Driving Process Excellence in Shared Services

© 2013 Consider Solutions All rights reserved.
solutions for world class finance
Driving Process Excellence in Shared Services
“More than just KPIs”
April 24, 2013
Dan French
CEO, Consider Solutions

Who is this?
2 © 2013 Consider Solutions All rights reserved

The Aggregation of Marginal Gains . . . .

Today’s Discussion
Introduction
Shared Services & World Class Finance
Standardisation & Simplification
Continuous Improvement & KPIs
Exception Monitoring & KEIs
Q & A
© 2013 Consider Solutions All rights reserved4

World
Class
Finance
Business Results
Cost of Finance
Cash flow
Risk Management
World Class Finance

Pillars of Success for World Class Finance
Efficiency Effectiveness Relevance Influence
Continually
improve
process
efficiency,
speed, and
quality
Deliver
expertise in
financial
stewardship
and risk
management
Provide
analytical
support that
decision-
makers
need
Business
partnering
for superior
outcomes

Shared Services: the status today
The foundation is built
‐ Centralisation
‐ Common systems
‐ Standardisation
The results of the First and Second Wave
‐ Financial savings
‐ Predictable results
‐ Compliance
‐ Organisations with a mission

SSOs: Benchmarks

Shared Services: tomorrow’s charter
Business demands
‐ Increased customer satisfaction
‐ Continue drive for cost efficiencies
‐ Expand scope of Shared Services
Process responses
‐ Better business partnering
‐ Enhanced simplification & standardisation
‐ Continuous improvement
Shared Services as a component of World Class
Finance strategy

Simplification & Standardisation

The Standardisation Myth
We invest heavily in ERP implementation to drive:
‐ Process standardisation
‐ Business efficiency
‐ Economies of scale
However, only some of the value gets released . . .
‐ Businesses implement standard systems and achieve
A standard data input process
NOT
A standard business process

GR is created
against PO
Purchasing
creates
PO for
Shipment
Truck drops off
shipment,
but no PO
exists
Warehouse
calls up
Purchasing to
create a PO
ERP is configured to only allow GR if PO exists, however…
ERP enabled standardisation example
‘First time match’ KPI looks good despite process breakdown!

Standardisation & Exceptions

Example 1: Invoice Processing
Desired process
‐ Purchase Order to initiate and approve purchase
‐ Touch-less Invoice/Payment approval on match
KPIs
‐ First time match rate
‐ Invoice processing cost/effort
What can go wrong (Key Exception Indicator)
‐ Duplicate Invoices, duplicate vendors, duplicate POs
Discovery
‐ 3% duplicate invoices causing re-work and cash loss
Root Cause
‐ Duplicate vendor data, Imprecise PO data

KPIs – Measures & Barriers
Lagging & Leading Indicators
Exceptions are Leading Indicators
of Performance Risk
‐ Performance KPI (Measure)
DSO
‐ A/R Risks & Exceptions (Barriers)
Credit check
Payment terms
Delivery quantity & quality
Unintended Consequences
‐ Managing by KPI can drive
suboptimal business results

Exceptions

What are Exceptions?
An exception is
‐ A mismatch between expected vs actual performance
‐ Something that generally should not happen but does
e.g. duplicated effort, multi-touch invoices, payment
term changes, duplicate payments
‐ Something that should happen but doesn’t
e.g. 3-way match, customer credit check, supplier
discount claim
‐ Happening on purpose or by accident
e.g. fraud, ignorance, system flaw, history, human
nature
‐ Occurring in single digit percentage-wise but with an
asymmetric impact on effort and efficiency
‐ Often influenced by KPIs!

Improvement by Exception
Look at the processes and KPIs
Define ‘what can go wrong’ (KEIs)
Identify any exception from standard
Identify root causes
Manage & resolve root causes
Continuously improve processes
Non-disruptive performance improvement . . .

The Gearbox of World Class Finance

Example 2: Purchase Order Processing
Desired process
‐ Purchase Request to approve expenditure
‐ Purchase Order to initiate and approve purchase
KPIs
‐ Spend under PO
‐ PO processing cost
‐ Multiple touch POs, changes to PO Pricing & Terms
Discovery
‐ 11% POs change activity
Root Cause
‐ Pro-forma POs, Master Data inaccuracy

Classic Process Improvement Cycle
Define
Measure
AnalyseImprove
Control
A Miracle
Occurs !

The Myth of Measures

Example 3: Accounts Receivable
Desired process
‐ Sales Invoicing
‐ Accounts Receivable
KPIs
‐ Days Sales Outstanding (DSO)
‐ Sales Order to Delivery to Invoice delay
Discovery
‐ Excellent cash collection metric undermined by use of
Pro-forma invoices to confirm customer payment
Root Cause
‐ DSO KPI, Invoicing errors

Process Improvement Cycle . . .

World Class Finance
Continuous Improvement

Example 4: Accounts Payable
Desired process
‐ Purchase Orders
‐ Goods Receipt & Invoice Processing
KPIs
‐ Cost per Invoice – Touch-less invoices
‐ Over-payment – GR > PO, IR > GR
Discovery
‐ 4.5% over payment in certain areas
Root Cause
‐ Vendor ‘enthusiasm’ with payment tolerances, vendor
performance issues, system controls

QuickScan - Exception Analytics
Scoped process & organisation target
Agreed risk and/or performance themes
Agreed ownership to manage and
resolve exceptions
Ongoing analysis of all relevant system
data and transactions
Matching 100% of transactions and data
against exception rules
Work flow for addressing and resolving
exceptions
Process for continuous improvement
Rapid Execution, Rapid Return

Principles
‐ Continually improve process efficiency, speed, and
quality
‐ Deliver expertise in financial stewardship and risk
management
‐ Provide analytical support that decision-makers need
Use Exception Analytics
‐ To support these principles
‐ Start with an assessment/benchmark
‐ Evolutionary & Iterative approach

Hits & Myths
1. The Standardisation Myth
Will give economy of scale
Will lead to uniform data
Will not automatically lead to standard process execution
2. The Measures Myth
Lagging KPIs are not enough to drive action
One-dimensional indicators risk unintended consequences
Exceptions to expectation expose the real process
3. The Miracle Myth
Analysis of exceptions drives Continuous Improvement
Continuous Improvement drives World Class Finance
Consider benchmarking/assessing a process ‘slice’

Aggregation of Marginal Gains – Results

Review
Introduction
Standardisation & Simplification
Continuous Improvement & KPIs
Exception Monitoring & KEIs

The pessimist complains about the wind. The optimist expects it to change.
The leader adjusts the sails.”32

Questions?
dfrench@consider.biz
Enjoy the journey!
Blogerati can visit . . .
consider-ations.blogspot.co.uk

Driving Process Excellence in Shared Services

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