The benefits of a digitalised escrow service

A digitalised Escrow service is easier to access, reducing cost by eliminating needless bureaucracy typically involved with traditional trade security products offered by banks, such as Letters of Credit. The result is a service that can efficiently cater for smaller as well as larger consignments, shipped by ocean container, air or truck.

The extent of the bureaucracy involved in traditional banking products is such that it can discourage parties from completing the required processes, or even sway them to decline potential business altogether. Additional complications can arise when attempting to mitigate financial weakness of an issuing bank, leaving aside the conditionality contained in the document itself potentially making it unenforceable. The Escrow service is hence simpler and safer:

  • A transparent fee structure, competitive pricing and a less operationally cumbersome alternative to the traditional trade security services as provided by banks.
  • Safeguarding the interests of both buyer and seller, as funds are only released to the seller and the goods transferred to the buyer when both parties have performed under the Escrow Agreement in accordance with the Trade Agreement.
  • A straightforward and efficient KYC on-boarding process finalised promptly.
  • On-boarding less administratively intensive in respect of repeat transactions as the KYC data-set is securely held on the platform. Subject to the KYC data-set remaining the same.
  • Faster and less cumbersome settlement of transactions will bring about quicker receipt of funds leading to an increase of available working capital for buyer as well as seller.
  • Due to the digitalised nature of the process, there is no longer the risk of loss of physical documentation and the potential for fraud is greatly reduced.
  • The lack of the contractual conditionality compared to traditional bank security documentation, such as letters of credit, will enhance the flow of the process, avoiding delays and additional costs.
  • A fully transparent and auditable process comprising the activities of all parties involved.
  • 24/7 access to a secure cloud-based platform  
  • Dashboard functionality, document uploads and (optional) notifications

Payments as a Strategy

Introduction

Many corporates are working with various bank sponsored electronic banking solutions which lead to high administration costs, in-transparent cash positions and restrictions to fulfill internal compliance. An alternative solution could be to connect your banks via a single, bank-independent payment factory solution, supporting straight through processing. Since a variety of digital bank services are available to integrate all banks by a single payment hub, it makes sense to understand what could work best for you.

Payment channels, the alternatives:

Access to the ebics/mcft channel

The ebics communication channel, already supported by many international transaction banks is an internet communication standard especially designed for electronic banking purposes. The number of banks that offer this channel is growing fast.

The mcft (multicash file transfer) channel is product specific channel, developed by omikron and is provided by many banks and service providers as well (e.g. Uk bacs service bureau). Mcft will bring additional benefits to multicash users, as it is similar to ebics especially designed to use the internet channel.

Setting up a connection with banks that support ebics/mcft is a plug and play implementation.

H2H connections

This is an individual connection with a bank. H2h connections are bank specific and built to use secured file transfer protocols. Each h2h connection can be a bank specific project.

Access to the swift network (to be purchased from swift)

To access the swift network, there are two alternatives:

1.    Via a swift al2 connection, direct linked to the swift network.

2.    Via a swift service bureau, indirect link, via a third party.

Once the access to the swift network is in place, you need to implement and test connections per individual bank. As swift is using a private network for the data exchange, this will lead to additional costs because companies are also charged by the amount of traffic over the channel.

Independent of the (combination of) channel(s) you use, you still need payment software which allows you to read the incoming bank statements and create and send payment files in a secure way.

Payment file formats

Another important aspect of payments is the ‘payment file format’ question (mt101/xml/local standards/ bank-specific standards). Which formats are currently used by the corporate systems and will their bank accept them in the new standardized set up, or does the client wish to harmonize formats and workflows? This discussion is important when replacing a variety of eb systems of a corporate with multiple international subsidiaries and bank connections.

Strategic considerations

The choice of payment channels depends on various factors. For instance, a client with 20 banks, of which 16 can be connected via ebics/mcft would probably connect the remaining 4 via separate h2h-connections because this is most efficient set-up. Alternatively, a client with 20 banks of which only 5 can be connected via ebics/mcft would connect the rest via swift. 

