Business Unit
Finance Effectiveness
Efficiency
An overview
2012
Agenda
Page
1 Efficiency - An overview 1
2 Our services 7
3 Case study 14
Section 1
Efficiency - An overview
Finance Effectiveness • Efficiency 2012
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Section 1 – Efficiency - An overview
Efficiency
Efficiency in finance means performing tasks in a timely and cost effective manner typically via simplified and
standardised processes that leverage technology and consolidation / elimination of non core activities through
shared services / outsourcing.
Efficiency is all about
• Corporate Reporting
• Accounts Payable
• Accounts Receivable
• General Accounting
Our services
• Shared Services Advisory
• Outsourcing Advisory
• Build, Operate & Transfer
• Outsourcing Services Provisioning
• Record to Report Optimisation
Select Case Studies
• Shared Services Design & Implementation
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Section 1 – Efficiency - An overview
Corporate Reporting
Good Corporate Reporting : involves providing the external investor community with information that enables them to get a good
understanding of the quality and sustainability of underlying operational performance. It involves financial and non-
financial/contextual information and both an both historical and forward looking orientation.
Features of good practice:
• Corporate reporting provides better – not more – information with a commitment to transparency
• Clear alignment between stated strategy, management actions and performance in information reported
• Corporate responsibility is an integral part of the reporting focused on key strategic issues for the business and its stakeholders
• Quantified data that support the qualitative statements made
• Metrics that, where relevant, illustrate performance against peers
• Granularity and consistency in segment reporting enables the reader to make effective comparisons
• External reporting reflects the internal data set used by management.
• Finance function works closely with the investor relations function
• Corporate reporting is highly automated, easily accessible and available to the appropriate people.
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Section 1 – Efficiency - An overview
Accounts Payable (inc. Travel and Entertainment
Accounting)
Accounts Payable : Routine AP transaction processing of tasks in finance has historically taken up much of finance’s time. That
balance has been shifting in best practice organisations with the goal of reducing time spent on mechanical tasks that add little value by
leveraging EPI and EFT technology, thereby freeing up resources for more value added activities.
Features of good practice:
• Standardised processes delivered using automation technologies (such as EIP and EFT) wherever possible which interface directly
with ERP systems
• Consolidation, where above economies of scale exist, of back office processing into shared service centres or outsourcing to third
party providers to drive down cost and ensure processes are delivered by focussed teams
• Highly efficiency processes hitting best practice benchmarks for volume and accuracy of transaction processing
• Fully integrated approach to working capital management across the organisation
• Proactive management of payment timing by maintaining open line of communications and negotiation in order to maximise
company cashflow
• Payables management managed as an integrated operation
• Travel expenses processed promptly and efficient authorisation procedures in place
• Fraud prevention and detection measures in place
• AP professionals shift focus from transactions-oriented processes to value-adding activities such as building relationship with
suppliers
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Section 1 – Efficiency - An overview
Accounts Receivable, Credit and Collections
Accounts Receivable : The AR process manages money owed to a business by customers who have bought goods or services on
credit. Its effectiveness is vital to a successful company’s healthy cash flow and working capital.
Features of good practice:
• Standardised processes delivered using automation technologies to process remittance and wherever possible, interfacing directly
with ERP systems
• Consolidation where above economies of scale exist, of back office processing into shared service centres or outsourcing to third
party providers to drive down cost and ensure processes are delivered by focussed teams
• Highly efficient hitting best practice benchmarks for volume and accuracy of transaction processing
• Receivables managed as an integrated, cross-organisation set of related processes
• Customer oriented approach to ensure prompt payment (such as continuous improvement to the order fulfillment process)
• Formal dispute management process in place
• Receivables performance is formally reported to Finance and managed
• Maintenance of customer credit ratings
• Automated controls with appropriate independent overrides to enforce credit terms and credit limits
• Align credit and sales initiatives to educate customers about payment issues
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Section 1 – Efficiency - An overview
General Accounting
General Accounting: The process used to reconcile, consolidate and report financial information on a periodic basis. Includes ensuring
validity and consistency in charts of accounts, administration of general ledger database reporting/consolidation structure and journal
processing. Accounting for inter-company transactions includes maintaining accounts, settling balances and reconciling balances monthly. The
process to close the books and GAAPs used for statutory financial reporting.
