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Inforum 2013: Get Tighter Controls with Efficiency

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April 22nd, 2013 - Inforum Conference in Orlando ...

April 22nd, 2013 - Inforum Conference in Orlando

This presentation comes at a time when both companies and public sector organizations face increased scrutiny from regulators, auditors, shareholders, and trading partners to assure the integrity of their business processes and safeguard sensitive information. This makes it ever more important for organisations to keep track of the advances in continuous monitoring of business processes

The discussion explores best practice approaches, case studies and business benefits of continuous monitoring. Recent experiences shared in it showcase how effective monitoring of risk and control can drive substantial business value and operational cost reduction.The main focus is placed on ways of ensuring business process optimisation and on key examples from areas such as P2P, O2C, T&E and R2R.

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Inforum 2013: Get Tighter Controls with Efficiency Inforum 2013: Get Tighter Controls with Efficiency Presentation Transcript

  • 1Copyright © 2012. Infor. All Rights Reserved. www.infor.com
  • 2Copyright © 2012. Infor. All Rights Reserved. www.infor.comCopyright © 2012. Infor. All Rights Reserved. www.infor.com 2IFIN-6024Infor Financials Today:Get Tighter Controls withEfficiencyDan French, CEO Consider SolutionsPramod Mathur, Product Management Director
  • 3Copyright © 2012. Infor. All Rights Reserved. www.infor.com• Introduction• Landscape of risk & control assurance• Managing risk and managing control• Risk, control & business performance• Continuous Monitoring• Case study examples• Pitfalls and critical success factors• Questions & DiscussionSession outline – 60 minutes
  • 4Copyright © 2012. Infor. All Rights Reserved. www.infor.comContext – Consider Solutions• Delivering Solutions for World Class Finance• Controls & Compliance• Risk Management & Assurance• Finance Process Optimisation• Solution focus• Infor Approva (CCM/CM) Implementation• CCM/CM Optimization• Consulting services• Custom solutions• Sourcing solutions4 © 2013 Consider Solutions All rights reservedWorldClassFinanceBusiness ResultsCost of FinanceCash flowRisk Management
  • 5Copyright © 2012. Infor. All Rights Reserved. www.infor.com5
  • 6Copyright © 2012. Infor. All Rights Reserved. www.infor.comQuestion for YOU!What is your primary job role related to risk & control?1. IT2. Finance3. Risk & Compliance4. Internal Audit5. External Audit6. Consultant7. Other
  • 7Copyright © 2012. Infor. All Rights Reserved. www.infor.comRisk & Control Assurance Landscape• IIA 2013 Pulse of the Profession - OutlookSource: The Institute of Internal Auditors
  • 8Copyright © 2012. Infor. All Rights Reserved. www.infor.comRisk & Control Assurance LandscapeSource: The Institute of Internal Auditors
  • 9Copyright © 2012. Infor. All Rights Reserved. www.infor.comRisk & Control Assurance LandscapeSource: The Institute of Internal Auditors
  • 10Copyright © 2012. Infor. All Rights Reserved. www.infor.comRelevance of Analytics &Continuous Monitoring• Stakeholder expectations are rising• Complexity• Interconnection• Reputation• Data
  • 11Copyright © 2012. Infor. All Rights Reserved. www.infor.comManaging Risk vs Managing Control11
  • 12Copyright © 2012. Infor. All Rights Reserved. www.infor.comRisk, Controls & Performance• Effective controls are designed to mitigate risk• Business is focussed on performance• Performance measures are lagging indicators• Exceptions are Leading Indicators for both 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
  • 13Copyright © 2012. Infor. All Rights Reserved. www.infor.comThe Standardization 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 processNOT• A standard business process
  • 14Copyright © 2012. Infor. All Rights Reserved. www.infor.comGR is createdagainst POPurchasingcreatesPO for ShipmentTruck drops offshipment,but no PO existsWarehouse callsup Purchasing tocreate a POERP is configured to only allow GR if PO exists, however…ERP standardization example‘First time match’ KPI looks good despite process breakdown!
  • 15Copyright © 2012. Infor. All Rights Reserved. www.infor.comWhat are Exceptions?• An exception is• A mismatch between expected vs. actual performance• Something that generally should not happen but does• Something that should happen but doesn‟t• Happening on purpose or by accident• Occurring in single digit percentage-wise but with an asymmetric impact on effort andefficiency (not to mention RISK!)• Often influenced by Performance Measures!
