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Sapphire Now + 2012 ASUG Conference
May 14-16, 2012; Orange County Convention Center, ORLANDO, Florida (USA)
Catch Minacs’ CIO Arvind Sood as he shares practical tips and tools to translate business intelligence into real business results, at the world’s largest SAP conference on Tuesday, May 15 at 11:00 am. Arvind will speak on the topic "Making Business Intelligence More Intelligent: Insider Tips and Techniques”.
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BPO India Forum 2012
May 11, 2012; The Westin, MUMBAI, (India)
Catch Milind Godbole share his views at the inaugural CEO Panel discussion on "Driving non-linear growth - do we have a business model?", at the fourth edition of the BPO India Forum in Bangalore.
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Blog: Finance and Procurement

Finance & Accounting Outsourcing: Take out the Ifs & Buts, Focus on "Business Wins"

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Authors: Amit Sharma | (Formerly) Vice President & Head Procurement Outsourcing at Aditya Birla Minacs
              Bhawna Bhatia | Manager-Finance & Procurement Services at Aditya Birla Minacs
 
In our previous blog, we discussed how an outsourcing strategy could help a CFO be a better “partner” to the business and proposed a framework for organizational transformation.
In this post, we intend to offer some concrete directions to derive early business results from such an exercise. In strategic planning for the transformation of the finance and accounting (F&A) organization, visible quick wins with low hanging fruit will make it easier to take on more complex challenges. In fact, an astute CFO would plan for some KPIs to be achieved within 3, 6 or 9 months of kickoff.
By weaving in such a results-led mandate right from the start, you ensure not only measurability of success, but also build momentum driven by your vision. Business results that effectively benefit the enterprise (like improving its working capital situation) and enhance organizational strength over the long term (like systematically managing risk) are two larger planning foundations to look at to select more specific goals. As mentioned in my earlier post, another good catalyst to focus on is to strengthen the organization’s technology foundation. Accurate, actionable, real-time business intelligence helps a CFO “bring out” the intended and delivered benefits of the transformation. Based on this reasoning, we suggest three “quick win” candidate targets below that could be considered as desired business outcomes from your transformation.

TARGET 1: IMPROVE WORKING CAPITAL EFFICIENCY

If you choose to target working capital, plan for your outsourcing services partner to early on understand your procure to pay (P2P) and order to cash (O2C) cycles. Direct its focus to supporting a more active, aggressive working capital management strategy by providing analytics that generate additional value for these objectives:
  • Improve collection efficiency
  • Reduce the percentage share of past-due balances
  • Leverage early payment discounts on payables
  • Extend payments beyond standard vendor terms.
Direct your provider towards actively engaging with suppliers to leverage dynamic discounts from vendors during periods of high cash availability. When credit risk increases, or to meet the cash needs of the organization, dynamic discounts to customers again help realize quicker payments. To support this, your outsourcing services partner can provide analyses of payments beyond terms, variability of payments made to suppliers, follow-up/actions (penalties, interests) for late payments and more. This helps your Procurement department to identify those suppliers with whom to negotiate better payment terms. For example, they are likely to agree to longer terms if there is predictability, rather than receiving unpredictable payments in installments that are early/late/on-time.

TARGET 2: MANAGE CREDIT RISK

Credit risk management has assumed center stage in the current macroeconomic scenario. In my experience, most global organizations face challenges in effectively managing their exposure to credit risk. Very often issues accumulate from the customer master. For example, a “customer” setup multiple times in the master may not have the “right mapping” to resolve these multiple instances. Also, slow internal synchronization of information often delays the identification of a potential credit risk. For example, Sales may still be shipping to a customer whose earlier payments have not been honored.
Charge your partner with the responsibility of reducing delinquencies by stratifying customers based on their risk profiles, accounts receivable (AR) exposure levels and quality of your relationship. For example, a customer paying less than the invoiced amount due to issues with your invoices needs to be treated differently from a customer that is paying less due to cash flow trouble.
Your outsourcing services partner must develop a customized collection strategy for each customer and ensure that potential issues are minimized by analyzing past disputes and fixing the process upfront, and working with your customer to proactively manage known issues. Your partner can also ensure that any issue is properly researched, identified and discussed with the sales team to minimize risk.

TARGET 3: INCREASE EFFICIENCY AND EFFECTIVENESS OF REPORTING

Many global organizations face challenges in the accuracy and speed of data received from departments across the organization. Most people end up looking at largely similar but different reports to analyze the same requirements. To add to this, delays in receiving, validating and consolidating data packages result in extended accounts closing timelines.
By working with your outsourcing services provider, plan to overcome these challenges by analyzing enterprise reporting requirements. Implement a common structure that is made available to stakeholders at required intervals. Your outsourcing provider could help you to:
  • Analyze data elements and sources
  • Identify data validation mechanisms
  • Ensure that data is properly scrubbed before being populated in the reports
  • Map and automate the entire data collection process (to the extent possible).
Both your and the partner’s teams should be directed to design and obtain verifiable benefits from reducing the closing cycle, increasing the accuracy of projections and forecasts, and reducing the effort being putinto adhoc reporting.

CONCLUSION

Weaving in the strategy of driving business results right from the start of your transformation journey, you are “designing” for a good test run before heavy duty exploitation. In the selection of these goals, a CFO must balance organizational agility, scalability and cost effectiveness (with outsourcing as the foundation) on one hand and build in best practices, data driven rigor and long term sustainability (by reengineering the F&A organization) on the other.
This post is a part of our series that focuses on best practices, tools, frameworks and our experiences working with CFOs who are driving higher effectiveness for their F&A functions. Have you read our earlier posts An Outsourcing Framework for Transforming CFOs (by the same authors) and As a CFO Have You Considered Tracking COFF?—Why the Time is NOW! (by Hitesh Dixit)?

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