Round_table_dinner_Devi_Kencki_Transparent

Accounts Payables Market Maturity & Trends

How to achieve higher ground

S&O Consulting Introduction

Financial Shared Services Evolutionary Path

Major trends in Financial Shared Services

Accounts Payables Market Maturity Analysis

Accounts Payables Market Maturity & Trends

Agenda

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Global HR Shared Services - Emerging Trends3

S&O ConsultingIntroduction

S&O Consulting

Devi Kencki

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Background:

Devi Kencki is a transformation expert with over 10 years of experience in Shared Services and Outsourcing. He advised many shared service leaders on the full Finance/IT Transformation cycles into GBS-structures. This includes the provision of guiding companies in the development of a strategic vision, defining and achieving maturity levels, development of global organizational structures and end-to-end operational processes. He can be seen as a strategist and visionary thinker.

Furthermore Devi is a columnist of the Shared Services Networks and regular key-note speaker at International Shared Services summits.

Key-clients assisted:

Dell Computers, IBM, Xerox, TNT

Document Services; Barclays Bank , HSBC , ING,

BNP

Paribas Fortis; AXA Insurances, Delta Lloyd,

Allianz, Zurich Insurance; Vodaphone, Deutsche Telekom; DSM, Shell, Sony , Sharp, UCB,

Solvay; Governmental Institutions in

Benelux, Mauritius, Ireland,

France, UK, Sweden including The

European Commission and United

Nations.

Global HR Shared Services - Emerging Trends5


2

Corporate office

Shared Service Center

Customer/Retained organization

Inexperienced Experienced

Soft money conceptCustomized services

BU Governance

Time-driven costingDifferentiated services

Executive steering

SSC as central staff unitPassive / Defensive

Low value

Cost reductionCost Center

Core businessInnovative/Competitive

Business Value

Strategic enablerInvestment Center


A learning curve to work with a shared services concept

3

Consolidation

Establishment Shared Services

Important to SSC customers

•Timeless of response•Routine cost effective services

•Knowledge of the Business

Gradual expansion of shared services

Formation of Islands of Services

Perceived and / or real performance shortfall

Performance shortfalls

•Technology automation•Process standardization•Utilization of resources• Implementation time

Business opt-in

• Scalability (lower cost) • Efficiency through synergy• Center of Excellence• Higher quality/talent

?

Reconstitute

Ignore

Devolve

Business opts-out

• Inability of global delivery• Lack of service culture• Poor quality, higher costs

Gro

w p

ath

Matu

rity

Journey in time


Shared Services Centers Growth Path

Single - functional alignment SSC drives autonomous standardization

Fully integrated regional centers with slim global coordination role

Multi-function alignment and control GLT drives standardisation and process

excellence

Fully integrated centers controlled and managed globally

• Embryonic maturity level (technology driven)

• Single functional model• Functional end-to-end• Optimization coordinated

at strategic level• Low integration between

functions• Hybrid delivery model

with outsourcing providers

• Advanced maturity level (Regional P&L driven)• Multi-functional model• Multi-functional end-to-

end• Regional accountability• Optimization coordinated

at strategic level• High-integration at

regional level• Regional captive centers

• Optimized level (process driven)• Single functional model• GLT lead as “landlord” of

SSO• Multi-functional

standardization & tactical optimization• Captive delivery solution

• Best-in class maturity level (Global P&L driven

• Multi-functional model• Global integrated end-to-

end services & optimization

• Hub-spoke hybrid model with 1 global delivery center and 1 or more center of excellences


Variants of GBS models becoming more integrated as the business matures

4

Evolutionary path of Financial Shared Services

Create additional value to your business

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Optimisation

Value Creation

• Data analytics Improving global insight through the use of consistent data

structures and delivery of enterprise-wide data analytics.

• Growth platformNew markets - expediting expansion into emerging markets

Mergers & acquisitions - enhancing PMI capability

• Process value Generating business value across a widened scope of end to end

processes

• Commercial focus Freeing up market resource to focus on driving business growth

by truly removing distraction of support services.

• Innovation

Leveraging skill and deployment ability to drive innovation

Boosting talent attraction and access to a wider pool of skills as Global Business Services becomes an increasingly rewarding career and training ground.

