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Core & Non-Core Activities: A Checklist

A quick checklist to help CFOs, Finance Directors and Finance & Accounting Managers determine core & non-core functions to help them develop an outsourcing strategy that works!

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Finding Focus
How Non-Core Activities Are
Blurring Your Strategic Vision
A Checklist For Identifying Core & Non-Core Activities


Overview
What's Really Core to Your Organization?
Finance & Accounting (F&A): The Processes Defined
How To Determine Non-Core F&A Activities
Finding Focus
Want to Learn More?
Sutherland Finance & Accounting Outsourcing Services - A Practical Overview
Finding Focus: A Checklist For Identifying Core & Non-Core Activities


                        What's Really Core to Your Organization?

                        As companies cautiously manoeuvre their way through hard economic times, CXOs are
                        tasked with identifying and leveraging the activities that deliver brand differentiation, a
                        competitive edge and undeniable value to the firm.
                        Core competencies are central to operations, whereas non-core activities are considered
                        incidental, peripheral, or, sometimes, an expensive distraction.

                                    Core Activities…                         Non-Core Activities…
                                    Are Strategic                            Are Part of Day-to-Day Tactics
                                    Improve Customer Value                   Do Not Add Value
                                    Drive Profits                             Are Not a Profit Centre

                        For decades, enterprise companies have been divesting themselves of non-core activities
                        and operations to be able to focus on activities that support the organisation’s core
                        business strategy and its strategic vision. For example, it’s common, and often preferred, for
                        companies to outsource their shipping duties to large third-party logistic companies, rather
                        than invest in a fleet of trucks and the inherent costs of running the fleet efficiently.

                        More and more, company leaders are casting a hard look at their end-to-end processes to
                        evaluate what is best kept in-house and what an outside provider can handle more
                        efficiently and cost-effectively. One of the areas for consideration is the Finance and
                        Accounting Department.



                        Finance & Accounting (F&A): The Processes Defined

                        The Everest Group’s Research Practice, an independent research and analysis organisation,
                        defines these accounting processes in the following manner:

                        Procure-to-Pay: Procure-to-Pay process is an integrated end-to-end process that includes
                        support, day-to-day purchasing, catalog, accounts payable, T&E processing, spend analysis,
                        business analytics, reporting, audit, and compliance management.

                        Order-to-Cash: Order-to-Cash process is an end-to-end process that includes order
                        management and billing, dispute and deduction management, accounts receivable, aging
                        and collections, and business analytics and reporting.




                                                                                                                    1
Finding Focus: A Checklist For Identifying Core & Non-Core Activities


                         Record-to-Report: Record-to-Report process is an end-to-end process that includes
                         regulatory compliance, financial analysis and reporting, budgeting and forecasting, internal
                         audit, fixed-asset accounting, tax compliance and general accounting.

                         Procure-to-pay                Order-to-Cash                                            Record-to-Report


                         Customer set-up and             Vendor management       Master set-up and            Journal entry processing      Financial statement
                         maintenance                     Purchasing              maintenance                  Account and bank              generation
                         Order processing                Invoice and payment     Calculation and posting of   reconciliations               Project reporting
                         Customer invoicing              processing              depreciation                 Fiscal period and year-end    KPI reporting
                         Lock box management and         Travel and expense      Capital budgeting support    general ledger closing        Management reporting
                         cash applications               reimbursement           Job/project costing          Consolidations/eliminations   Financial planning
                         Credit and collections          Speciality payment      Administration of capital    Budgeting                     Financial analysis
                         Customer inquiries              requests                approval process             Treasury services
                         Period and year-end closing     P-card administration   Period and year-end          Cost accounting
                         Reporting                       Vendor inquiries        closing                      Payroll accounting
                                                         Period and year-end     Reporting
                                                         closing
                                                         Reporting




                         How To Determine Non-Core F&A Activities

                         Non-Core Activities, Defined:
                         Non-core activities are services and business functions that do not add to the company’s value
                         proposition to its customers. From a Finance and Accounting perspective, common non-core
                         activities often include functions like accounts payable, collections, transaction processing, billing
                         and records management.

