ALEXANDER HAMILTON BEST PRACTICES:
CASH MANAGEMENT
GoLD Winner
The ZBA Way to Concentrate Cash: Microsoft
For the accounting to work, the ZBA trans-
fers would have to include customized texts for
each transaction, something no ZBA structure
was able to provide. But microsoft found a
willing partner in Citi. Together they devel-
oped a new product, called Global Concentra-
tion engine, that can incorporate customized
texts into the ZBA transactions, explains Jim
scurlock, cash planning manager.
microsoft has 350 legal entities operating in 118 countries (and using 1,000 accounts at 100 dif- ferent banks), so concentrating
excess cash efficiently and funding those operations just in time is a formidable challenge
that the $70 billion company addressed with
eye-catching success.
long a leader in the use of automation,
microsoft treasury was still using a time-consuming manual process to fund and collect from 175 actively funded subsidiaries in
And it worked. Now microsoft has a ZBA
structure that sweeps each account to zero
every day and creates journal entries with no
manual involvement. And the solution has no
negative impact on the operations of finance
staffs in the subs, Zinn says. From day one
in August 2010, treasury recovered an aver-
age of $105 million a day that formerly had
languished in the subs’ accounts. Now that
money is placed immediately in productive in-
vestments. Within a year, the harvest of useful
cash is projected to grow to $250 million a day.
In addition to the liquidity pickup, the proj-
ect cut costs as a result of a 41% decrease in
wire transfers. The ZBA solution costs about
$25 per account a month, compared with
about $200 for wires. And previously the high
cost of cross-border wires made it uneconomi-
cal to move small balances. With the much
less expensive ZBA arrangement, it now pays
to sweep those balances.
Implementation at this point depends on
Citi, which only offers the Global Concentra-
tion engine in london and the u.s. microsoft’s
first-stage rollout was limited to 120 accounts
in the u.K and New York, but the company
plans to expand the project as Citi expands its
capabilities and expects to add 15 to 20 coun-
tries before its fiscal year ends in June 2012.
efficiency improved as both the global cash
management and accounting staffs saved
many hours a week. “We learned through
benchmarking that many large multinationals
reconcile activity in spreadsheets and then
journal entries are uploaded by accounting
teams,” Zinn reports. “our ZBA solution reconciles the transactions every day and posts
them to the subsidiaries’ in-house cash center
account, and it all happens automatically.”
The old wire transfers created journal entries in microsoft’s sAP system that ZBA transfers did not create. so microsoft’s project team
worked with sAP to develop a way to get the
ZBA customized texts to feed sAP with the data
needed to create journal entries automatically.
“We had to make key changes so that the
sAP system could handle the new ZBA reporting,” scurlock says.
Because the project required considerable
2010. Funding usually meant wiring funds
to the subsidiaries twice a month and wiring
back excess balances when local regulations
permitted. Treasury knew that daily sweeps to
zero balance accounts (ZBAs) was ideal, but
doing it manually took time, and the time zone
differences made same-day sweeps impossible for europe and Asia. The key to better
control and liquidity management would be a
global ZBA structure with same-day automated
sweeps and just-in-time funding.
IT resources, the treasury team had to lay out
its complete vision in a business requirement
document and convince IT and senior management that it should be a top priority, says
George Zinn, microsoft’s treasurer and corporate vice president. The treasury controllers
group carried out six months of accounting
tests to ensure that there would be no operational glitches.
Photo by Rick Dahms
