Strong growth in China and across Asia have helped propel the global economy and created opportunities for businesses worldwide.

But this stretching of supply chains around the globe has highlighted the inadequacies of the financial systems and processes of many businesses, which often date back to an era when most trade was done closer to home.

Globalisation demands a greater sophistication of trade and supply chain management processes that has not always been matched by a similar evolution in the finance function. That is because these two parts of the business have traditionally functioned separately.

”Increasingly, we find that finance employees are collaborating with supply chain people but that was not often the case in the past as they did not have a need to talk to each other,” says Ehsan Ehsani, a supply chain consultant with Accenture.

Similarly, the IT systems used by each department were never designed with the needs of the other in mind.

So, the finance staff charged with setting payment terms and managing trade financing often have little knowledge of the workings of their physical supply chains. Meanwhile, the supply chain planners are oblivious to the financial considerations of a particular plan in terms of corporate cash flow or working capital.

Mr Ehsani says these failings have created a golden opportunity for vendors of IT solutions that can bridge the gulf between the two departments.

”Transactional supply chain systems were all about minimising costs but now we are seeing systems that focus more on working capital and value maximisation,” says Mr Ehsani.

According to a recent study by Aberdeen Research, supply chain finance and inventory management practices are undergoing a much-needed overhaul as companies start to look at once-separate functions more broadly in a bid to optimise working capital.

The consultancy found that 69 per cent of companies surveyed are either actively using techniques to improve working capital or investigating ways to do so.

Adopting more innovative approaches to supply chain management can help an enterprise free cash and reduce costs at various stages of the supply chain. For example, it can reduce the cost of short-term borrowed capital or the costs of goods sold, while improving efficiency in the accounts payable and receivable processes can reduce a company’s cash reserve requirements.

In a globalised economy, the accounts payable and receivable functions have a much greater importance – and complexity – than they did in the past, even if that importance is not always recognised.

”Most top management would argue that they have more important concerns that managing the cash more efficiently,” says Joergen Jensen, director of treasury products for Wall Street Systems, a US vendor of financial software.

It is not just the inexorable trend to source from low-cost countries that is shaking up financial supply chains. As the economies of these emerging countries develop, they become important new markets in their own right. For example, Asia now contributes almost 8 per cent of the turnover of Carrefour, the French supermarket chain, while China accounts for 11 per cent of the orders for Gamesa, the Spanish maker of wind turbines.

To service customers and suppliers in new fast-growing markets the traditional approach has been to set up local cash and treasury functions and recruit local staff to run them. But this decentralised approach has many disadvantages, not least the duplication of staff and banking relationships.

”The more global you become, the more bank accounts you need and the more local banks you have to deal with as no bank can cover the whole world,” says Mr Jensen.

This patchwork of local banking relationships leads to higher banking fees, since each location uses its own staff and has little transaction volume with which to negotiate reduced banking fees.

Mr Jensen argues that the better solution for multinationals is to centralise the payments function in a single location using a shared services centre approach, creating what is often dubbed a ”payments factory”.

By centralising payment processes, the business is able to not only negotiate better deals with a smaller number of banks, but it gets better cashflow forecasting capabilities and can save on the number of It interfaces it need to build to electronic payment systems.

Suppliers like SAP, Trema and Wall Street Systems offer payment factory software for businesses looking to centralise the payables function. While the software is aimed at multinationals and priced accordingly, Mr Jensen says that it can soon pay for itself. ”Companies that have gone down the payments factory route have got a good rate of return on their investment,” he says.

Because of Asia’s economic boom, the Asian operations of many multinationals have now grown big enough that it makes sense to centralise accounts payable and receivable operations across the region.

Asia is now home to more than 100 shared service centres handling payables and because the business is relatively labour-intensive, there is a lot of competition between Asia’s low-cost countries to attract these payment factories.

For treasury and cash management, labour costs are not so important – a typical corporate treasury only employs a handful of staff. Nevertheless, there are other good reasons for centralising treasury operations, not least the greater visibility it brings to an organisation’s overall cash position.

Oracle centralised its treasury operations a few years back and the move allowed it to earn $5m a year by pooling cash from its subsidiaries that would otherwise be sitting unused in local bank accounts.

A less drastic approach to optimising working capital is to set up regional treasury operations that span the globe in a bid to ”follow the sun”.

Cash positions in local currency pools in Asia are automatically swept into a regional US dollar pool managed by an Asian regional treasury centre, which can better exploit the liquidity and fund countries with cash deficits.

At the end of the day in Asia, any surplus is then swept to the European regional treasury centre and then on to the centre in the US, before returning to Asia on the next day.

Another good reason for centralising treasury is to better manage foreign exchange exposure. This has become more important with globalisation, as more western companies are now doing business in emerging markets with often volatile currencies.

Despite the range of IT solutions and services to help global businesses rationalise their financial supply chain, Mr Jensen laments that many businesses are reluctant to go too far, often because of the resistance of local staff who fear a loss of local flexibility and, perhaps more importantly, power. ”Local mangers still like to be able to write their own cheques,” he says.