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Automating Working Capital Settlement with ORMB

Introduction

Working Capital in simple term refers to Funds available for day to day operations of the company. However, the effective management of it plays a pivotal role in success of the Organization. It affects the various lines of the business involving Treasury, Finance, procurement, Collection and Supply chain etc. The Organization must strategically consider the current level and anticipate future requirement while determining the optimal level of working capital needed. The Working capital should be adequate in the sense that it should be neither abundant nor scarce.

In a globally diverse organization with decentralized business functions, management needs requisite tools that provide decision makers visibility, real time access and ability to drill down into the details of working capital across individual business units. Additionally, it becomes challenging as it involves high transfer cost, Regulatory requirement and legal compliances. Hence the organization need a robust system to efficiently calculate the working capital needed along with its ancillary functions like billing, payment and reconciliations along with associated reporting.

This blog attempts to explore how Oracle Revenue Management and Billing (ORMB) platform can be utilized for providing working capital solution for organizations.

Industry Pain Point:

The common pain points which companies often face with regards to Working Capital are as below:

  1. Limited access or no access to real time data to accurately estimate the working capital requirements for the organization
  2. Global nature of the organizations requiring the maintenance of working capital in multiple currencies based on geographical spread. This adds to the complexity of potential Forex Exposure
  3. With the changing dynamics of business and its size, organization must remain flexible to change/update the calculation techniques to advance method. Traditional legacy systems are unable to provide this flexibility.
  4. The traditional methods involve labor-intensive processes like performing calculation in excel without adequate proof of the supporting data to drilldown. Moreover, this calculation is prone to human error.

 

The Oracle Revenue Management and Billing module with its robust TFM (Transaction Feed Management) engine supports End-to-End settlement like raw transactions processing to determine Unbilled receivables, billing Supplier/Customer for the net amount, facilitating both inbound and outbound Payment and reconciliation of the same.. 

Along with the regular Supplier/Customer settlement, it can be configured to perform Working capital based the same raw transactions used for Supplier/Customer settlement thereby leveraging the existing enterprise solution to establish an automated working capital process.

Additionally, the same solution can be extended to provide the requisite reporting to end users.


Working Capital settlement process flow

The following depicts the high-level working capital settlement process as envisaged in ORMB.

Working_Capital_Settlement_ Blog_Image.PNG
















Features

  1. Flexible and configurable solution for tailor made offering.
  2. Automate the entire process of Working Capital management right from calculating the amount to Billing, Payment and reconciliation.
  3. Calculation of working capital amount at the transaction level thereby providing the transaction level traceability.
  4. Support different calculation method like FLAT/Percentage/Multi-dimensional through its Pricing functionality.
  5. Flexibility to enable the working capital calculation at the broader level like Country corridors APAC, EMEA etc. or specific country based on business requirement.
  6. Comprehensive dashboards and reporting providing significant insights on operational process and increase statutory compliance with respect to inter-company transactions.

 

Business Benefits

An ORMB based working capital solution can provide the following business benefits:

  1. Reduced Operational Cost and Enhanced Operational Efficiency.
  2. Improved Data quality as the settlement system act as the single source of truth enhancing internal control.
  3. Reduced manual effort and eliminates error prone spreadsheet calculations.
  4. High Business Opportunity as funds can be utilized judiciously to explore new opportunity.
  5. Seamless integration with downstream applications for payment processing and Reconciliation
  6. Robust reporting which enables the visibility and operational insights to the business user and help them to visualize, monitor and optimize the overall process.
  7. Automate the accounting and reconciliation for the Intercompany advices.
  8. Helps the Treasury department to forecast and maintain the optimal level of cash.
  9. Reduced dependency on IT as user can change the Pricing based on the changing need of the business without any technical support.. 

 

Indicative ORMB Setup/Configuration for Working Capital Settlement

User needs to do a set of configuration and system will automatically calculate the billable charges for the working capital. Since intercompany billing need to create the equal and opposite bill, ORMB provide the ability to create such mirror advice (Receivable or Payable) with tailoring approach. Depending on the business requirement, company can select the universal currency say USD or country specific currency for all working capital transaction.

Following are the high-level setups required in ORMB to support the working capital settlement:

  1. Setup Person for the Legal Entity Partner type: - Since this is internal cash movement, a Person need to be defined for the Legal entity to which the Working capital transaction will be settled.
  2. Contract Setup: - Setup the contract for the Person.
  3. Rules Setup: - To derive and stamp the attributes to be used by the TFM engine to determine and create the billable charge for working capital settlement in addition to regular partner settlement.
  4. Setup Usage and Invoice Account: - User need to setup the usage and invoice account using the invoice construct,
  5. Pricing: - To calculate the working capital settlement amount user need to define the pricing for the partner which can be account or Person specific. User can define pricing using Criteria based or Relationship based or business specific need which can be tailored using the algorithm.
  6. Billing Frequency: - Required to determine the frequency of billing based on business need. For instance, it can be Daily or Weekly or biweekly based on business need.
  7. Bank Attribute Setup: - To transfer the funds from one location to another, user need to define the set of Banking attribute setup at the partner level like Payment method, Bank Account Number etc.


Conclusion

In the rapidly changing marketplace, increasing competition and globalization, a company need to adopt new technologies which can accommodate to multiple business needs. ORMB as a settlement and billing platform can create the value with its next generation pricing and billing solutions not only with regards to end Customer billing but also with Working Capital Settlement within the organization.

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