Payment Operations

Periods of political and economic change have a direct impact on corporate business models and increase the likelihood of M&A activity. In a macroeconomic environment with recessionary trends and declining earnings, carve-outs are becoming more common, particularly in industrial companies. For Treasury, this often means being thrown into a time-critical reorganization with far-reaching implications for processes and systems. This article takes a closer look at treasury’s role in such carve-out situations, focusing on one of the most urgent challenges: establishing and safeguarding payment capability.

This year has been marked by a growing number of external shocks with tangible impact on businesses: shifts in traditional business models in sectors like energy and automotive, tightened US trade policy, escalating geopolitical conflicts (such as the ongoing war in Ukraine), rising defense spending, and recessionary headwinds affecting long-standing business models. For many companies, this creates pressure to transform and invest – and those investments need to be financed. When higher capital costs coincide with stressed earnings, divesting a business unit quickly becomes an option to generate liquidity and fund transformation programs. Such a sale or carve-out is not always long-planned. Sometimes it comes out of necessity, as part of a portfolio cleanup involving the sale of non-core assets – essentially a “stressed divestiture.” Whether expected, unexpected or strategically sought, a carve-out project puts treasurers under pressure to deliver on multiple fronts at once: 

• Opening bank accounts to maintain payment capability
• Setting up efficient and automated mass payment processing
• Planning and managing operational liquidity
• Arranging financing if not provided by the new owner
• Implementing or migrating a Treasury Management System (TMS) 
• Migrating banking relationships and data
• Identifying and hedging financial risks (FX, interest rates)
• And more.

Among these, ensuring payments can be executed from Day One – the moment operational responsibility is transferred – is usually the most urgent and critical task. Without functioning payments, insolvency risk looms, which is why this article focuses on that topic specifically. Other topics such as risk management and TMS systems, while also important, are not the focus of this article.

A successful payments project starts with the right mindset. In practice, however, we often encounter misconceptions that can derail progress:

All of these underestimate how critical payment readiness really is, and this can lead to major implementation issues.

When kicking off a payments project, it’s important to be clear about the players involved – both on the buyer and seller side – and their return-on-equity (ROE) expectations¹:

• Foundation/Family Office: 7-10%
• Traditional corporate in Germany: 8-12%
• Private Equity firm: 15-25%

Private equity investors frequently step in as buyers. Compared with other owner types, their focus often leans even more strongly toward optimizing financial performance and cost structures. This can influence organizational setup – for example, a PE investor may aim to maintain fewer permanent staff in supporting processes and rely more heavily on outsourcing and service providers. In addition, IT project approvals usually require a business case, and project reporting is expected to be more granular than with corporate or foundation ownership. PE owners typically also require more detailed liquidity monitoring, working capital analysis as well as net debt reporting.

The purchase agreement itself plays a major role in shaping the project. It defines, for instance, which party builds the new organization, how much support the seller provides, and how much time is granted until go-live (i.e. the moment operational responsibility transfers).  A Transitional Service Agreement (TSA) further specifies to what extent, and for how long, the seller’s IT systems, processes, and staff remain available to the new company (NewCo).

On top of that, a wide range of external partners often need to be coordinated in a carve-out:

• IT service providers handling system migration
• Treasury software vendors
• Consulting firms managing the carve-out project
• Payment service providers (PSPs) 
• Payroll providers
• Outsourcing partners for IT services
• Freelancers and management consultancies
• and, of course, banks.

In this complex setup, consistent documentation, clean communication and clearly defined responsibilities are vital. At the same time, Treasury should actively advocate for its own priorities when it comes to selecting partners:

• Infrastructure: While IT or procurement may dictate ERP, TMS or middleware solutions, Treasury should, where possible, have a say for instance in deciding whether to develop custom formats or buy existing ones.
• Banks: Owner-level banking decisions or financing needs may narrow the field, but Treasury should still push for the best setup from a payments perspective.
• Centralization: How centralized should payment processes and approvals be? What degree of “bank connectivity” should run through headquarters versus local entities? These are fundamental design choices.

