiaries
 Presence in 126 countries
 100+ banking relationships
Our mission is enable people and businesses throughout the world to
realize their full potential by creating technology that transforms the
way people work, play, and communicate.
Life Cycle of the $
Risk Management
Treasury Operations
Before In-House Cash Center
 Cash required for intercompany
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settlements
Repatriating cash was time
consuming
Too much cash held in local bank
accounts
Unfavorable interest rates on
local investments
Increased risks
In House Cash Center (IHCC)
The In House Cash Center is a virtual in-house bank
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Manage intercompany loans
Centralized clearinghouse
Automated accounting
Balances invested in Treasurymanaged portfolio
Participation depends on tax &
local regulations
MSFT
#1
MSFT
#7
MSFT
#6
MSFT
#2
Centralized
Treasury
Portfolio
MSFT
#5
MSFT
#4
MSFT
#3
Pay on Behalf (POB)
Objective: Implement a just-in-time process to centralize
A/P disbursements from treasury bank accounts on behalf
of subsidiaries.
Invoice
received
&
payment
approved
ERP
chooses
cheapest
payment
Payment
file sent to
bank
Bank
debits
account
Vendor
receives
payment
Benefits of Pay on Behalf
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Simplified bank account structures
Reduced cash at subsidiary
Increased cash in portfolio
Reduction of transaction costs
 Consolidate invoices by company
 Consolidate invoices across companies
 Reduced FX fees
Pay on Behalf Lessons Learned
Vendor Master File
• Review VMF
• Standardization
Engage Stakeholder
Change Management
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• Payment frequency
• Strategic vendors
Treasury
Accounts Payable
IT
Subsidiary
Accounting
Multi-Country ZBA
Objectives
100%
automated
accounting!
1. Reduce bank account balances to zero
2. Automate subsidiary funding process
3. Automate cash sweeps to portfolio
4. Automate subsidiary cash concentration
Inter-company ZBA structure is the most optimal
solution to manage bank account balances
ZBA Considerations
 International ZBA availability
 Limited customizable text
 Manual accounting for ZBA
 Company tax structure
 Cash forecasting
 Resident/Non-resident
 Central bank restrictions or reporting
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ZBA Scope & Benefits
Scope
• More than 30+ countries
• Hundreds of bank accounts
• Multiple currencies
Benefits
• Just-in-time subsidiary funding
• Automation of collection sweeps
• Reduced average daily balance
• Improved operational efficiency
• Increase in monetary gain
• Decrease in sovereign risks
• Decrease in bank fees
ZBA is the most optimal solution
Strategizing Banks
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Identify statutory or regulatory banking requirements
Identify the right partner regionally or globally
Identify the right bank per country
Strategic customers
Banking capabilities
Summary - Leverage Technology
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Focus on long term automation
Create scalable solutions
Engage internal business partners
Develop a clear roadmap
Change management
Rationalization your banks
How a Bank Can Help?
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Bank View: Citi
How bank can help?
Global network
Enhanced capabilities
Customized tools
Regulatory requirements
Better Controls
Citi: Moving $1.5 T in 45 countries
Europe
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Austria
Belgium
Bulgaria
Czech
Republic
 Denmark
 Finland
 France
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Germany
Greece
Hungary
Ireland
Italy
London PLC
Luxembourg
Netherlands
Poland
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Portugal
Romania
Romania
Russia
Slovakia
Spain
Sweden
United
Kingdom
North America
Asia/Pacific
 Canada
 United States
Latam
Middle East
 Puerto Rico
Africa
 Algeria
 Tunisia
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Abu Dhabi’
Bahrain
Dubai
Israel
Kuwait
Lebanon
Qatar
Sharjah
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Australia
China
Hong Kong
Indonesia
Japan
Korea
Malaysia
New Zealand
Singapore
Taiwan
Global Concentration Service:
Moving Every Last Dollar!
With the Sun
Additional Challenges
• Difference in timezones
• Back Valued
transactions
• Holidays
Against the Sun
Tools for Client Customization
Pre-set rules
Customized
tags
Comply with
Regulations
Assist clients in:
• Moving exact amounts that they need to
• Auto reconciliation
• Keep track of inter company loan movements
• Comply with country specific regulatory requirements
How Proprietary Network Helps
Below example shows cost savings when funds are moved through Citi’s Network
Multi-Bank Structure
Bank’s Branch Network
Number
Number
# of A/Cs in 3rd party bank
80
0
# of A/Cs at Citi- in ZBA
40
100
Cross Border A/Cs
20
40
Cross Regional A/Cs
2
2
MBTBA A/C Fee
$265
0
Domestic Sweep Fee
$25
$25
Cross Border Sweep Fee
$100
$100
Cross Regional Sweep Fee
$500
$500
In & Outgoing Wire Fees
$2 per wire
0
Monthly Cost
$23,700
$7,500
Yearly Cost
$284,400
$90,000
# of A/Cs
Help Address Regulatory Requirements
Examples:
Central
Banking
reporting
Regulatory
Requirement
Compliance
Limits to
inter company
lending /
periods
Tax approvals for
specific amounts /
periods
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China
Israel
Russia
Singapore
Taiwan
Better Controls & Risk Management
Enhanced Risk Management
Leaving zero
balance in
certain
jurisdictions
Dynamic Limits
to subsidiary
lending or
borrowing
Limits on
movements to
conform with tax
requirements
Interest
Reallocation
Services
Assist clients :
• Provide exact amount of funding required – no excess balance
• Control and monitor inter company loan movements
• Fund movements subject to tax considerations
• Optional: Keep track of inter company loan positions and interest on
arm’s-length pricing
How Does a Bank Facilitate In-House Banks?
Support global network /
accounts for subsidiaries
Seamless Domestic / X-border
Sweeps
Assist auto-reconciliation
between legal entities & IHB
Sharing intra-day Liquidity or
DOLs
Efficient / Robust Technology
platforms
Thank you!!!
Jim Scurlock
Senior Manager
Microsoft Corporation
Ph: (425) 538-2980
[email protected]
Parimal Hemkar
Director
Citi
Ph: (212) 816-5208
[email protected]