how finance can create value and business insight cfo ... · how finance can create value and...

How Finance can create value and business

insight

- and drive globalization

The VELUX case

Deloitte CFO agenda 2016, 5 September

GLOBAL DIGITAL COLLABORATE

BRING ⁄ LIGHT TO LIFE

THE VELUX VISION

To lead the development of better living environments with daylight and fresh air through the roof, and to be rated as the best in the eyes of our customers.

3

Company facts

The VELUX Group is owned by VKR Holding A/S, a limited company wholly owned by the foundations and family.

The VELUX Group’s financial results are incorporated into VKR Holding’s consolidated accounts.

17 sales companies around the world

40 production sites in nine countries

9,500 employees

globally

2.4bn

2015 numbers (EUR)

VKR Holding

revenue

268.7m

VKR Holding

net profit

CULTIVATE ⁄ A SIMPLE IDEA

• We have a successful history of managing the VELUX Group as the sum of numerous local companies with a strong entrepreneurial spirit

We realised we had a challenge

• The steady and profitable growth which we were used to changed overnight in 2008, introducing decreasing demand and higher volatility

• Our ability to react efficiently were challenged by low flexibility and scale-ability and too rigid financial and operational planning

2006 2007 2008 2009 2010 2011 2012 2013

For Finance we introduced a new

operating model…

Americas

4 Countries

1 PCOs

4 SCOs

Americas

4 Countries

1 PCOs

4 SCOs

Western Europe

12 Countries

13 PCOs

12 SCOs

VFC + Group

Western Europe

12 Countries

13 PCOs

12 SCOs

VFC + Group

Asia

4 Countries

1 PCOs

4 SCOs

Asia

4 Countries

1 PCOs

4 SCOs

Eastern Europe

16 Countries

6 PCOs

16 SCOs

Eastern Europe

16 Countries

6 PCOs

16 SCOs

From +55 separate finance functions located in and part of Group, Sales- or Production companies:

VELUX Finance

Global Business Services

Global Financial Management

Global Accounting & Tax

One Global Finance OrganisationOne Global Finance Organisation


71 employees

globally

VELUX Operations India250

• Process efficiency

• Accurate data in right time

• Cost effectiveness

• Common ERP-platform (SAP)

• User friendly front-ends to approve invoices etc.

• Internal bank interfaces etc.

• Global management

• Front offices serving as first point of contact for business

• Global delivery centre in Delhi (Accenture)

Purpose:

Technology enabler

Organisation

• Invoice processing, Payments, Vendor Master/Statements, T&E

• Cash application, Credit hold, Dunning/Customer statements

• Fixed assets, IC, GL-postings etc.

Tasks:


133 employees

globally

in local companies

105

o Business intelligence

o Product costing

o Group business analysis

28

• Financial management of VELUX

• Information/reporting/decision support

• Business Partnering


• SAP BW, BPC and Hana

• SAP Business Objects


• Regional structure

• Local presence (Production, Sales, Group- and Support Systems)

Purpose:

Technology enabler

Organisation

• Financial Performance Management

• Planning/forecasting

• Product costing, Pricing analytics

• BI/Analytics

Tasks:

Global Accounting and Tax

19 employees

globally indirect tax and group tax

9o Compliance

o Consolidation10

PWC services for local statutory reporting and tax

• Financial compliance

• Group accounts

• Tax


• SAP BW, BPC and Hana


• Indirect tax for all Europe handled in center in Warzaw

• Local statutory reporting outsourced to PWC

Purpose:

Technology enabler

Organisation

• Direct and indirect tax

• Statutory accounts

• Group accounts

Tasks:

Vendor reconciliation


Group accounts

Fast close

Statutory reporting

VAT/Indirect tax

Group tax

Vendor creation

Blocking of debtors

Payments

Bank statements/reconciliation

Invoice approval process

AGM

Management reporting

Integrated forecasting

Product profitability

Customer profitability

Financial decision appraisals

Target setting and follow-up

Performance Management

Business intelligence

Costing

All the things which can stop the business……..

All the things which can grow the business……..

Business partnering

Sales Performance

Production Performance


Logistics Performance

Group Functions Performance

Forecasting


Etc.

We believe in our numbers…because

we believe in our processes

Net sales

COGS

Other direct costs

Gross Margin

Sales & marketing costs

Market contribution

Group costs

Group EBIT

Group accounts

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

Fixed assets

Inventory

Etc…

Gross/Net turnover

Gross Margin

Other sales costs

Market contribution

Group costs:

D&D, Group-IT, Corporate marketing, Common logistics, HR, Finance, Group management etc.

