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Tackling the Challenge of Embedded Derivatives

White paper explores how to mitigate accounting risk and optimize working capital by automating identification and reporting of embedded derivatives 

Fundtech, now a part of D+H, is a market leader in global transaction banking solutions and today released a white paper on the reemerging relevance of embedded derivatives, and how this corporate accounting burden can be transformed into a business benefit. Titled, “Tackling the Challenge of Embedded Derivatives,” the white paper explains how automating receivables can simplify accounting for embedded derivatives, and ultimately mitigate accounting risk and optimize working capital.

For multinational corporations selling in multiple currencies, the strengthening U.S. dollar has made accounting for embedded derivatives a material issue. Most corporations have applied a “rear-view” perspective to account for and report on embedded derivatives, identifying and classifying them at the back end of the receivables process, rather than up front. By automating receivables and capturing them in a centralized hub, organizations can gain 100% real-time visibility into embedded derivatives, dramatically reducing associated risks, while realizing wider benefits ranging from a higher rate of straight-through processing to improved working capital.

“The most effective solution to accounting for embedded derivatives is to automate receivables processing,” says Danne Buchanan, Executive Vice President, Merchant Services, Fundtech. “By moving to a hub-based accounting framework, corporates will reduce audit scrutiny, improve working capital metrics, and even reduce customer service costs and costs associated with processing paper invoices.”