A.I.C.M. National Conference

Gold Coast

12th October 2007

Prepared & Presented by Colin Prosser FICM CCE

Back Office - Outsourcing in Australia & Overseas

2 My Background

36 years in Credit Management & Accounting Hold Diploma in Business Studies in Accounting - 1988 AICM Member since 1985 Fellowship Membership with A.I.C.M - 2004 Hold Certified Credit Executive ( CCE ) Status – 1998 AICM Councillor – Vic / Tas Div’n – 1997 to 99 & 2003 to

2006 AICM President – Vic / Tas Div’n – 2005/6 Currently AICM Director – Member Services – 2006 to now Worked in various Industries over the years including

Manufacturing, Media, Finance & Title Searching, Telecommunications, Local Govt, 3@Law, Supplier / Distribution – Retail, Wholesale & Service, Accountancy, Electricity Supply, Plant and Equipment, Construction / Building

3 My Employer’s Background

Stamfords Advisors & Consultants

Been in Business for over 25 years

Has over 200 Employees

Has Offices in Perth, Sydney and Melbourne

Provide a wide variety of Accounting Services including:

– Business Process Outsourcing

– Assurance & Risk Management

– Management Consulting

– Business Advisory Services

– Corporate Finance

– Information Systems & Technology Consulting

4 Outsourcing “Definitions”

To contract outside ( jobs, services, etc.) the company rather than employ more in-house staff: e.g: a small business that outsources bookkeeping to an accounting firm.

Negotiated Agreement, creating understanding about services, responsibilities, expectations & priorities.

Strategically place business functions, by using an outside ( 3rd party) business to manage.

Complete tasks or duties for others and to do it cheaper, better & / or more efficiently ( improve productivity / results ).

5 When did Outsourcing Start ??!!

Recognised as starting in the 80’s ( called - work specialisation ) but what about these:

– Middle Ages – Royalty and Nobles used Armies to fight battles, the Butler & Staff tend to their household, Serfs and Slaves to harvest their Food and tender their Animals / Stables

– Industrial Revolution – Line Assembly Production – Components, Weaving, Packaging, Cars – Parts, Welding, Spray Painting & Assembly Robots / Mechanical Arms -Japan smaller / cheaper

– Telecommunication / Computer Age - Marketing / Research / Polls by Phone / Message Bank – Home ( 101 ); Mobiles / Electronic Media ( save trees ).

6 Global Giant Companies – Outsourcing Overseas

IBM

Hewlett Packard

General Electric

Reebok

Fujitsu

Microsoft

General Motors

Phillips

Oracle

AT&T

Governments:

– Federal;

– State; or

– Foreign

Banks:

– Deutsche;

– HSBC; and

– Bank of America

7 Outsourcing Overseas Issues

Privacy Issues – Name, Address, DOB and Phone

Security Issues – Credit Card and Bank Account details

Australian ( ASIC/ACCC ) Debt Collection Guidelines Issues

Language Issues – Understanding & Comprehension

Different Time Zones (India, China, Indonesia, Mexico, Botswana, Columbia & Philippines)

Lack of Knowledge (only cover FAQ’s)

8 Everyday Outsourcing

Marketing & Call Centre by Phone ( your Goods / Services )

HPA – Locked Bag ( Mail, Processing & Banking )

Dry Cleaners & / or Ironing

Mechanic ( Grease, Oil change, Tune up )

RACV Roadside Assist ( Flat Tyre, out of Petrol )

Jim’s Mowing ( Lawn & Gardening )

Babysitter / Child Minding Services

Takeaway Food / Restaurants

House Keeping / Maid Services

Taxi / Chauffeur

Surrogate Mothers

9 Types of Non–Core Operations that are Outsourced

Accounts Receivable / Credit Management

Accounts Payable

Billing – Invoicing, Standard Follow up Letters & Statements

Call Centre

Customer Service

Data Entry / Payment Processing

IT Server/s & Maintenance

Payroll

Human Resources

Procurement

Mailing / Printing / Photocopying / Scanning / Binding

10 Benefits of Outsourcing

Improves Cash flow ( Wages / Super ) , Administration Costs

Floor Space – Better Usage

Electricity and Telecommunication Costs

Gain Knowledge and Expertise

Better Efficiencies and Effectiveness

Better Computer / IT Capabilities

Skills Upgrade, Retention & Access

Save on Supervision, Staff Replacement & associated Costs No Sick Leave or Annual Leave Issues

Re-invest saving in Core Business activities

Economic Issues less effect ( Interest Rates )

11 Reasons to Outsource

Tight Job Market - National Skill Shortage

National Un-Employment is at 4.3%

Greater Efforts made to retain Critical Staff

Higher Salary Packages

Concentrate on Core Business – Selling & Marketing

Detailed Reporting

KPI’s & Timeframes must be met

SLA – Service Level Agreement (Guarantee Performance Levels)

12 Service Level Agreement

Communication Tool between Parties

Lists a Start / End Date or a Period; Objectives; Fees / Costs

Outlines Service/s and Management Levels

Define Tasks, Duties and Reporting ( Frequency )

Performance Agreement measure KPI’s and Deadlines

Monitor, Audit & Review of Service/s

Ongoing – Flexible Document – Review Annually

13 Possible SLA Duties & Responsibilities

Outline Daily, Weekly, Monthly, Quarterly and Yearly Reporting

Compliance, Insurance, Data Integrity, Records Management and Business Continuity Plan

Maintain and Update Credit Policy, Manual/s and Procedures Communication lines – Phone, Email and face to face Meetings

Ledger/s Management – Phone Calls – Credit and/or Customer Service ( plus Feedback )

Reconcile Bank Accounts, G/L Journals, T/B, Revenue Forecasts

Data Input – Transactions and Debtor Notes

Daily Banking

14 Possible SLA Duties & Responsibilities Continued

Budgets – Monthly Comparison - Actual to Forecast

Risk Management, Legal Action, Internal / External Audits

Minimize Doubtful and Bad Debt/s

Six (6) monthly review and discussion of KPI’s and Timeframes

15 Considering Outsourcing some Questions to ask Yourself

Can your internal processes be improved

Can Staff time be better spent

How effective and efficient are you

Do you have the right expertise

What would costs savings be ( 30% to 60% )

How could you use the re-invest the savings

Can you better use the Floor Space

16 Example : Credit Department

Credit Manager, Supervisor & 8 Credit Officers

Old PC’s / Server, Accounting Programs and Microsoft Products

Cost of Phones, Electricity, Workstations, Floor space, Salaries, Super, W/Comp etc

Sick Leave, Annual Leave & Staff Replacement costs ( Down Time )

Old / Non Functional Office/s ( affect Moral )

17 Example : Outsourced Credit Department

Experienced Professional Credit Staff

Leading IT/Computer Software

Latest Communication Technology

Must meet KPI’s, Deadlines & Reporting

Increased Efficiencies & Effectiveness

Scaleable Solutions (Large or Small)

Reduces/Transfers Risk/Responsibility

18

Questions ??