genpact sep finance presentation
TRANSCRIPT
Driving Effectiveness in your Finance function
Speaker Session – 13th Annual Australian Shared Services & Outsourcing WeekDate: May 12, 2010
2Is your Finance function delivering on its true potential?
• Organizational issues
Barriers to realising the potential
– Geography
– Process
Functional– Functional
– Lack of Enterprise Strategies
• Focus on Process Efficiencies versus Process Effectiveness
• Limited clarity on the linkages between overall business outcomes and operational metrics which tie to EPS and Working Capital
• Lack of external benchmarks for process metrics at a granular level which provide appropriate corrective actions
• Under-utilization of technology for process effectiveness
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Under utilization of technology for process effectiveness
3
2-3X variation in average vs. best-in-class performances
YoY Days to ReportYoY reduction in DSOYoY % reduction in spend
Order To CashSource To Pay Record To Report
YoY Days to Report
3X+
17
YoY reduction in DSO
2X+
47
YoY % reduction in spend
2X+
4-5
3X+
5
2X+
23
2X+
1-2
Impact on bottom-lineFor a typical $5 billion company, it could
Best-in-class AverageBest-in-class Average
Impact on bottom-lineFor a typical $5 billion company, it could
Best-in-class Average
Impact on bottom-lineFor a typical $5 billion company, it could
mean:
• Enhanced controllership and significant capacity for insights into performance
• Critical path process analytics and policy streamlining drive 50% improvements
mean:
• Cash release of $200-300MM
• Eliminating billing input errors improve DSO by 2-3 days: $35-50M cash release
mean:
• A reduction in purchase spend by $ 50-150 million over three years
• An increase 100-300 bps in margins
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• Collections Strategy with intelligent payment analytics improve DSO by 20%
4
We spoke with over 50 executives in 35+ large global companiesLeading APAC
t l i tiGlobal FMCG
2 global pharmaceuticals companies Global aerospace
manufacturer
telecommunications provider
Global FMCG company
Others*8%CPG
11%
Leading global healthcare company
Leading biotech company
Industrial Manufacturing
17%
Pharma & Healthcare
14%
company
BFSI50%
4 insurance majors2 global banks
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* Others – Telecom, Transportation and IT
5
…and this is what we heard
Organizational silos
Major barriers to realizing value• No single decision maker with full process ownership • Incentives of sub process owners not aligned with overall business outcomes
We have sought to re-engineer large parts of the bank. We’ve undertaken some restructuring and some off shoring yet the silos continue to come in the way” COO global bankoff shoring, yet the silos continue to come in the way
Execution has not kept pace as there is lack of top down sponsorship for G&A break-through initiatives – a full end-to-end proposition starts to run into organizational barriers”
Customers believe that an end to end approach to opportunity identification could
COO, global bank
VP, global automotive major
Fundamentally, end-end outcome based thinking is the right way to go. People who ignore this trend will do so at their own peril”
Process in-effectiveness
Customers believe that an end-to-end approach to opportunity identification could provide the break-throughs
VP, global financial services company
The large amount of value left on the table is because organizations do not work as end-to-end processes”
Business outcome Clarity of linkages between overall business outcomes and detailed operational
EVP, global insurance major
In order to move from output to outcomes, the right framework of measures and drivers is needed to provide line of sight to key business goals”
K i h t t t ti l l l i k h 25 th t h k it
linkages metrics can help companies identify the real operational drivers of value
VP, global financial services company
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Knowing what to measure at an operational level is key…we have 25 groups that each makes up its own metrics”
Regional Head, global bank
6A structured approach to drive effectiveness and business impact
Link business
Identify drivers of performance
Develop holistic solutions including process
Identify key business
Map every core business process at a
l l l
Link business outcomes and benchmarks to key performance measures and
variability and provides an improvement roadmap by leveraging
process, analytics reengineering and focused IT
key business outcomes for the company
granular level measures and drivers
leveraging ‘insights’ and ‘best practices’
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Record to Report – A Deep Dive Framework
Level 1SEP
Record to Report business outcomes• Reliability & Statutory Compliance• Time to Report• Insights into business performance
• Cost of Finance Organization• Standardization of processes
Sub Ledger
E t lLevel 2Sub-process
Closing
• Days from close of period to internal report out
• Recs cycle time• Ageing of variance• %/$ balance of un-