• Sites Economies of scale Low cost locations

• Labour pool Maximise arbitrage Optimise strategic and operational roles

• Operations Standardise use of enabling technology Standardise processes

GBS enabled integration of Gillette in 15 months vs. 3-4 years, saving $4m per day

Achieved significant process savings across O2C and P2P

India analytics centre provides market leading

commercial insight

TraditionalCost and

operational efficiencies

Global HR Shared Services - Emerging Trends


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Accounts Payable

Accounts Receivable

General Accounting

Fixed Asset Accounting

Travel and Entertainment

Payroll

Collections

Billing

Cash Management

Freight Payable

Revenue Accounting

Financial Management Reporting

Credit Management

Treasury

Cost Accounting

Project Accounting

External Reporting

Internal Audit

Budgeting

Business Analytics

External Audit

Financial Planning and Analysis

Forecasting

Financial Risk Management

Function Management and Strategy

55%

50%

48%

48%

44%

38%

36%

35%

33%

29%

28%

28%

28%

28%

25%

24%

20%

16%

15%

14%

14%

14%

13%

13%

8%

Source: Deloitte 2014 Global Shared Services Survey; Data is cross-industry


Accounts Payables still leading as the “service” to be shared / outsourced

6

12

The past 3-5 years have seen an uptake in globally integrated delivery and synergies across different finance back-office functions

Limited leverage which has led to:• Lack of governance and a regional focus• Functional siloes across F&A, HR and IT• Transactional services outsourced to a

large number of 3rd party providers (regional / global)

Limited coordination / oversight Global services function provides oversight

Companies are now looking to enable:• Centralised sourcing / global services

function to manage end to end service delivery with

• CoE’s: Delivering complex, high value services

• Regional SSC’s: Covering language/regulatory needs

• Strategic, global relationships with service providers


Global integrated delivery model

7

13

Potential Reduction

Main AspectsLever

Business Process Reengineering

10-25%Process re-design, benchmarking, Implementing and active management of KPIs and service catalogues

Automation 10-60%Converting to electronic inputs, Live data feeds, Image & Workflow systems, ICR / OCR, OB10(e-invoicing),signature verification and robotics

IT Optimisation 10-20%Rationalise IT application by utilization and functionality requirements, hardware portfolio

Location 10-65%Integrated service delivery model with knowledge based processes remaining in Europe and transactional in India/Eastern-Europe

Scale 5-20%Consolidate processes (within companies, within industries, across industries)

ContinuousImprovement

3-8% paService Management using factory mgmt (eg. incentives) and quality techniques (eg. Lean Manufacturing, Six Sigma)


Average potential reduction in Financial Shared Services Initiatives

8

14


First Figures – Early Adopters of Robotics

9

Areas of Impact% of

benefits achieved

Reduction in error rates 21%

Better Management of repeatable tasks 21%

Better standardization of process workflows 19%

Reduce reliance on multiple systems/screens to complete a process 14%

Create a frictionless, straight through process 11%

Yield process data/meta-data for better process insights 7%

Potential for process obviation/elemination as a result of the automated business rules 7%

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• Standalone Functional Shared Services

• Scattered• Duplicative• Inconsistent• Inefficient• Lack of customer

focus• Focus on cost

savings, labor arbitrage

• No Vendor engagement

• Unintegrated Multifunctional Shared Services

• Increased consolidation

• Improved efficiency and effectiveness

• Wide use of SLAs• Limited Vendor

engagement• Engagement model

based on project & staff augmentation

• Increased focus on core business

• Semi-Integrated Multifunctional Shared Services

• Hybrid of offshoring and external BPO

• Integrated service & performance management – SLA, Scorecard, KPI

• Innovation and talent primary levers for transformation

• End-to-end operations• Integration of value

chain with smart sourcing

• Integrated Business Services

• Alignment to corporate strategy

• Multi-functional across geographies

• Global policies, processes and systems

• Value maximisation via internal consolidation and external partners

• Customer and process focused

Labor Arbitrage

Centralized, Transactional

Processes

Process Management Capability

Global Business Services

1510


Financial Shared Services Value Chain Model

Global HR Shared Services - Emerging Trends


“A goal is not always meant to be reached, it often serves simply as

something to aim at.”