Market EBIT

Group EBIT

Sum of all Market EBIT

Material prices

Products

Sales channels

Production Group Functions Sales

Other prod. cost

Sales prices

Trade conditions

Product mix

Logistic standard costsUnit volume and mix

Marketing cost

Production standard costs

Allocated Group cost

Group cost variance

Purchase price variance

Material variance

Labor variance

Overhead costs variance

Depreciation cost variance

Other variance

VELUX Performance Model

VELUX Performance Process

2: Break-down of targets

3: Plan to reach target4: Monitor and follow-up

Input: Global target (step 1)

Horizon: 1-2 years

Timing: June - September

Who: VELUX Management and management teams

Purpose: Link targets to business structure

Examples: • Market Contribution in D, F, GB, USA, E27• Market share• Production cost efficiency

Input: Plans defined in step 3

Horizon: Current and next year

Timing: Monthly

Who: Management in cooperation with Finance

Purpose: Review performance and develop forecast

Examples: • Follow up on actual and forecasted performance• Define new actions to address gap (if any)• More trend reporting and forward looking

Input: Targets (step 2)

Horizon: 1-2 year

Timing: October/Monthly

Who: SCo, PCo, Business support

Purpose: Develop plan and commitment to reach targets

Examples: • Planning supported by simulation tool• Actions, initiatives, financial impact • Operational plans

1: Global target setting

Input: Strategic plan, initiatives etc.

Horizon: 1-2 year

Timing: June-September

Who: VELUX Management, BoD

Purpose: Link strategy to performance management

Example: • EBIT-%

Gross/Net turnover

Gross Margin

Other sales costs

Market contribution

Group costs:

D&D, Group-IT, Corporate marketing, Common logistics, HR, Finance, Group management etc.

Market EBIT

Group EBIT

Sum of all Market EBIT

Material prices

Products

Sales channels

Production Group Systems Sales

Other prod. cost

Sales prices

Trade conditions

Product mix

Logistic standard costsUnit volume and mix

Marketing cost

Production standard costs

Allocated Group cost

Group cost variance

Purchase price variance

Material variance

Labor variance

Overhead costs variance

Depreciation cost variance

Other variance

VELUX Performance Model

Target

Target

Target

Target

Target

VELUX Performance Model and Process

SAP BPC on Hana

Dashboards

Web based standard reports

Analysis plug-in for Excel

• Planning and simulation (monthly rolling forecasting)

• Allocation engine for profitability measurement

• Interactive dashboards with focus on ‘Target KPI’s’ and trends

• Support Top Management

• Standard reports available

• Support broader group of data users

• Analysis tool for data mining

• Support Finance Business Partners

Target

Example: Production Management

Management Team

Finance Business Partner

Dashboard

Month XXX

Dashboard

50.000

45.000

40.000

35.000

30.000

25.000

480

470

460

450

440

430

27%

26%

25%

24%

23%

22%

25%

24%

23%

22%

21%

20%

V-X

19,2%

19,0%

20,1%

21,1%

21,3%

Standardized Financial Management

• Creating a global performance management model with functional-specific processes has been a lever for Finance to:

• Organize in a partner structure globally with local presence – teaming up with and spanning functional silos

• Drive investments in digitalization and use BI to create value

• With this off-set the next step (currently being rolled out) is to:

• Create uniform processes for financial management in all companies and functions (‘Financial Management in a box’ approach)

• Standardize skill level(s) to increase competences and gain flexibility/scale-ability (scale up/down/replace)

My take on where Finance are heading…



Global Accounting & Tax

…to extended Business Services incl. process owners with change

capabilities

From Finance Shared Services

Centre…

…to support of all Performance Management

From Financial Management…

…to more of the sameFrom Accounting

& Tax…

My take on where Finance are heading…

• What started as a Global Finance organization will turn into a more broad, consolidated back-office function covering all performance and transactional processes in the business

• The transformation in Finance has been a vehicle for globalization in the wider business (transfer “services” from functions outside Finance to Global Business Services)

• Digitalisation has provided possibilities for Finance to accelerate this development – and move from focus on Financial Performance to wider Business Performance (financial and non-financial)

• Only Accounting & Tax will remain as classic “Finance”

GLOBAL DIGITAL COLLABORATE

THANK YOU FOR LISTENING!

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