Enveloping Processes in Continuous Improvement

Cenveo Worldwide Ltd. operates in an industry sector known for tight profit margins. Based in Stamford, Connecticut, and operating out of 19 facilities across North America, Cenveo produces a wide variety of envelopes, as well as custom labels for various industries including food and beverage. “We produce one in every four envelopes manufactured in the U.S.,” says Benjamin Seal, vice president of treasury services.

Visibility into the company’s global cash position is business-critical. In addition to the cash management pressures that every business faces, Cenveo must plan around seasonal demand for envelopes, particularly from the financial services firms that make up a sizable portion of its customer base.

“The outflows for materials to make all those envelopes get intense in late summer, a few months before demand for our products peaks,” explains Frank Coppola, senior vice president of finance and accounting. “Managing liquidity could get sticky. We need accurate forecasts; we need to see the trends and know where to pull levers. Business and financing decisions are only as good as the information we have.”

In Cenveo’s legacy environment, that information flow was suboptimal. Cash management and forecasting were Excel-based. The treasury group had developed sophisticated processes around their spreadsheets, but those processes were complex. The three treasury team members struggled to achieve visibility into the company’s cash position in a timely manner.

“The biggest challenge was the timing of data flows around daily liquidity,” Seal says. Payment processes were tedious and convoluted. “The treasury team would pull cash balances from our bank portals into spreadsheets. Our A/P [accounts payable] team would run a payment file out of our ERP [enterprise resource planning] system and convert that file into Excel. They would do VLOOKUPs to organize the payments, then they would send the payment file to me or Frank. We would indicate which payments should be made that day, based on the liquidity we had in our different accounts. We would send the file back to A/P, who would generate a payment file for the banks out of the ERP system. Then they would notify the IT team to upload that file to the banks.”

All in all, Seal says, “the A/P team would start payment processing around 2 p.m. to 3 p.m. the prior day, and it would take seven or eight hours. We wouldn’t have a true number for our current liquidity until mid-afternoon on the next business day.” The lack of predictability in payment timing, lack of real-time visibility into the company’s cash position, and the amount of time A/P and treasury staff had to spend just on execution of payments and cash position reporting all hampered Cenveo’s ability to take advantage of competitive pricing, contract discounts for early payments, or improve supplier relationships.

Covid-19 made the need for better cash management and forecasting even clearer. “Early in the pandemic, Frank was presenting a liquidity update to the board almost every week,” Seal says. “At any point in time, we might have two dozen different forecasts going, ranging from daily forecasts to 12-month forecasts. Keeping all those forecasts updated took a tremendous amount of time. I would arrive at the office at 5 a.m., and I was often working past 8 p.m. We needed a more efficient process for changing forecasts quickly and accurately based on the rapid changes we were seeing in the marketplace.”

Coppola and Seal launched a project designed to transform payment processing and liquidity management. They started by conducting a full audit of the people, systems, and processes involved in generating the cash position and liquidity forecasts. A software system that could serve as a “single version of the truth” seemed crucial. Cenveo evaluated multiple software vendors, settling on a treasury management system from Kyriba.

The project goals were fivefold. The treasury group wanted to be able to prioritize payments based on liquidity reserves, and to make those decisions in under an hour. They wanted to leverage on-demand scenario modeling to deliver insights to senior management with minimal manual work. They wanted to develop a reliable cash flow forecast that could be updated within minutes. They wanted to unlock bottom-line value and operational efficiencies. And, perhaps most important, they wanted to become a strategic treasury organization.

One sticking point was that the treasury management system’s out-of-the-box approach to payments did not meet Cenveo’s needs. “Our requirement was to digitize and optimize our payment process in a way that allowed Cenveo to continue to identify individual invoices to pay, versus processing payments in batches,” Seal says. Kyriba engaged an external firm, Clearsulting, to help design a payment process that would work for Cenveo. “Clearsulting suggested that we use the payment builder within Kyriba’s supply-chain finance module.” This was a novel approach, and one made possible by the upfront legwork of Cenveo’s treasury team.

“As you start this process,” Seal says, “it’s indispensable to know where your company is currently and where it’s been, in addition to what improvements the company has already attempted. Our focus on improving A/P processes, and our ability to articulate what payments looked like in the legacy environment, enabled Clearsulting to identify the solution of using the Kyriba solution in a way that no other company was using it.”

Once the payment issue was solved, Kyriba helped the treasury team develop a business case for the new technology. “The business case essentially confirmed what we already knew: Our payment and cash management processes were very labor-intensive across multiple departments,” Seal says. The business case brought senior management on board with the initiative. “That’s a great thing about Cenveo,” Seal adds. “We’re constantly looking at how to improve our processes and drive efficiency. That’s especially true in the treasury team—because we’re so lean, saving one step in a process can have major benefits down the road by enabling us to take on additional projects that provide value.”

With the help of Clearsulting, Cenveo began implementing several modules of the treasury management system—including cash forecasting and bank fee analysis modules—over several months. At the same time, the company completely revamped its cash management processes.

Now, Seal explains, “the A/P team kicks off a payment run directly in the treasury management system. The A/P manager will prioritize payments based on criteria we’ve set and logic we’ve used in the past. She’ll send that information to either me or Frank for review, so that we can make any necessary changes based on our current liquidity. Then we’ll approve it and Kyriba will send the payment file to the bank.”

The treasury management system also provides the payment information directly to Cenveo’s ERP system, and it stores payment confirmation messages from the banks. Seal sees this as a key benefit. “Before, if a payment was rejected, we wouldn’t know until the next day,” he says. “Now, the payment file from Kyriba is automatically matched to both our ERP system and our digital bank statements. If there is a problem, we can go in and fix it much more quickly.”

Moreover, he adds, “when our process was Excel-based, we had no track record to show auditors. If someone changed something in Excel, for example, we would have no documentation of what had happened. The treasury management system has payment confirmations from the banks, which we can pull out when vendors haven’t received their funds or when auditors want to see confirmation of specific payments.”

Most important, treasury now has rapid visibility into corporate liquidity. “Our goal was to get our payment runs done within an hour,” Seal says. “The very first time we used this new process, it took approximately 30 minutes, and it’s even faster now. Rather than having a cash forecast ready in the early afternoon—based on the previous day’s payment run—we can give management a realistic forecast for the current day by around 9:30 a.m. We’ll know at that time if we need to borrow, or pay down a line of credit, or optimize discounts by paying early. The new process has enabled us to adapt much more quickly to the external environment.”

And because the process is so efficient, Seal says, “we have a lot more time to dive into the numbers, looking for trends and ways to work better with our vendors.” Adds Coppola: “With the visibility we have now, if there’s a need for capex within the business, we can see that. We’re not spending the whole day looking at accounts payable. We’re actually helping change and invest in the business.” The next step on Cenveo’s treasury transformation will be to deploy a supply-chain finance program later this year.

Ultimately, Seal concludes, the treasury transformation came about because of the team’s continuous improvement mindset, in which Coppola leads the way. “Frank is always emphasizing the importance of reinventing ourselves and looking for ways to improve, not only individually but for the company,” Seal says. “It drives the professionalism in our department and made this project possible.”