Bruce Lee


Positioning of Shared Services in the end-state

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The future vision of AP in an end-to-end Purchase to Pay view (Example)

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A practical approach used at DSM

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FSS VisionMission

FSS Long Term Goals

Shared picture

GLT AmbitionEnd 2015

End state2017

Vision

FSS Roadmap

Market Best Practices

Design

Prioritized Projects

Resource planning

Projects

FSS Programs

FSS Maturity

Definitions

Maturity Programs aligned

with FSS LTG

FSSVision/Mission

Definitions


Accounts Payables Benchmark Figures – Comparison DSM Peers

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1st Quartile

2nd Quartile

3rd Quartile

4thQuartile

Finance AP Cost as a % of Corporate Revenue 0,04% 0,08% 0,13% 0,16%

AP Cost per invoice € 5,05 € 7,09 € 11,03 € 14,29

AP Invoices per AP FTE 8755 6694 5196 3802

AP Automation rate (non-touch) 75% 60,00% 50,80% 20,00%

E-invoice Percentage 59,00% 37,00% 15,00% 4,00%

% of invoices matched with purchase order 82,00% 60,33% 54,00% 21,00%

% of invoices that are processed first time error free 99,30% 95,00% 90,00% 82,00%

Average Process Time (invoice process loop) 4,1 5,36 8,8 14,8

no. of supplier invoices per active supplier account 6,56% 11,41% 20,40% 41,66%

Net Promotor Score 9 7,5 6 4

Average fixes per invoice 1,07 1,89 2,78 3,87

Complete payment runs on prescribed schedule 100,00% 99,50% 98,00% 97,00%


Accounts Payables Maturity Analysis

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Accounts payable process is not centralized but managed in functional silos.

Accounts payable processes is not fully centralized.

Accounts payable processes are managed by a centralized function, with low integration to total receipt procurement cycle.

Accounts payable is centralized and is an integral part of the total receipt procurement cycle (end-to-end perspective).

Non-integrated systems and many errors throughout the process.

Methods and processes are partly defined.

Methods, systems and processes are well defined, low error rates.

Methods and systems are standardized, processes are automated (i.e. invoice processing and matching).

Low degree of vendor data base management and no/low optimization efforts for vendor portfolio.

Usage of PO and GRN for matching process not thoroughly applied. Majority of documents, POs and

invoices are filed electronically, banking systems operates electronically.

Fully integrated systems internally and with supplier; EDI and EFT linkage with recurring suppliers.

Stand-alone accounts payable system with limited disbursement controls and procedures.

Documents are partially electronically processed with still significant amount of paper documents.

Vendor data base is proactively managed and vendor portfolio is continuously optimized

Excessive paper required throughout the process.

Payables are processed via several systems and locations, causing medium error rates due to duplication of activities.

Most systems are integrated internally and with supplier.

Elimination of paper POs, receivers, and invoices and minimal reliance on paper based processes.

Excessive number of approval or authorization steps.

Disbursement policies, procedures, and controls are defined but not thoroughly implemented

Controls for mitigation of risk of fraud and to ensure compliance are in place but not differentiated according to risk and value of transactions.

Segregations of duties and controls are installed and differentiated according to risk and value of transactions.

Late payment penalties (supplier relations strained); payment discounts not exploited.

Discounts taken infrequently.Dynamic discounting system implemented for early payment discounts

Discounting taken as value performance indicator

Partly defined and installed controls and no performance framework established.

The performance of the accounts payable process is measured irregularly.

The performance of the accounts payable process is measured on a regular basis.

AP Process Maturity Analysis

Leading AdvancedOptimizedSub-Optimized

Agree on overall maturity levels, priority setting and governance upfront implementation

Take time to align Senior Leadership as well as your customers to increase project success

Distinct clearly and implement simultaneously FSS-wide design vs. SSC functionally specific solutions

Run FSS projects in conjunction with any Corporate wide Target Operating Model project

Agree the scope of end-to-end processes as well as ownerships to be reviewed (Mandate the GPO)

Factor in sufficient resource / time to obtain cross-function and cross-geography elements

Plan realistically and understand the critical path


Bottom line key enablers for success

16AP Best Practices

Devi KenckiShared Services Transformation Expert

(+32) –(0)-468-198132e-mail: [email protected]

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Questions and Answers

mailto:[email protected]