Features of good practice:
• Standardised chart of accounts with clear descriptions
• Clear guidelines and common procedures for inter-company transactions
• Minimal manual processing of journals
• Cost accounting managed through a standardised technology platform
• Automated, standardised expense capture
• Fully integrated single fixed asset systems that include tax data, revaluation data and leased assets and a fully maintained central repository
of all intangible assets
• Widespread knowledge of the close process and timescales
• Good relationship between the group and operating units causing them to strive to meet or beat deadlines
• Reporting is highly automated, easily accessible and available to the appropriate people
• Financial close is a timely process and/or virtual close is in place
• Few re-allocations or corrections required and performed in a timely manner at month end
• GAAPs aligned with finance systems flexible to report in different GAAPs if required
• Up to date policy and procedures manual is widely available providing clear guidelines on how to apply GAAP compliant accounting policies
and other external reporting requirements. Includes definitions, examples and ownership of key financial and non-financial metrics
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Section 2
Our services
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Section 2 – Our services
Shared Services Advisory
Has your sourcing strategy delivered the
expected benefits?
Shared Services help in the consolidation of common Change
corporate administrative systems and functions among management
departments and agencies. This in turn helps in improving Programme
efficiency, effectiveness and lowering costs of service management
Benefits
delivery. It usually refers to the provision of a service by one management
part of an organisation or group called Shared Services
Centre (SSC), where that service had previously been found
in more than one part of the organisation or group. We
have helped numerous clients in assessing, designing and
setting up Shared Service Centres.
Our methodology enables us to address various issues that
arise at different points in the SSC lifecycle ; the emphasis on
change and benefits management is key to the success of the
Shared Services journey.
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Section 2 – Our services
Shared Services Advisory (contd.)
Our services Value add
• Prepare the business case supporting the • Clear separation of responsibilities
establishment of an SSC • Higher information consistency, better analysis and
• Confirm the scope of the services to be provided by decision making
the SSC, define SSC management and support • Defined (quality) standards for
infrastructure requirements, and prepare a conceptual input/processing/output
model of the optimised processes to be relocated to
• Establishment of internal customer and supplier
the SSC
relationship management
• Move processes and SSC staff and stabilise until all
• Focus on core operations in various business areas
‘Go –live’ criteria have been met
• Standardised processes and reporting
• Establish a management team, locate a city and
premises and implement infrastructure; build • Established performance production and control
interfaces and prepare data for migration; recruit and through SLAs
train staff • Company-wide utilisation of available knowledge
• During the steady state, implement a continuous
improvement program to ensure that service levels
meet or exceed expectations
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Section 2 – Our services
Outsourcing Services Advisory
Are you geared up for the requirements Different stages of the outsourcing lifecycle and
of the evolving outsourcing stages? typical challenges
• Our performance and process improvement Strategy development
professionals can help your organisation 1 Project type - Driven by certain business objectives (e.g. need to improve
performance, create competitive advantage, reduce costs), the organisation is
rightly outsource your information considering outsourcing
technology, human resources and F&A Typical issues and challenges - Ensure that an appropriate blend of sourcing
options that align with the organisation’s business objectives, is defined.
functions
• We can help bring together the different Embarking on Optimisation / Transformation
elements that drive efficiencies for your 2
Project type - The organisation outsourcing contract is distressed
outsourcing engagements Typical issues and challenges - Address poor supplier relationships,
cost overruns, poor performance against SLAs or fraud, enforcement of
• Our multi-disciplinary team, consisting of punitive clauses and implementation of the right governance model.
strategic sourcing and subject matter experts
in tax, transfer pricing, customs matters, Maturing in Optimisation / Transformation
regulatory, HR, IT, financial modeling, 3 Project type - An outsourced environment is in place and needs to be
assessed due to change in management, market changes, the need to improve
governance, controls and risk management, performance etc.
independently advise our clients and tailor Typical issues and challenges - Improve service delivery and/or supplier
management or determine why the originally defined benefits of the sourcing
practical solutions to suit clients’ strategic model are not being realised.
and operational goals Review/Renegotiation
4
Project type - The organisation has outsourced but the contract(s) is due to
expire
Typical issues and challenges - Decide whether to re-negotiate, terminate
the contract or continue to source the delivery of the service externally, or
terminate the contract and return to a self-provision model.