                         One way to assess your core functions is to start by examining the features of each process.
                         Review whether the process is rules-based, does it demand key business judgment, is it
                         dependent on the stage of the process maturity, the systems used, proximity to the business
                         and language requirements.




                                                                                                                                                                  2
Finding Focus: A Checklist For Identifying Core & Non-Core Activities


                           Typically Retained                                                 Typically Outsourced


                           Decision Making Authority                                          Routine & Process
                           Acceptance and Approval                                            Driven
                           Risk Management                          Strategy                  Rules Based
                           Proximity to Business                                              Can’t Be Automated
                           Vision                                   Business                  Data Mining
                           Strategy                                 Processes

                           Policy Setting                                                     Value Added Non-Core Activities
                                                                  Transaction
                                                                  Management                  Research
                                                                                              Analytics
                                                                                              Knowledge Driven

                         Process
                         Your F&A functions may be non-core if:
                           The F&A processes in the company are routine.
                           The policies, rules or even chart of accounts could be simplified and made routine.
                           The process could be automated with access to new technologies not available in-house,
                         ssand technology investment is unlikely given other priorities.
                           The process cannot be eliminated or automated, however, the cost per transaction could
                         ssbe reduced if outsourced.
                           The process does not require higher-level skills such as analysis and evaluation.
                           The process is not aligned with the company’s vision.
                           The function does not affect policy setting.
                           Outsourcing allows us to better benchmark our processes and improve KPIs
                           Our ability to focus on activities that deliver value is improved by removing this function.

                         People
                         Your F&A functions may be non-core if:
                           By outsourcing the task it enables the company’s F&A staff to undertake more core and
                         ssstrategic functions.
                           Cyclical peaks and valleys govern the company’s F&A functions.
                           Flexible resourcing models would benefit the company during peak/lean periods to rid
                         ssthe company of additional temporary HR needs.
                           Staffing levels are currently set for high-season, or low season.
                           There are underutilised resources in the low periods.
                           The company needs access to talent to scale up or scale down when required.
                           Access to skills and talent that do not exist in-house is needed and may be difficult to retain.
                           By outsourcing, the company is able to remove position redundancies.
                           You need to minimise labour costs?


                                                                                                                            3
Finding Focus: A Checklist For Identifying Core & Non-Core Activities


                        Technology
                        Your F&A functions may be non-core if:
                          Outsourcing acts as a gateway to better technologies than those you can afford in-house.
                          This access to technology improves communication and reduces silos.
                          You can reduce costs and efficiencies by harnessing this technology.
                          The technology allows the company to increase its controls and compliance.
                          The technology improves the accuracy of reports and decision-making information.


                                              The Process                       Core       Non-Core
                          Procure-to-Pay
                          Customer set-up and maintenance
                          Order processing
                          Customer invoicing
                          Lock box management and cash applications
                          Credit and collections
                          Customer inquiries
                          Period and year-end closing
                          Reporting


                          Order-to-Cash
                          Vendor management
                          Purchasing
                          Invoice and payment processing
                          Travel and expense reimbursement
                          Specialty payment requests
                          P-card administration
                          Vendor inquiries
                          Period and year-end closing
                          Reporting

                          Record-to-Report
                          Master set-up and maintenance
                          Calculation and posting of depreciation
                          Capital budgeting support
                          Job/project costing
                          Administration of capital approval process
                          Period and year-end closing



                                                                                                               4
Finding Focus: A Checklist For Identifying Core & Non-Core Activities


                                            The Process                           Core        Non-Core
                        Reporting
                        Journal entry processing
                        Account and bank reconciliations
                        Fiscal period and year-end general ledger closing
                        Consolidations/eliminations
                        Budgeting
                        Treasury services
                        Cost accounting
                        Payroll accounting
                        Financial statement generation
                        Project reporting
                        KPI reporting
                        Management reporting
                        Financial planning
                        Financial analysis

                        FINDING FOCUS

                        Identifying non-core activities enables CXOs to look at the end-to-end processes, and exam-
                        ine the functions and activities that really add value to the company.
                        Many times, a “crawl, walk, run” approach can be a strategic entryway into an outsourcing
                        journey. Companies that are cautious about outsourcing may want to look at areas, like
                        FP&A that are less transformational. These areas offer less touchpoints into the organisa-
                        tion, and the result is staff augmentation rather than “outsourcing.”