• # of Re- filings• # of SEC Comments• Reporting cycle time
• Time to close• %/# Manual
• Days from SL close to month end
• % Corrections• % of interface
errors
• Days from SL close to month end
• % payroll inaccurately processed
• Days to close SL
• Absolute $
• Days from SL close to month end
ReconciliationFixed Assets
Inventory PayrollManagement Reporting
External ReportingAccounts
PayableAccounts receivable
Inter-company
p• % of delays in
internal reporting during a period
• % of ad hocs vs regular reports
• % deviation to plan
%/$ balance of un-reconciled accounts
• % Balance not reconciled in scope
Reporting cycle timejournals /Topside adjustments
• % Interface Errors• # SOX/ Audit
defects
• % interface error • % invoices
accuracy• DSO• % past due• Bad debt write
off to sales %
errors • Days to SL
cut off• # SOX / Audit
Findings• Speed of
Capitalization
• % inaccurately processed
• # of open items identified in recs
• Days from month end to SL cut off
• # of statutory compliance failures
Absolute $ value of intercompany variances
• Aging of transactions, open
• % interface error
• % invoices processed inaccurately
• % absolute variance in Vendor
Key performance measures
Level 3activities
General Ledger Maintenance
Pre-submission review and consolidation
GL submission and Close communication
Post Forex and Tax adjustments
Pass JE (auto Manual, & feed)
Close Planning and Review
Vendor balance recs
Pre-submission review and consolidationconsolidationconsolidation
• # Chart of accounts • # requests per user• % availability of IT
helpdesk in close• % service request
• Accuracy of Tax and Forex rates
• # of tax runs• No. of Pre Tax
Journals posted
• % Correction Journals• # interface errors• % automated journals• % JE’s in last 48
hours of close
• FPY of subsidiary feeds• # entries related to GL
validation errors• # of repetitive errors• % adjustments basis pre
• # errors per submission
• # times GL re-opened
• # times GL close d l d
• % entities on common close calendar
• % entities missing at least one timeline
• # of changes to close l d t ll t
Key performance drivers (not
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% service request resolved within TAT
Journals posted after cut off date
hours of close • % adjustments basis pre-close review to total JEs
delayed per yearcalendar post rollout(
exhaustive)
88Linkages between business outcomes, performance measures and drivers. e.g., Time to Report
Level 1SEP
Record to Report Business Outcome
Time to ReportLaggard
Leader
Level 2
Key GL Closing Reconciliations
performance measures
# MJE per billion revenue Time to reconcile (days)
Prepare review and d J l
Compare GL balances to b k
6K <0.5K
Level 3
45 14
record Journals backup
# corrections journals Accruals as % of revenue
2700 0
% auto match
0% 100%
% standard backup
25% 100%
Key performance drivers x% Y%
Key Insights/ Practices
• Use ERP workflow to submit JE & approve• Identify and automate recurring journals• Validation rules set while JE creation • Materiality Thresholds defined for Accruals
• Use of reconciliation tool for resolving open items• Clearly defined approved backup per category• Leverage auto consolidation tools to improve auto match • Stringent analytics on repetitive open items to reduce inflow
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Benchmarks helps size opportunity at a sub-process level (WHAT)Key insights and practices provides levers to drive to best in class (WHY & HOW)
9Accelerating Business Impact: Smart Enterprise Processes (SEPSM)
Key Observations About Managing Business Processes
• Holistic and granular framework for managing
Smart Enterprise Processes (SEPSM) –A New Science
• Core enterprise level processes cut across functional Holistic and granular framework for managing business processes
• Highly scientific, enterprise-wide view of processes
• Proprietary IP based on analysis of 200 million+ transactions across 3,000+ managed processes
Core enterprise level processes cut across functional silos
• Typical focus is on driving process efficiency vs. driving effectiveness
• Driving effectiveness delivers 3x – 5x benefits over d i i ffi i , g p
• Maps client performance at every step of a process and measures against best-in-class standards
• Offers solutions including process, analytics reengineering and focused IT based on achieving
driving efficiency
• Companies lack benchmarks to know how good they could be
• Technology is often not the answer – 50–70% of benefits from process and insights
business impact
CFO Suites Insurance Suites Healthcare Suites Enterprise Suites Financial ServicesSuites Lodging Suites
p g
SEPSM is a unique proprietary methodology that can deliver 2 – 5x’s the impact on
Source to Pay Order to CashRecord to Report
Application to In-force P & C Claims
Customer Service Request to RepairHire to Retire Enterprise Risk
CollectionsApplication to Disbursal Commercial lending
Check in to Check outVisit to CashPay to Recover
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9999
SEP is a unique proprietary methodology that can deliver 2 5x s the impact on improved cash flow, margins, revenue growth or other metrics.
