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Effectively transitioning your finance processing activities to offshore

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Effectively transitioning your finance processing activities to offshore

Effectively transitioning your finance processing activities to offshore

By Dave Humphries, Logica plc

www.CFOevent.com

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Effectively transitioning your finance processing activities to offshore Effectively transitioning your finance processing activities to offshore Presentation Transcript

  • Effectively transitioning your finance processing activities to offshore
    CFO Event, Celtic Manor, 5 July 2011
    Dave Humphries, Logica plc
  • SESSION OBJECTIVES
    Through a case study on Logica’s finance processing transformation programme and sharing your own experiences, we will explore:
    • The benefits (financial and otherwise) of moving your finance processing activity to offshore shared service cost centre(s).
    • Resolving the common problems that arise from the offshore transition. View slide
    • How does one best cope with transitioning unaligned processes and structures to shared service centres?
    © Copyright Logica 2011. All rights reserved
    View slide
  • LOGICA’S FINANCE PROCESSING CHANGE PROGRAMME OVERVIEW
    In 2009, Logica commenced a global transition programme to standardise finance transaction processes and move as much as possible offshore.
    Scope:
    • Accounts payable (invoice processing, payment, queries)
    • Accounts receivable (customer set up, billing, cash allocation, reporting)
    • Timesheets & expenses (processing and queries)
    • Intercompany (reconciliation, postings, invoice creation)
    • Banking (manual payments, reconciliations, reporting)
    • General ledger (fixed assets, payroll journals)
    • Management reporting
    © Copyright Logica 2011. All rights reserved
  • Morocco
    Philippines
    India Chennai, Bangalore
    LOGICA’S OFFSHORE CENTRES
    © Copyright Logica 2011. All rights reserved
  • CHANGE PROGRAMME OVERVIEW (CONTINUED)
    • Multiple ledger systems and processes a legacy of acquisition
    • Businesses have completed phase 1 – core service transition; phase 2 being implemented to (a) mop up non-core; and (b) standardise processes that have been transitioned
    • Around 70% of all such processing activity is now undertaken offshore (270 pp)
    • Annual cost savings of £5 million realised; one-off costs of transition and restructuring of £2 million
    • Further benefits to be realised through process standardisation
    • Governance through programme team supported by local CFO’s and via SLA’s
    • Offshore finance processing led by global director; local FC responsible for onshore relationship with offshore
    © Copyright Logica 2011. All rights reserved
  • BENEFITS EXAMPLE
    • Illustrative costs above relate to annualised salary and benefits and social security but not infrastructure.
    • Social security costs in certain European countries significantly impact on the overall cost of service provision.
    • Transfer costs typically equate to 3-4 months of offshore salary for process documentation, knowledge transfer, training of the team offshore and exclude onshore retention payments and restructuring costs.
    • Retention costs can vary significantly according to custom and practice.
    • Restructuring costs depend on service, contract, jurisdiction, custom and practice.
    © Copyright Logica 2011. All rights reserved
  • OTHER BENEFITS
    • Headcount arbitrage from work quality and process improvement (20-40% lower headcount; 50% lower cost of service)
    • Control improvement and risk reduction
    • Process expertise
    • Rigour to workflow and control including separation of responsibilities
    • Reduced onshore management time
    • Special tax treatments and/or preferential cost rates
    © Copyright Logica 2011. All rights reserved
  • COMMON OFFSHORE CHALLENGES
    • Restructuring costs and long service entitlements
    • Inflation, FX and attrition
    • Cultural differences and pro-activity
    • Language
    • Effective process transfer
    • Local risk profile – political volatility, climate
    • Local resistance to change
    • Whole business change (not just finance)
    • Move to “gold standard” service
    © Copyright Logica 2011. All rights reserved
  • RECOMMENDED GOOD PRACTICE
    • Use existing near shore and offshore locations
    • Importance of local management/leadership
    • Offshore is an extension of your team
    • Accept but manage attrition – training and documentation
    • Multiple sites for resilience
    • Invest in process and knowledge transfer
    • Experienced change programme leadership
    • Maintain onshore/offshore relationships
    • Business ownership
    • Benchmark existing performance before you transfer
    © Copyright Logica 2011. All rights reserved
  • TRANSITIONING UNALIGNED PROCESSES AND SYSTEMS
    • Processes do not have to be perfect to transfer BUT should not be broken
    • “Ship then Fix” “Fix then Ship” “Ship and fix”
    • Offshore starts with mirror systems and processes
    • Alignment versus cost benefit?
    • Change programme both onshore and offshore
    © Copyright Logica 2011. All rights reserved
  • RECAP ON OFFSHORE TRANSITION
    • Substantial benefits are available from offshore provision of finance processing activity
    • 50% plus cost benefit, process rigour and control improvement, local cost/tax benefits
    • Generally not something to be undertaken lightly as there are many challenges
    • Cost/benefit, cultural difficulties, local risk (onshore and offshore)
    • Implementing good practise can underpin success
    • Know the environment, invest in leadership and process transfer, locate for the long term
    • Can move unaligned processes but recommend don’t fix andship simultaneously
    © Copyright Logica 2011. All rights reserved
  • Thank you
    © Copyright Logica 2011. All rights reserved