                        Outsourcing non-core functions goes well past cost benefits, which can be significant, deliv-
                        ering an array of benefits including:

                          The most effective use of personnel
                          Less day-to-day tactics, and more strategy
                          More controls and quality assurance
                          Access to reliable talent
                          Access to skills and technologies not available in-house
                          Process standardization and optimization

                        This shift facilitates a transformation from peripheral distractions and a drain on resources to
                        a highly focused organisation that is positioned for growth. This renewed vision on core com-
                        petencies is the difference between industry leaders that can build market share, respond
                        quickly to opportunities and move ahead of competitors, and industry laggards that stagnate.


                                                                                                                     5

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Core & Non-Core Activities: A Checklist

  • 1. Finding Focus How Non-Core Activities Are Blurring Your Strategic Vision A Checklist For Identifying Core & Non-Core Activities Overview What's Really Core to Your Organization? Finance & Accounting (F&A): The Processes Defined How To Determine Non-Core F&A Activities Finding Focus Want to Learn More? Sutherland Finance & Accounting Outsourcing Services - A Practical Overview
  • 2. Finding Focus: A Checklist For Identifying Core & Non-Core Activities What's Really Core to Your Organization? As companies cautiously manoeuvre their way through hard economic times, CXOs are tasked with identifying and leveraging the activities that deliver brand differentiation, a competitive edge and undeniable value to the firm. Core competencies are central to operations, whereas non-core activities are considered incidental, peripheral, or, sometimes, an expensive distraction. Core Activities… Non-Core Activities… Are Strategic Are Part of Day-to-Day Tactics Improve Customer Value Do Not Add Value Drive Profits Are Not a Profit Centre For decades, enterprise companies have been divesting themselves of non-core activities and operations to be able to focus on activities that support the organisation’s core business strategy and its strategic vision. For example, it’s common, and often preferred, for companies to outsource their shipping duties to large third-party logistic companies, rather than invest in a fleet of trucks and the inherent costs of running the fleet efficiently. More and more, company leaders are casting a hard look at their end-to-end processes to evaluate what is best kept in-house and what an outside provider can handle more efficiently and cost-effectively. One of the areas for consideration is the Finance and Accounting Department. Finance & Accounting (F&A): The Processes Defined The Everest Group’s Research Practice, an independent research and analysis organisation, defines these accounting processes in the following manner: Procure-to-Pay: Procure-to-Pay process is an integrated end-to-end process that includes support, day-to-day purchasing, catalog, accounts payable, T&E processing, spend analysis, business analytics, reporting, audit, and compliance management. Order-to-Cash: Order-to-Cash process is an end-to-end process that includes order management and billing, dispute and deduction management, accounts receivable, aging and collections, and business analytics and reporting. 1
  • 3. Finding Focus: A Checklist For Identifying Core & Non-Core Activities Record-to-Report: Record-to-Report process is an end-to-end process that includes regulatory compliance, financial analysis and reporting, budgeting and forecasting, internal audit, fixed-asset accounting, tax compliance and general accounting. Procure-to-pay Order-to-Cash Record-to-Report Customer set-up and Vendor management Master set-up and Journal entry processing Financial statement maintenance Purchasing maintenance Account and bank generation Order processing Invoice and payment Calculation and posting of reconciliations Project reporting Customer invoicing processing depreciation Fiscal period and year-end KPI reporting Lock box management and Travel and expense Capital budgeting support general ledger closing Management reporting cash applications reimbursement Job/project costing Consolidations/eliminations Financial planning Credit and collections Speciality payment Administration of capital Budgeting Financial analysis Customer inquiries requests approval process Treasury services Period and year-end closing P-card administration Period and year-end Cost accounting Reporting Vendor inquiries closing