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Banking Relationship Management, new stakes for corporate strategy

www.xrtcerg.com

Be it in today's or tomorrow's economies, companies continue to be the interface between the products they purchase from the supplier, and the clients. To ensure that this flow of goods and services is as smooth and efficient as possible, the company relies on several departments:

Computer Programming, Finance, and of course Sales and Marketing. This is one approach to doing business, but it is not the only one. For it is possible to apply this process in reverse, i.e., to have clients contact the suppliers.

Analysing companies from a cash-flow perspective
Traditionally, a company's cash-flow entailed the following:

Clients would pay, i.e. send information to the bank, asking the bank to forward this information to the supplier's bank, which in turn would provide the supplier with this information. Then, the company, or the company's bank, would take this transaction into account, and maximise its potential by controlling the risk factors (fraud, rates, currency exchange, etc.) and overseeing the payment for human resources and its infrastructure.

This contrasts sharply with the Net economy, wherein the number of clients and suppliers rises considerably, thus increasing the risk factor. Similarly, the fact that business is carried out at a much higher speed on the Internet, causing people to say that a trimester now resembles an entire year, further enhances this point. Americans refer to these changed circumstances as the three A's: anybody, anywhere, anytime. All companies have to adapt to this new business environment.

The 1980s: the ERP years
To meet these new demands, companies installed integrated programming software, called ERP (Enterprise Resource Planning). We knew then that this programming software was rather well suited to handling the transactional and administrative aspects of the flow of goods and services. However, this software left something to be desired where decision-making and strategy-forming were concerned .

The 1990s: the CRM and SCM years
This is commonly referred to as business intelligence, which led to many applications used in sales and marketing, as well as computer programming. All of the problem areas regarding financial management, call centre management, data base management, and operational marketing were addressed by the CRM (Customer Relationship Management) concept. CRM combined the need to resolve business intelligence-related problem areas with customer relations to form a broad-based solution. The result was the creation of the SCM (Supply Chain Management) which consisted of procurement, ready-to-order, market places, and software.

The limitations of these concepts within the net economy
ERP, CRM and SCM now satisfactorily meet companies' needs in terms of the flow of goods and services.

None of the initiatives we have just described solve the cash-flow problem, however. CRM tells us everything we need to know except whether or not the client has paid. That isn't CRM's domain. This also applies to market places: payment, risk factors, and fraud are not addressed by this software at all.

New obligations concerning cash-flow management
In the world of finance, there now exists reporting software, as well as software providing solutions to the problems of obtaining the client's payment, maximising cash-flow, minimising risks, and payment-related problems. With the new economy come two

factors which alter companies' cash-flow management needs.
The first of these is the global economy, which for all international companies has resulted in the centralisation of treasuries and payment.

The second factor is that the Net economy greatly increases the number of people involved, in terms of clients, suppliers, and partners. This consequently increases the risk factor as well as the complexity of the processes.

The 2000s: the emergence of Banking Relationship Management (BRM)
We are now witnessing the emergence of the Banking Relationship Management (BRM) concept, whose purpose is to find the missing link between B2B e-commerce from CRM to SCM, not to mention relations with the bank. BRM takes into consideration every aspect of cash-flow, from its roots (the reception of payment) to final payment while optimising the user's financial position and reducing risk.

Today financial management problem areas are no longer defined in terms of purchases made by the accounts manager seeking to optimise credit and receipt of payment, the treasurer seeking to maximise his investments, or for the manager merely seeking to ensure that payments are received. From hereon in, the common goal for both financial and general management is an investment with the capacity to synchronise the entire process, by ensuring transparency, control, and security from beginning to end.

To sum up the BRM concept, it is a broad-based approach to monitoring cash position, risks, and payments. Most importantly, it is also a means of ensuring the security of the cash-flow process from beginning to end, with complete traceability, and control over it. Treasurers', credit managers', and administrative managers' spending are thus replaced by a strategic investment made by financial and administrative management.

BRM demands that serious thought be given to company management procedures
The BRM solution, once in place, must absolutely integrate control, visibility, and security, be it in the back office or in the company's information processing system, bearing in mind that 60% of today's companies have adopted ERP. The BRM solution, once adopted, needs to be broad-based, meaning that the equipment, the solution, the instalment and the execution of this process need to be closely tied together and harmonised. The process should not stop after the company has merely acquired the software, then proceeded to apply it on an international basis. It is also essential that this take place in accordance with strategic consulting, for the methods and procedures have not yet been fully completed in terms of finance, treasury centralisation, and payment centralisation, seeing as the software has yet to become widespread. It is therefore our responsibility to install this process and make it standard, in order to ascertain maximised cash-flow within the company.

Jean-Pierre Roumilhac
President, XRT-CERG

 

 

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