10
SEPSM redesigned Record to Report for brewery Major 10
Key Record to report benchmarks and approach .. ….
Key Process Outcomes* Approach & Impact
Days to Close at Country Level (Number of Days)
Best in class Average
2
Future State
3
Close Cycle Reduction from 6 to 3 days (country level)
Close Monitoring Tool for tacking key activities... with Pre -defined close calendar
Reduction of rework and manual touch points • ~60% journal automation
9
# GL Instances
Best in class Average
1 3
60% jou a auto at o
• Standard templates for high volume & recurring journals
• Workflow for input validation & simplification
Rigorous close planning• Standardised closing calendar
• Pre close meeting – updates, dashboards, assess site readiness address issues challenges
16
Future Stateg
Best in class Average
1 1
# Chart of accounts readiness, address issues, challenges
Minimise GL Instances • 3 GL instances (LATAM/ Europe/ Asia & Africa) due to large
volumes and Global presence
Standardised CoA
• Significant reduction in mapping issuesR li t C A f SAP f l lid ti
6
Future State
Future State
Reconciliations (Number of Days)
Best in class Average
14 14
• Replicate CoA for non SAP for seamless consolidation
Improved Controllership -aged balances, write -offs
• Risk based reconciliation methodology• Facilitates smoother audit of accounts
• Superior documentation, audit trail, tick & tie tool capability30
Future State
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g Future State
* Source – Genpact Internal Benchmarking
11
SEPSM redesigned Record to Report for brewery Major 11
Roadmap for moving towards Best-in-Class Processes
Currently initiatives
Further Steps to Best in Classinitiatives Best in Class
– In tang ib le A ssets part of S ub-S ystem as aga inst in G L
– S tandard forms with data v alidat ions
– A utomate pro jec t c reation through workflow
S t t l t f k T & h l d i t f
Fixed Assets
Cash & Bank
Poor Average G ood Best- in-Class
Excellent
– S eparate cont rol acc oun ts fo r known excep tions
– Controls on opening o f bank accounts in G L
– T reasury & cash pool design part of p ro jects on automated feeds
– S ub-accts desi gned to cap ture k ey P ay components to facilita te ana lysis
– W orkflow for payro ll approv als with HR team & A uto journals
Payroll
– V ariance ana lysis reports by Biz un it & Tax / re trials
– Non standard p rocesses e .g . incen tive , bonus etc
– Close monitoring tool with S tandardized Close Calendar
– ~60% Journa ls au tomated
– Inc lude HQ consolidat ion & reporting as part of S cope
– Reduce days to close to 3 day s by t t i f li i t i & ll
Close & Consolidation
automat ion o f eliminat ions & ro ll-ups
– Forced settlement & Thresho ld limi ts part o f the new po lic y
– Restricted acc es s & Cut-o ff dates fo r pos ting in ter-co journals
– T reasury Inte r-Co transaction part of separa te Pro ject
Inter-Company
Poor Average G ood Best- in-Class
Excellent
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12A roadmap for driving on-going improvementLevel 2 Outcome ImpactedCh ll L U dI tSub-process
r
Outcome ImpactedChallenge Levers UsedImpact
Accounts Payable
Accounts receivable
AR billing Cycle time reduction
21 day 9 daysBilling cycle time
Billing cycle time reduction from 21 to 9
Accuracy at 99%
Process re-design & invetory tracking tool implementation
Value stream mapping –reducing handoffs and anlytics
Sub
Ledg
er receivable
Inter Company
Fixed Assets Reduce Interco
Balances$2MM 0.7MM
P&L Reserve
62% reduction in disconnects > 30K
Aging of open items
Invoice settlement process redesign
Access to counter party billing info – query resolution
reducing handoffs and anlytics
Reduce manual Journals
7.3k 2.7kManual Journal lines
Payroll
Close & C lid ti
60+% Reduction
Close time savings
Quality time for analysis
Workflows
Auto subsystem interface
Exploited ERP functionality
Reduced financial exposure from open items
25% productivity
Recs prioritization model
Standardized backups
Automation of recsReconciliation
Consolidation
90 days <28 daysDays to Close
Reduce aging of open Items
• 75% reduction CoA standardization
Reduced timelines
40 days
22 days
Improved controllership
Improved TAT for recon
Technology intervention
Web cash reports optimization
Reduction of Reconciliation timelinesManagement
Reporting
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8 2%
• 5% reduction in effort Uniform reporting structure
Standardized set of books
Days to reportReduce reporting time
External Reporting
CONTACT INFORMATIONS h l S bSusheel [email protected]
www.genpact.com
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