Payroll accounting Period and year-end Reporting closing Reporting How To Determine Non-Core F&A Activities Non-Core Activities, Defined: Non-core activities are services and business functions that do not add to the company’s value proposition to its customers. From a Finance and Accounting perspective, common non-core activities often include functions like accounts payable, collections, transaction processing, billing and records management. One way to assess your core functions is to start by examining the features of each process. Review whether the process is rules-based, does it demand key business judgment, is it dependent on the stage of the process maturity, the systems used, proximity to the business and language requirements. 2
  • 4. Finding Focus: A Checklist For Identifying Core & Non-Core Activities Typically Retained Typically Outsourced Decision Making Authority Routine & Process Acceptance and Approval Driven Risk Management Strategy Rules Based Proximity to Business Can’t Be Automated Vision Business Data Mining Strategy Processes Policy Setting Value Added Non-Core Activities Transaction Management Research Analytics Knowledge Driven Process Your F&A functions may be non-core if: The F&A processes in the company are routine. The policies, rules or even chart of accounts could be simplified and made routine. The process could be automated with access to new technologies not available in-house, ssand technology investment is unlikely given other priorities. The process cannot be eliminated or automated, however, the cost per transaction could ssbe reduced if outsourced. The process does not require higher-level skills such as analysis and evaluation. The process is not aligned with the company’s vision. The function does not affect policy setting. Outsourcing allows us to better benchmark our processes and improve KPIs Our ability to focus on activities that deliver value is improved by removing this function. People Your F&A functions may be non-core if: By outsourcing the task it enables the company’s F&A staff to undertake more core and ssstrategic functions. Cyclical peaks and valleys govern the company’s F&A functions. Flexible resourcing models would benefit the company during peak/lean periods to rid ssthe company of additional temporary HR needs. Staffing levels are currently set for high-season, or low season. There are underutilised resources in the low periods. The company needs access to talent to scale up or scale down when required. Access to skills and talent that do not exist in-house is needed and may be difficult to retain. By outsourcing, the company is able to remove position redundancies. You need to minimise labour costs? 3
  • 5. Finding Focus: A Checklist For Identifying Core & Non-Core Activities Technology Your F&A functions may be non-core if: Outsourcing acts as a gateway to better technologies than those you can afford in-house. This access to technology improves communication and reduces silos. You can reduce costs and efficiencies by harnessing this technology. The technology allows the company to increase its controls and compliance. The technology improves the accuracy of reports and decision-making information. The Process Core Non-Core Procure-to-Pay Customer set-up and maintenance Order processing Customer invoicing Lock box management and cash applications Credit and collections Customer inquiries Period and year-end closing Reporting Order-to-Cash Vendor management Purchasing Invoice and payment processing Travel and expense reimbursement Specialty payment requests P-card administration Vendor inquiries Period and year-end closing Reporting Record-to-Report Master set-up and maintenance Calculation and posting of depreciation Capital budgeting support Job/project costing Administration of capital approval process Period and year-end closing 4
  • 6. Finding Focus: A Checklist For Identifying Core & Non-Core Activities The Process Core Non-Core Reporting Journal entry processing Account and bank reconciliations Fiscal period and year-end general ledger closing Consolidations/eliminations Budgeting Treasury services Cost accounting Payroll accounting Financial statement generation Project reporting KPI reporting Management reporting Financial planning Financial analysis FINDING FOCUS Identifying non-core activities enables CXOs to look at the end-to-end processes, and exam- ine the functions and activities that really add value to the company. Many times, a “crawl, walk, run” approach can be a strategic entryway into an outsourcing journey. Companies that are cautious about outsourcing may want to look at areas, like FP&A that are less transformational. These areas offer less touchpoints into the organisa- tion, and the result is staff augmentation rather than “outsourcing.” Outsourcing non-core functions goes well past cost benefits, which can be significant, deliv- ering an array of benefits including: The most effective use of personnel Less day-to-day tactics, and more strategy More controls and quality assurance Access to reliable talent Access to skills and technologies not available in-house Process standardization and optimization This shift facilitates a transformation from peripheral distractions and a drain on resources to a highly focused organisation that is positioned for growth. This renewed vision on core com- petencies is the difference between industry leaders that can build market share, respond quickly to opportunities and move ahead of competitors, and industry laggards that stagnate. 5