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Section 2 – Our services
Outsourcing Services Advisory (contd.)
Our services Value add
• Assess business drivers for the outsourcing initiative
• Outsourcing strategy that is well aligned with the
• Conduct services portfolio assessment using process organisation strategy
candidacy framework • Defined engagement parameters measurable against
• Develop and float RFI/RFP to a set of identified business needs
service providers • Best efforts from clients and from service providers
• Evaluate service provider responses and benchmark brought about by structured and transparent
against industry standards evaluation process
• Help in negotiations and contract structuring • Mutually beneficial partnerships driven by results
• Align interests to develop a partnership model with rather than by inputs
the service providers • Timely completion of transition activities and
• Monitor and track transition attainment of a steady state
• Clear visibility of the health of the outsourcing
• Develop reporting and tracking mechanisms to
partnership for the senior management
manage ongoing operations
• Less downstream risk and liability
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Section 2 – Our services
Record to Report optimisation
Do you get the right picture behind your numbers? Are your reports timely?
• Statutory and management reporting is a key Closing process Reporting
Account • Management reports
responsibility of any finance function •
reconciliations • Preparation of
financial statements
• The frequency for statutory reporting is generally • Intercompany
and related
accounting
quarterly/annual, whereas management reporting • Material adjustments information
is more frequent • Close ledgers
• The depth of information and analysis for
General
management reporting is also much higher and Transaction ledgers Reports Audit
very context specific activities complete finalised completed completed
• Companies adopting best practices try and ensure Sub-ledgers
Period-end Consolidation Audit
accounting and Reporting
that the reporting is timely and there is minimum procedures
duplication of effort in preparing statutory and
management reports and both provide one version Transaction process and
data
of the truth • Accounts Payable
• Accounts Receivable
• To this effect, they adopt automated, faster and • Treasury/Cash mgmt.
transparent reporting processes • Payroll Audit procedures
• Technical inputs e.g. • External auditors complete audit
production estimates procedures
• Reserves • Audit accounts submitted to group
• Accruals finance
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Section 2 – Our services
Record to Report optimisation (contd.)
Our services Value add
• Work with the finance stakeholders to assess the ‘As- • Faster, simpler book close and reporting processes
Is’ process and define a high-level ‘To-Be’ strategy • Streamlined reporting process that will enable
• Perform a detailed assessment to identify specific meeting stakeholder expectations
bottlenecks in the closing process; define solutions for • Closing and Reporting process becomes
a streamlined closing and reporting process − quicker
• Execute programs to implement the defined solutions, − more reliable
which could include new processes and system − more transparent
changes − more cost-effective
• Identify continuous improvement processes to − more reliable assessments of financial reporting
enhance the quality of the reports generated risks and the strength of related controls
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Section 3
Case study
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Section 3 – Case study
Shared Services design and implementation
Client context The client is a leader in the wind energy market, involved in manufacturing, installation and maintenance
of wind turbines. The group is divided into 13 companies for managing the different business aspects.
and challenge
• Different accounting processes across the 13 group companies.
• Varied level of efficiency of F&A team across the group.
• Redundancy of resources with similar skills across companies.
• Delay and difficulty in consolidation of accounts.
Our approach •Understanding the organisation and its accounting processes
• Preparation of detailed ‘As-Is’ Process maps
• Design and documentation of standardised processes for all group companies
• Development of the standard operating procedure for seven process verticals across 13 companies
• Development of organisation structure and change management (including training)
• Support on development of a document management system
• Development of strategic and operational dashboards
Value • F&A Shared Services is in place for five companies
• Standardised processes based on best practices across the group
delivered • Published well defined standard operating procedure
• Flatter organisation structure established
• Objective performance measures and capability to benchmark verticals
• Cost savings expected as the scale of business grows
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Thank you
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© 2012. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers India
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