  • 16Copyright © 2012. Infor. All Rights Reserved. www.infor.comStandardization & Exceptions
  • 17Copyright © 2012. Infor. All Rights Reserved. www.infor.comContinuous MonitoringApproach, Examples &Results
  • 18Copyright © 2012. Infor. All Rights Reserved. www.infor.comContinuous Monitoring (CM) CycleCONTINUOUSMONITORINGScoping &PlanningTechnologyDeploymentExceptionDefinitionDefineRemediationProcessManagingBusinessExceptionsBusinessProcessImprovement
  • 19Copyright © 2012. Infor. All Rights Reserved. www.infor.comCM drives valueP2P/Accounts Payable‐ Duplicate Payments‐ Retrospective POs‐ Changing payment terms‐ Duplicate InvoicesO2C/Accounts Receivable- Price Changes- Undelivered orders- Exceptional customer credits- Payment termsFixed Assets‐ Inappropriate assetdepreciation periods‐ Misclassified capital equipmentTravel & Entertainment- Duplicate claims- Suspicious claims- Ineligible items claimsGeneral Ledger/Record to Report:- JE postings into prior periodsalready closed- Manual payments
  • 20Copyright © 2012. Infor. All Rights Reserved. www.infor.comExample 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• Duplicate Invoices, duplicate vendors, duplicate POs• Discovery• 3% duplicate invoices causing re-work and cash loss• Root Cause• Duplicate vendor data, Imprecise PO data20
  • 21Copyright © 2012. Infor. All Rights Reserved. www.infor.comExample 2: Fixed Assets• Risk• Assets if depreciated to zero in shorter than required period can be disposed of to thirdparties at preferential rate• Exception Rules• Fixed Asset Records where depreciation periods are not in line with statutory guidelines forasset class, especially with shorter periods• What can go wrong• Company vehicles with lower than advised depreciation of 3-5 years• Other examples ... Buildings (40 years), New Machinery & Equipment (15 years), OfficeTechnology (3 years)• Discovery• Company vehicles depreciating in 1 year and then being disposed of ... value in in $millions• Buildings depreciating in 1 year21
  • 22Copyright © 2012. Infor. All Rights Reserved. www.infor.comExample 3: Travel & Entertainment (T&E)• Risk• Fraudulent and “creative” use of expense claims• Exception Rules• Identify expense records with suspicious characteristics, e.g.;• Duplicate expense items (same item, same amount)• Multiple claims just under threshold of proof of purchase needed• Cross claims between P-Card and expense claim• Discovery• Same meals & hotels claimed again a month later• Personal expenses claimed for – taxis / trains / travel agent fees• Cross claims• “Gifts”• Value may not be material but cultural impact is22
  • 23Copyright © 2012. Infor. All Rights Reserved. www.infor.comExample 4: Purchase Order Processing• Desired process• Purchase Request to approve expenditure• Purchase Order to initiate and approve purchase• KPIs• Spend under PO• PO processing cost• What can go wrong• Multiple touch POs, changes to PO Pricing & Terms• Discovery• 11% POs change activity• Root Cause• Pro-forma POs, Master Data inaccuracy23
  • 24Copyright © 2012. Infor. All Rights Reserved. www.infor.comExample 5: Accounts Receivable• Desired process• Sales Invoicing• Accounts Receivable• KPIs• Days Sales Outstanding (DSO)• What can go wrong (Key Exception Indicator)• Sales Order to Delivery to Invoice delay• Discovery• Excellent cash collection metric undermined by use of Pro-forma invoices to confirmcustomer payment• Root Cause• DSO KPI, Invoicing errors24
  • 25Copyright © 2012. Infor. All Rights Reserved. www.infor.comExample 6: Accounts Payable• Desired process• Purchase Orders• Goods Receipt & Invoice Processing• KPIs• Cost per Invoice – Touch-less invoices• What can go wrong (Key Exception Indicator)• 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 controls25
  • 26Copyright © 2012. Infor. All Rights Reserved. www.infor.comExample 7: Sales Price Changes• Risk• Changes to prices may lead to fraudulent / inappropriate pricing of Sales Orders.• Price changes after creation can be a tactic to by-pass controls / approvals / workflows inplace for order creation• “Local agreements” / “Unapproved discounting”• Prices being increased to finance intermediary• Impacts cash flow forecasting & margin• Exception Rules• Identify Sales Orders with prices changed after initial creation• Discovery• 16% of orders within 1 month period had price changed• Plus 1000s more changed from placeholder values (e.g., 0.01) – circumventing systemcontrol & distorting financial numbers• Many changes – post order creation / discounting / avoiding approvals26