In the end, it is the corporate who decides which channel is preferred and how channels can be combined efficiently. The payment factory must be as flexible as possible to support the corporate strategic goals, even with a change of banks and strategy.

Recommendation

Moving away from traditional electronic banking systems to a modern independent payment factory solution is a challenge. It starts with an analysis and leads to a strategy. Several operational and it-specific questions need to be answered: which new digital services, channels and formats are offered by the bank, and what is the best operational approach for my company?

Since most people in treasury prefer to outsource these analyzes to external experts, it makes sense to seek professional advice.

Who should change? You? Or your treasury system?

Medium-sized companies often use extensive Excel files, that have grown over the years to manage their liquidity management. Some even use complex macros, but in most cases, the four eyes principle is not enforced. If someone changes a value or a formula, this can hardly be proven, but can have significantconsequences for the company. 

Complex calculations sometimes lead to rounding differences, formula errors lead to incorrect results and, finally, the tables do not offer any search functions because they are not databases. 

Switching to a professional Treasury Management System (TMS), in which all financial and hedging transactions, all bank accounts and sales, even sucurities and guarantees can be properly managed, analyzed and simulated, is often not dared for various reasons: 

It costs too much: possible, but you can quickly check which way of working is more economical and easier.

No time to get started: probably because you can’t work efficiently with the current systems. 

No staff left: You don’t need it. Our people have managed implementations at many customers. Our staff take a lot of work out of hands. Alternatively, an external consultant can help.

But then my colleagues have to work overtime: This may be possible, but if that is the case, usually only for a short period. With our help, you can get started in a few weeks. We relieve you of some of the work and we tailor the training to you. 

But for that I definitely need special, new hardware and software?: No, internet access and a web browser are sufficient, as the application is implemented individually for you in our ISO27001-certified data center in a private cloud. 

Trinity TMS is definitely difficult to use? You have to learn everything first, including Excel. However, we have designed our system in such a way that you think in many places that you are working in EXCEL. The workflows in the various modules are also designed in a similar way, so that you can quickly find your way around. 

But we have grown so special and over the years with complex processes, you certainly cannot map everythingWe like to give it a try. We cannot do everything, but so far there has only been a little that could not be represented in our flexible configurable solution. 

Is our financial data safe in the cloud? With Trinity yes, because we do not implement in the global public cloud, but rent hardware exclusively for you in a protected data center (therefore private cloud) with numerous security precautions. The failure data centers are all located in 3 locations in Germany And access is via the Internet? It is compatible with all common browsers and even allows you to work from your home office during these times. 

Try it out, we look forward to your call! 

EU-US privacy shield valid or not? Trinity users can relax

In 2015, the European Commission’s Safe Harbor decision was declared invalid by the European Court of Justice (ECJ). Five months later, the EU and the United States reached an agreement, regarding the set of rules which intend to protect the personal data of citizens of the European Economic Area, stored in the United States. 

A number of provisions should bring the level of data protection in the United States to a level that is in line with EU requirements. Already before Donald Trump published numerous decrees, US law took precedence allowing the FBI and NSA to gain access to the data stored on US servers in justified suspected cases (e.g. to combat terrorism). 

After living with this artificial, not really secure data protection shield for over four years, the ECJ invalidated this “adequacy decision” known as the “EU-US Privacy Shield” on July 16, 2020.

Standard contracts, with agreements on data protection that were still valid, were often agreed on a small scale. Large software providers in particular were happy to simplify referring to the EU-US Privacy Shield, which is now invalid.