Even under time pressure, a proper analysis phase is crucial. Skipping directly into execution without transparency about the current situation leads to blind spots and costly surprises later.

The first step is mapping current payment processes and defining the target setup. Do you have a payment factory for external payments, or a netting process for intercompany flows? Are foreign currency accounts in place, and how is forex conversion handled? Are payroll processes internal, or outsourced? What cash pools or MT101 agreements already exist for cash management?

Historical payment volumes by country should also be analyzed. Using the Pareto principle (80/20) helps identify where automated payment processing is most critical.

That said, don’t ignore the 20%. Conduct a country-level review of special cases to avoid conflicts with local CFOs or controllers later on. Examples of local specifics include: It may be the case that a cheque printing program needs to be migrated in the US, a process for regulatory reporting with supporting documents needs to be set up in China, or a direct debit system (BACS Direct Debit) for collecting receivables needs to be established in the UK, to name just a few local special cases.

Once the groundwork of analysis, decision-making and stakeholder alignment is done, the prospects for successful implementation are good. The process of setting up payment transactions follows more predictable steps and will only be described in broad terms here.

It usually begins with discussions with banks around account opening (KYC), setting up connection channels (SWIFT, EBICS, host-to-host) and format specifications. Project plans are agreed centrally with bank headquarters while local implementation managers handle country-level details.

Based on bank requirements, payment formats are developed in the ERP or TMS where no standard library is available. Payment runs are then created and tested through multiple rounds: developer testing, user acceptance or volume testing and productive verification testing (“penny tests”) after go-live. 

In parallel, additional technical prerequisites such as system master data must be configured (bank accounts, GL accounts, approvers, etc.) and interfaces set up. Just as outbound payment files must flow smoothly, inbound statements must also be integrated automatically into accounting. Finally, roles and authorizations for AP, AR, and approvers need to be properly configured in ERP/TMS.

After go-live, a hypercare phase typically follows, with frequent check-ins on business-critical countries to resolve production defects jointly with developers, system providers, IT ops teams and banks.

Experience from previous projects often makes the difference between success and failure. Some frequent pitfalls include:

1. Legal: Bank account opening depends on timely legal entity registration. 
2. Accounting: Chart of accounts setup, GL assignment per account, and UAT participation need to be enforced early.
3. Project risks: Management must be briefed on major risks – insolvency threats, fraud potential, data privacy penalties. 
4. Bank account list: A comprehensive, up-to-date master list of all accounts from the outset is essential. Ideally, it should be maintained in a TMS or Bank Account Management (BAM) module and made available to all project members.
5. Liquidity forecasting: Payments can only be executed where liquidity is available. Short-term forecasting and internal cash pooling must be set up accordingly. 
6. Security: A robust roles-and-rights concept, with segregation of duties (four-eyes principle) and multi-factor authentication, is essential for secure operations.
7. Knowledge transfer: Local payments specifics must be thoroughly handed over and documented via workshops or shadowing if staff are not transitioning to the NewCo.

Ensuring payment readiness in a carve-out is no small task. It involves significant complexity, technical challenges, and heavy workload – usually under intense time pressure. Still, Treasury can rise to the challenge. Success depends on taking ownership from Day One, conducting a solid initial analysis to uncover critical issues, and setting the right priorities. If Treasury stays in the driver’s seat in managing both internal and external stakeholders, and engages banks and service providers in a professional way, payment capability can be secured in time. With clear roles defined for the new organization, large-scale payment operations can then run securely and reliably well beyond go-live.

Source: KPMG Corporate Treasury News, Edition 157, August 2025
Authors:
Nils Bothe, Partner, Finance and Treasury Management, Corporate Treasury Advisory, KPMG AG
Sascha Uhlmann, Senior Manager, Finance and Treasury Management, Corporate Treasury Advisory, KPMG AG

_____________________________________________________________________________________________________________

¹ The stated percentages are only guidelines or subjective empirical values for companies in Germany and are not substantiated by any sources. They may be higher or lower depending on the region and the macroeconomic situation.