  • 27Copyright © 2012. Infor. All Rights Reserved. www.infor.comExample 8: Non Standard Payment Terms• Risk• Unnecessary effect on cash outflow and working capital.• Excessively short payment terms: potentially inappropriate relationships• Excessively long terms may indicate future period commitments• Multi-touch POs increases cost of processing• Exception Rules• Identify any Purchase Orders where the Payment Terms used are not the standard paymentterms agreed with the vendor• Discovery• >8% of POs with Payment Terms Non Standard• Many terms changed after PO creation from standard to non• Many with reduced payment periods for same discount modelexample - 30 days / 2% (standard terms) to 10 days / 2%27
  • 28Copyright © 2012. Infor. All Rights Reserved. www.infor.comSo What?• 100%• Of transaction data continuously monitored• Not sampling• Facts• Not opinions• Exceptions• Sharp focus; minimal noise• Technology• Used effectively to take care of the leg-work• Freeing high value resources for high value work• Business Value Driven• Enabling better business partnering
  • 29Copyright © 2012. Infor. All Rights Reserved. www.infor.comQuestion for YOU!What is the status of Continuous Monitoring in yourorganisation?1. Well embedded mature model2. Emerging scope / programmed roll-out3. Limited scope / first attempts4. Planning stage5. Not under consideration
  • 30Copyright © 2012. Infor. All Rights Reserved. www.infor.comThe Gearbox of Risk & Performance
  • 31Copyright © 2012. Infor. All Rights Reserved. www.infor.comBusiness Process Performance
  • 32Copyright © 2012. Infor. All Rights Reserved. www.infor.comCost of FinanceFrom > 1% Towards 0.5%26%25%49%39%28%33%
  • 33Copyright © 2012. Infor. All Rights Reserved. www.infor.com33Classic Process Improvement CycleDefineMeasureAnalyseImproveControlA MiracleOccurs !
  • 34Copyright © 2012. Infor. All Rights Reserved. www.infor.comThe Myth of Measures© 2013 Consider Solutions All rights reserved34
  • 35Copyright © 2012. Infor. All Rights Reserved. www.infor.comWorld Class Continuous Improvement
  • 36Copyright © 2012. Infor. All Rights Reserved. www.infor.comQuestion for YOU!In which financial process area do you see the biggest benefit ofmonitoring business exceptions?1. Purchase to pay/accounts payable2. Record to Report/general ledger3. Order to Cash/accounts receivable4. Treasury5. Other
  • 37Copyright © 2012. Infor. All Rights Reserved. www.infor.comThe Business Case• Depends• Organization• Situation• Bolting the Stable Door• The objective is typically• Assuring reputation• Reducing cost of control• Cost avoidance & Cash recovery• Driving financial process cost efficiency• Identify• Direct benefits: Cost/Effort - Savings/Avoidance• Soft benefits: Attitude/Image - Change/Improvement• Benchmarks: Continuous Improvement• A scoped pilot can quickly validate value
  • 38Copyright © 2012. Infor. All Rights Reserved. www.infor.comContinuous MonitoringPitfalls & Critical Success Factors
  • 39Copyright © 2012. Infor. All Rights Reserved. www.infor.comWhat could go wrong?
  • 40Copyright © 2012. Infor. All Rights Reserved. www.infor.comBalanced Skill-set• Analytical/critical thinking• Process/risk understanding• Data structure knowledge• Data filtering & data analysis skills• Design for Exception Analytics• Diagnosis & root cause analysis• Communication skills
  • 41Copyright © 2012. Infor. All Rights Reserved. www.infor.comCritical Success Factors• Continuous Monitoring andData Analytics are receiving moreand more attention – plan . . .• Focus on genuine business risk• . . . or business performance !• Use CM to enhance the business partnership• Identifying and managing exceptions should already be a keyfocus for management• Rapid results & quick wins are critical• Keep track of value delivered
  • 42Copyright © 2012. Infor. All Rights Reserved. www.infor.comThe Red Ferrari Test . . .