Trinity offers its customers a “private cloud solution” in which the data is only stored on servers in Germany. As an ISO 27001 / IKS PS 951 and PS 983-certified full-service IT provider, our data center is specialized in highly available IT services for banks, stock exchanges and financial service providers and meets the highest data security requirements. State-of-the-art building technology and physical security measures are used at three locations in Germany to ensure business continuity management. As a result, the EU-US Privacy Shield is completely irrelevant for our corporate-, municipality- and bank customers using the Trinity TMS.

Does Artificial Intelligence protect you against a crisis?

Weather forecasts are based on artificial intelligence. In general, they work fine but they often fail to predict hail damage. This is because hail usually forms at very short notice and the grain size depends on factors that the model doesn’t take into account. Next to that, one could wonder how management would deal with a predicted anomaly. For instance, would they have believed that oil prices were to turn negative?

Artificial intelligence” is not a clearly defined term. Some people already consider simple ‘rule based’ software as artificial intelligence (AI). True AI requires “if-then rules” to be supported by more complex and self-learning algorithms. 

Deep learning, which is the use of artificial neural networks (ANN). This is effective to improve predictions. The layered model of the ANN develops “thought patterns” similar as in the human brain. In the end, the ANN learns the “right” ways through conclusions based on experiences, whereby many unconscious factors also have an impact on the result. Even if they weren’t originally considered in the rule-based programming.

In certain cases, the likelihood that a predicted result will occur, can be significantly improved with such methods. Complex algorithms can now make autonomous driving possible. 

In order to effectively secure the company’s liquidity, flexibility and a reliable information-base are crucial. Information can be collected via internet and automated interfaces. Plausibility checks and system monitoring are used to prevent incorrect entries and missing messages. The ability to stress tests with any interest and currency scenario are the strengths of a modern treasury management system.

In order to enable financial managers to quickly switch from EXCEL-based planning sheets to Trinity TMS, Trinity has already pre-installed a number of installations in the “private cloud”. Existing structures and data from EXCEL can be adopted in a few days and companies will receive a workable solution in just 5 days. 

Liquidity planning process; why simplicity matters…

Liquidity planning process; why simplicity matters….

Everyone will agree that liquidity planning is an essential part of managing a company. As dedicated provider of liquidity management software, the Trinity team talks to many different companies.

One of the reasons we are invited to speak with the CFO, is because the company’s current processes are no longer considered to be efficient. In most cases we come across two different situations:

Using Excel

The liquidity planning is done in Excel and management acknowledges that this has some essential disadvantages. At a certain point, the use and maintenance of the spreadsheets become time-consuming and the error risk increases continuously. Usually the calculation sheet is managed by one person only, meaning that the knowledge is not distributed in the organization and therefore creates an additional risk.

Furthermore, most spreadsheets miss valuable functionality like e.g.:

  • drill down from consolidated plan positions to their details
  • currency differentiated planning and easy conversion
  • reflection of cash flows from financial deals in current forecast without delay
  • automated and immediate import of cash flows from ERP systems
  • easy PLAN/ACTUAL deviation analysis
  • audit trails and user access rights system to comply with corporate governance guidelines

Using the ERP

The second situation is when we encounter a liquidity planning process that is supposed to work via the existing ERP platform. Due to the complexity of operation the cash forecasting process does not work as required. Next to the above, various other difficulties in handling can appear in ERP-based solutions, e.g. missing calculation of market values, no consideration of interest rate curves, impractical change of planning structures, inadequate automated integration of cashflows from different sources.

Another issue we encounter, is that the implementation of the solution has failed as a result of too much internal resistance from local subsidiaries. This reason, of course, is agnostic to the system in use, whether it is self-made spreadsheets or ERP-based solutions. Therefore, it might be a good idea to implement an easy-to-use system which is especially designed for integrated liquidity planning automatically reflecting all cash flows from financial deals without delay and accessible for all users via internet.

To make a project a success, it is important that different stakeholders, often based in different countries, need to work together in a positive spirit. A simple demo of Trinity’s liquidity planning module can be very convincing and will help to align people.