  • 7. Finding Focus: A Checklist For Identifying Core & Non-Core Activities FOR MORE INFORMATION CONTACT To have a deeper discussion about the outsourcing process, please contact: Dario Mazurek Vice President, Integrated BPO Sales Finance & Accounting Outsourcing Services Sutherland Global Services TEL: office +1(845)786-1767 | mobile +1(845)729-5381 EMAIL: dario.mazurek@sutherlandglobal.com Dario leads our business development organisation for our Global Finance & Accounting Prac- tice. Since joining Sutherland in 2009, he has held executive positions in our Business Transfor- mation and within our Technology Vertical. He has over 20 years in the outsourcing industry in multiple management roles ranging from transition management and operations, account management, and a sales leader. He has held management and executive positions at such firms as IBM, AT&T, ACS (now Xerox Business Services), and Perot Systems. His leadership duties have had he and his team work with both large, global enterprises and increasingly more SMB clientele. His industry experience predominantly includes manufacturing, software and services, travel/hospitality/logistics, healthcare and Life Sciences. Simon Speirs Senior Director, Solution Architect, EMEA Finance & Accounting Outsourcing Services Sutherland Global Services TEL: +44 (0)207 138 0924 EMAIL: simon.speirs@sutherlandglobal.com Simon is a member of the Association of Chartered Management Accountants (ACMA) with 18 years of experience in improving business and finance team performance. He has worked in a number of blue-chip companies including ABB, Accenture, PricewaterhouseCoopers and Hewlett Packard. Simon leads the design and implementation of back-office solutions across the European Region for Sutherland. He has a proven track record of designing and delivering shared service solutions and managing complex global projects. Simon’s experience spans across continuous improvement, finance and accounting, procurement, sourcing and IT man- agement. The depth and breadth of his experience enables him to combine people, process and technology to design optimised and customised outsourcing solutions. 7
  • 8. Finding Focus: A Checklist For Identifying Core & Non-Core Activities SUTHERLAND FINANCE & ACCOUNTING OUTSOURCING SERVICES – A PRACTICAL OVERVIEW Structure Globally distributed delivery capacity and domain capability The Deloitte-established Tulsa FAO Centre of Excellence has been servicing clients since 1995 Strategic global locations designed to satisfy SSAE 16 standards and Sarbanes-Oxley requirements Capability Full suite of FAO services – transaction processing to financial and management reporting Integrated Analytics to support Collections, Financial Planning and Analysis functions Onshore, offshore and hybrid solutions tailored to meet client-specific needs Expertise Dedicated team experienced in business transformation, process optimisation and transition services Expertise in utilising existing client applications and/or SGS-hosted ERP systems Robust set of add-on technologies supported by in-house application Management team Flexibility Custom-crafted Pricing and Commercial Structure aligned to client needs and objectives Output/Outcome Based Pricing and No Termination penalties 8
  • 9. Finding Focus: A Checklist For Identifying Core & Non-Core Activities About Sutherland Global Services Established in 1986, Sutherland offers an integrated portfolio of analytics-driven back-office and customer facing solutions that support the entire customer lifecycle. It is one of the largest, independent BPO companies in the world serving global leaders in major industry verticals. Headquartered in Rochester NY, Sutherland employs over 30,000 professionals and has 35 operations centers in the United States, China, Philippines, India, UAE, Egypt, Bulgaria, UK, Canada, Mexico, Colombia, and Jamaica. Business Transformation Services Knowledge Services Business Process Outsourcing Technology Enabled Services Bulgaria Canada Colombia Egypt Jamaica India Mexico Philippines United Arab Emirates United Kingdom United States Toll-Free: +1 800-388-4557 x2799 | E-mail: clarityes@sutherlandglobal.com | http://clarity.sutherlandglobal.com © 2013 Sutherland Global Services