  • 43Copyright © 2012. Infor. All Rights Reserved. www.infor.comQuestion for YOU!Where is the value in Continuous Monitoring to monitor riskin your organisation?1. Cash recovery / cash saving2. Effort reduction/Effort avoidance3. Improved testing depth, scope & quality4. Improved business relationship5. Other
  • 44Copyright © 2012. Infor. All Rights Reserved. www.infor.comDeveloping the Case for Action• Pilot – Proof of Concept• Scoped process & risk theme• One-time extraction and analysis of relevantsystem data and transactions for the period• Analysis performed on 100% of transactionsagainst agreed risk thresholds• Aggregate & detail exception reporting• Review of exceptions found and explorationof underlying issues• Agree the value of findings !• Develop Business Case
  • 45Copyright © 2012. Infor. All Rights Reserved. www.infor.com• Introduction• Landscape of risk & control assurance• Managing risk and managing control• Risk, control & business performance• Continuous Monitoring• Case study examples• Pitfalls and critical success factors• Questions & DiscussionTopic Review
  • 46Copyright © 2012. Infor. All Rights Reserved. www.infor.comHits & Myths1. The Controls Myth• Controls are only a tool• Focus on the risk and performance drivers• Exceptions to expectation expose the real issues2. The Standardisation Myth• Will give economy of scale• Will lead to uniform data• Will not automatically lead to standard process execution3. The Efficiency Myth• You need to know what is sub-optimal (exceptions) to drive efficiency gains• Analysis of exceptions drives Continuous Improvement• Exceptions should have a MONETARY value• Tightening the right Controls in this way will drive BUSINESS efficiency46
  • 47Copyright © 2012. Infor. All Rights Reserved. www.infor.comThe pessimist complains about the wind. The optimist expects it to change.The leader adjusts the sails.”47
  • 48Copyright © 2012. Infor. All Rights Reserved. www.infor.comDan French Pramod Mathurdfrench@consider.biz pramod.mathur@infor.comExperiences & Observations . . .http://consider-ations.blogspot.com/
  • 49Copyright © 2012. Infor. All Rights Reserved. www.infor.comLearn more about Infor ApprovaDay ID Session Time LocationSunday April 21 IFIN-5009 Focus Group: Governance, Risk and Compliance 1:00 pm - 2:00 pm W311GMonday April 22 IFIN-6024 Infor Financials Today: Get Tighter Controls with Efficiency 11:15 am - 12:15 pm W311HMonday April 22 IFIN-6026Advances in General Ledger Process Optimization: Cut Inefficiencies andReduce Fraud3:15 pm - 4:15 pm W311HMonday April 22 IFIN-6025Driving Financial Assurance by Eliminating Inefficiencies and Risk in YourProcure-to-Pay Process4:30 pm - 5:30 pm W311HMonday April 22 IFINS-9005 Stop the (Controls) Madness with InforApprova 4:30 pm (20 minutes) HUBTuesdayApril 23 IFIN-6003Enforce Segregation of Duties with InforApplication Security and IdentityManagement4:30 pm - 5:30 pm W311HWednesday April 24 IFIN-6027 Advances in User Access Certification and Compliant Provisioning 8:30 am - 9:30 am W311EWednesday April 24 IFINS-9012 Simplify the Internal Controls and Compliance role with InforApprova 10:00 am (20 minutes) HUBWednesday April 24 IFIN-5010 Informally for Continuous Controls Monitoring 11:00 am - 12:00 pm W311GWednesday April 24 IHEA-1014 InforApprova: Continuous Controls Monitoring for Healthcare 11:00 am - 12:00 pm W202BWednesday April 24 HOSP-700Security and compliance: Enabling tracking of key control points forcompliance across the organization11:00 am - 12:00 pm W204C
  • 50Copyright © 2012. Infor. All Rights Reserved. www.infor.comInfor Xtreme SupportSpecialized ProactivePersonalized Social AccountableKeeping your systems operating fast and efficiently
  • 51Copyright © 2012. Infor. All Rights Reserved. www.infor.com• Get an update on recently releasedfeatures and a preview of what‟snext in the “Xtreme Support CANMake a Difference” session onWednesday morningGet The Most From Xtreme Support• Visit Support and Maintenance inThe Hub for a quick support planassessmentAre you using the newest andmost effective features in InforXtreme?Is your Xtreme Support Planright for you?
  • 52Copyright © 2012. Infor. All Rights Reserved. www.infor.comCopyright © 2012. Infor. All Rights Reserved. www.infor.com 52Questions & Answers
  • 53Copyright © 2012. Infor. All Rights Reserved. www.infor.com