Did you know our liquidity module can be implemented in 5 days only?

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Invest in liquidity planning with Trinity TMS during a crisis?

Invest in liquidity planning with Trinity TMS during a crisis?

“So far we have got along very well with EXCEL, why should we do something different now?
Our specialist has built a complex planning sheet over the years and continuously optimized them. If something is unclear to us, we can always ask him. However, he has been in quarantine since last Tuesday and we all hope that he will soon return to the office healthy … “

We hope that this does not apply to your company and that we can all get through the pandemic in good health. Of course, a spreadsheet can be of great help in planning finances and is usually cheaper than using professional planning software. Nevertheless, there are many aspects that speak in favor of switching to an audit-proof system that is easy to use by all users:

An integrated system like the Trinity TMS stores the cash flows from all financial transactions in a single database. This means all interest and redemption payments of a multi-year loan are immediately available in the medium and long-term financial planning but also in the short-term cash forecast. There is no need to transfer the data and record it again, which can result in errors.

The same applies to cash flows from money market, foreign exchange transactions, securities, letters of credit and guarantees. In addition, data (creditors / debtors / rent / tax / salaries etc.) from ERP system(s) can automatically be transferred in the background to the Trinity planning module.

In order to obtain, as complete as possible, a basis for decision-making, additional manual entries or changes can be made by authorized users, both in the head office and at local subsidiaries.

As a private cloud solution, the Trinity TMS can be accessed via the internet, both from the office and from the home office. The planning data of individual companies can be consolidated across different levels in order to optimally and proactively carry out regional or company-wide financial planning for the next few days, weeks and months.

Planning is as easy to use as EXCEL but it can do a lot more. The risk of accidentally destroying the planning is almost zero and it is always clear from which source the data originate.

Speaking of “risk”: of course, in liquidity planning with Trinity TMS, simulations, e.g. for different interest rate, rate and turnover developments so that “worst case” scenarios can be avoided by initiating suitable measures at an early stage. If foreign currencies play a role, the exposure analysis and automatic calculation of the hedging ratios’ provide valuable support for financial management.

Later, the plans in Trinity can be filled with actual data using rule-based automatisms and deviation analyzes can be carried out to determine the cause and continuously improve the planning quality.

And if anything is unclear about any of these functions, just contact our support: We have several people here who are familiar with the software and who can help you.

You don’t have to set up your own data center to switch. Simply use ours and get the powerful ORACLE database with regular backups.

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Disadvantages of using Excel for liquidity planning

Disadvantages of using Excel for liquidity planning
Many controllers and treasurers of smaller and medium sized companies still use Excel to manage their treasury but there are many disadvantages of using Excel for liquidity planning. Of course, you can use Excel to manage some loans, FX contracts, Interest Rate Swaps and even do your liquidity planning and exposure management.

But at a certain point it will cost too much time and the chances of errors using Excel for liquidity planning are getting higher. Usually the ‘spreadsheet’ is managed by one person, meaning that the knowledge isn’t deep embedded in the organization.

Typical problems we encounter are:

  • Financial Transactions:
    • floating rates / holidays are difficult to manage in Excel
    • the calculation of market values is complex
    • Excel doesn’t generate journal entries
    • No 4 eyes principle
    • No generation of payment files (redemption & interest)
  • Liquidity planning
    • No drilldown possibility
    • No currency differentiation
    • Cash flows from transactions not automatically included in forecast.
    • Problems with version controls and comparison (Actual – Forecast)
  • Reporting
    • No standard reports available
    • Compliance and audit trail not available

When asking them if they have ever considered the use of a treasury management system, the answer is usually that they ‘do not have a budget’ and/or ‘do not have the time to implement it’.

It seems that, two key-assumptions already have been made here: a treasury management system (TMS) is expensive and takes a lot of time to implement.

Our sales team will be happy to prepare a solid business case together with you and prove that the above-mentioned assumptions are incorrect.

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