Case study: three steps to effective retail treasuries in Hong Kong

By Bank of China (Hong Kong) | Jun 16, 2021

Bank of China (Hong Kong) (BOCHK) successfully implemented a retail collection and treasury centralisation solution for a leading local retail player to optimise its finance operations.

An effective cash management strategy is one of the key success factors in the retail sector. Reflecting the importance of this, BOCHK created and implemented a three-step solution for a well-known retail company in Hong Kong.

By rationalising bank accounts, enhancing collection services and centralising cash management, the solution has successfully optimised finance operations for the retail company.

Bank account rationalisation
As a result of an earlier reorganisation, the company now manages two retail brands through two subsidiaries. Over the years, one of the brands has set up over 50 bank accounts in the same name at BOCHK to manage funds for each retail outlet. Funds collected in each one were deposited into the relevant account every day and automatically centralised into its header account by day-end with zero-balance sweeping.

As the brand’s retail network grew rapidly, maintaining these multiple bank accounts has created additional workload for the finance team, including a lot of surplus paperwork with statements and manual reconciliation.

To free up the team for more value-added tasks, the brand decided to close its accounts for each outlet and retain one account to settle collected funds from all its outlets across Hong Kong. Instead of using physical bank accounts, the brand makes full use of its internal sales system to differentiate funds collected from each outlet for reconciliation.

In short, the finance operations have been simplified from over 50 accounts to one.

Enhanced collection services
At the same time as the brand closed its accounts for each outlet, it has also revamped its on-site collection facilities at each outlet.

The settlement account of cash and electronic payments is centralised to its sole account at BOCHK for direct funds management. Through setting up BOCHK’s BoC Bill Integrated Billing Service (BoC Bill), the brand has introduced QR code payment to its customers – including Alipay HK, WeChat Pay HK and BoC Pay. Visa, MasterCard and Unionpay are also available with that one POS machine in each outlet.

Not only can the brand now capture market trends in contactless QR code payments; it has also minimised cash transactions, hence reducing risk and costs in handling cash.

BoC Bill also integrates transaction data from various payment methods into one set of data for the finance team to do electronic reconciliation easier and quicker.

Centralised cash management
The company has also utilised BOCHK’s services to achieve three treasury goals: visibility, control and liquidity management.

(1) Visibility:
With BOCHK’s online banking platform, the company is able to view real time account balances and activities of all its accounts in the subsidiaries. Reports can be generated from the platform for easy reconciliation and analysis.

(2) Control:
By setting up a bespoke authorisation matrix with BOCHK online banking, the company can perform the role of gatekeeper for payments of both brands. The authorisation matrix can be tailored for various scenarios, such as payments exceeding a specific amount, or payments to non-registered beneficiaries. The company can also maintain control over daily payment operations.

(3) Liquidity management:
To achieve funds concentration with minimum disruption to the brands’ daily operations, the company has set up a physical cash pool at BOCHK with flexible settings. This consists of the company as the header and its subsidiaries as members. Instead of a strict daily zero-balance sweeping arrangement, weekly minimum balance sweeping has been set up to centralise funds for both brands. Under this automatic sweeping arrangement, the company can utilise idle funds of pool members for higher yielding investments, while allowing autonomy for the brands to manage their daily expenses with the budgeted balance. In doing this, the company has successfully enhanced efficiency of funds from local cash concentration.

Continuous improvements
These changes offer a clear example of how a retail chain can optimise its finance operations by reviewing its funds management model to support its business growth and to match changes in the organisation structure.

In a world where change seems to be the only constant, successful treasurers must look to continuously enhance their processes to stay ahead of the game.

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