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Corporate 2 Bank Collaboration in Trade

After payments and reconciliation, Trade is among the most common collaboration needs that I have seen for corporates in this space. Within this space Letter of Credits is a classic case of a well established business model that can move to a completely automated model.

Whether it is when an importer requests a letter of credit or an exporter receives one there is a considerable and involved exchange of data between the corporates and the bank. In addition, messaging in this space has been considerably standardized – and the business of International trade and Documentary Credit itself has been heavily documented.

The standard points and guidelines that define corpoate to bank collaboration with respect to communication applied even in this space (Corporate to Bank (C2B) Collaboration). The standard process of a workflow where different stake holders in the Trade should also be defined- from the sales force, manufacturing, procurement, finance, production planning and others have to approve. An integration of the ERP and its peripheral systems with the bank’s system can be a great accelerator of the Business processes.

Let us take a case of a simplified case of an export LC being received by an exporter from its bank. When an LC is received as a message the message itself has to be received and normalized into an Export LC document in the system. This LC should be liked to an invoice, Sales Order, Customer or to some other document in the ERP. In addition the document has to be verified if it addresses the sales requirement to start the production. There could be rules that can force the necessary stakeholders to verify and approve or request amendments. A workflow can include communication with not just the banks but also customers and counter parties. A comprehensive tracking of the Documentary Credit against the sale can be defined for central tracking.

The same can be extended to create shipping and other documents to send for collection against L/C. In a similar way a purchase order can be liked to create an electronic application for creation of import LC at the importer side.

The fundamental principle of collaboration will remain the same – there will be a monitor, formator and a connector. These will convert and link the message to the necessary processes. Process integration will be in terms of updating the status and providing pre-defined set data to an existing Business process to keep the integration points clean.

Trade is fundamentally a collaborative experience between Business Partner who could be separate by great distances and banks are just one of the engines that facilitates it. Electronic collaboration can be set up between business themselves and also between corporates and custom departments and regulators.

None of the above is new and there are already electronic collaborations happening however streamlining and standardization require a greater thought among businesses particularly when decisions are taken in different departments and on different systems.

SAP GTS has comprehensive infrastructure that can be linked with a workflow and communication infrastructure to integrate into this space of the Financial Supply Chain.

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