Supporting the cash and treasury management needs of Honeywell, the global supplier of aerospace, performance materials and technologies and automation and control solutions, is demanding. They have an annual turnover of $36.8bn in 2015 (53% of sales outside the US), 1,300 sites in 70+ countries, so they need to make and collect payments everywhere. Séverine Le Blévennec’s presentation at the EuroFinance Conference last month entitled 'Global Payments and Collections in a Changing World’ showed the stresses and strains, and opportunities in the payments space. 

Honeywell treasury

The overall aim of Honeywell’s treasury operation is to provide liquidity whilst reducing cost of funds and managing risk. The key elements of Honeywell’s Treasury operating model are that they: 1) have one global treasury organization, with one in-house bank in Belgium, 2) support business growth globally , 3) drive functional excellence in key areas, 4) have robust controls & compliance, and 5) manage the payables and receivables out of treasury. 

The overall cash management strategy is to maximise cash deployability, returns and liquidity, as shown below:

Source & Copyright©2016 - Honeywell International Inc

With this set up their Global Treausury team achieved a great level of maturity:

• 100% cash and investments visibility worldwide
• Comprehensive cash management strategy
• Strict controls and compliance with Global Investment Policy & regulatory requirements
• SWIFT connectivity
• A/P: company-wide global disbursement 
• Global FX program.

Global disbursement project

Essentially, the objective of Honeywell Global Disbursement SWIFT (GDS) project was to introduce one common process for all payments and one single-channel to/ from all main partner banks, as diagram below shows.

Payment Process with GDS

Source & Copyright©2016 - Honeywell International Inc

The main benefits from GDS project have been:

• Automate the whole disbursement process
• Provide immediate payment status update [ it is a feedback from the system whereby we know whether the payment was successfully processed by the bank system or rejected, with specific codes providing technical reason of the payment rejection ]Ensure secure bank communication
• Reduce risk of fraud
• Standardize the bank interface
• Improve working capital.

Le Blévennec believes that the most important impact of the GDS project has been to reduce the number of payment centres globally from 40 to 3, with improved governance, roles and responsibilities and to achieve a no-touch disbursement process thanks to the high level of automation. 

Future development plans

In future Honeywell want to overcome the current problems when performing cross-border payments:

• limited visibility on payment status 
• delays before the cash arrives on the beneficiary account
• unexpected fees
• inefficient management of embedded FX exposure linked to payments & collections

These, Honeywell believe, are caused by the interbank infrastructure, relying on the relatively old model of correspondent banking over the SWIFT network which they plan to overcome by 1) adopting SWIFT’s Global Payments Initiativeand 2) moving to pre-agreed margins on benchmark rates on FX payments and collections:

• Honeywell plan to use the new facilities that come from all their partner banks participating in SWIFT’s GPI which will give them transparency of fees, the ability to track and trace payments, same day execution and rich payment information. It will, in effect, remove the black box effect in the payment chain.
• pre-agreed margins on benchmark rates linked to FX payments and collections will provide a comprehensive solution for smaller, cross-border, cross-currency transactions. 

This combined solution will enable Honeywell to maximise control, transparency and efficiency of their cross – currency payments and collections, and to take full control on their inbound flows with the new approach, see below:

Source & Copyright©2016 - Honeywell International Inc

The new approach to global collections will, Le Blévennec commented, “Give Honeywell the ability to collect foreign currency flows directly from our local account in a cost-effective, transparent, automatic manner. It removes the need for most foreign currency bank accounts, thus eliminating some bank account management fees and reducing FX exposure.  

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CTMfile take: it is the clarity and simplicity of Honeywell's global payment and collection solution that impresses.