Uploaded byHernan Huwyler, MBA CPA
Finance Transformation - Best Practices for Accounting and Control - Hernan Huwyler
The document discusses strategies for finance transformation and lean accounting. It proposes reducing costs by standardizing processes, automating tasks, consolidating activities, and simplifying controls. This would allow the finance department to focus on analysis and advisory work. Specific recommendations include expediting financial reporting, simplifying accounts payable/receivable, centralizing bank accounts, and digitalizing documents to reduce errors. Transformation requires defining a strategy, collecting baseline data, planning implementation in phases, and reviewing results.
More Related Content
Similar to Finance Transformation - Best Practices for Accounting and Control - Hernan Huwyler
![[Webinar] From Tactical to Strategic: A Shift in the Understanding of Account...](https://cdn.slidesharecdn.com/ss_thumbnails/fromtacticaltostrategic-ashiftintheunderstandingofaccountspayable-131120124048-phpapp01-thumbnail.jpg?width=640&height=640&fit=bounds)
Finance Transformation - Best Practices for Accounting and Control - Hernan Huwyler
- 1. Hernan Huwyler, MBACPA Governance, Risk and Compliance Management 2017 Finance Transformation
- 2. Finance department role? Traditional Accountinginformation for strategic goals Statements are not longer a source of value 84% of the market value is intangible assets New: saving costs under its control Reduce financing costs Lower effective tax rate Financial transformation
- 3. Finance transformation Reduce thepayroll expense in the accounting departmentReduce other costs such as licenses, office rental and training Focus on what is important Increase flexibility to react to urgencies and changes Foster collaboration for synergies Improve red flags for fraud, corruption and budget overruns
- 4. Where is thevalue? Reduce transaction processing time Fast closings with insightful reports Easy to audit information Trusted advisor – how to structure data for financial and non-financial reporting
- 5. Keep me onthe loop Add too many people in a hula hoop… and it will stop moving Finance staff in excess creates complexity Reduce costs and increase flexibility
- 6. Impact on performance Fastreporting Competitive advantage easy-to-query data, fast price decisions, better tenders, support to business partners Contribution to corporate agility Data quality Single source of truth Template-driven financial recons and closings Enhanced fraud red flags Detecting more saving opportunities Simplified compliance Auditing, accounting and reporting standards and regulations Anti-corruption financial controls Harmonization of decision-making by global policies
- 7. Escalation Large transformation projects Reengineeringbest practices at function level Shared services, outsourcing, analytics, automatization solutions Skills in project and change management Potential cost of the finance dept. as % of revenue: .6% Optimizing finance processes Incremental best practices at procedure level Simplification, standardization, consolidation Skills in process improvement (worldwide best practices) Potential cost of the finance dept. as % of revenue: 1%
- 8. Cost of thefinance department % revenue 1.6% 1.4% 1.2% 1.0% 0.8% 1994 2008 2010 2012 2014 2016 Benchmark for multinational companies (median revenue at USD 6 B) Sarbanes Oxley impact Cost-cut pressures Better ERPs Continuous improvement in finance E-invoicing and other targeted IT software
- 9. Strategies Relevant role for finance: →real time data Simplify controls according to risks Standardize routine tasks to improve compliance Centralize in an integrated model according to capabilities
- 10. Elimination of tasks –There is an improvement opportunity every time that a financial controller is “massaging data” in MS Excel Focus reports on relevant decisions Minimal bank accounts Rationalize legal entities Exception-based controls Extended forecasting horizon
- 11. Standardization Template-driven closing reconsand reports Global policies enforced by ERP controls – improved compliance Lean approval chains – RACI model, change job responsibilities Global chart of account Lean accounting reporting Based on automatization
- 12. Consolidation Integrated reporting – synergiesin financial and non-financial reports Single closing checklist – declined to subsidiaries to simplify consolidation – dependency of assigned tasks and due dates Single processing location Procurement consolidation Centralized and clean master data Fewer manual entries
- 13. Inadequate budgeting fortime, money or staff – monitor budgets, have “cushions” Lack of cooperation by other entities – get clear project sponsors, formal planning of actions Lack of communication to prepare for the change – build credibility from early wins, change liaison managers, address employee resistance Failure in customizing ERP functionalities – acceptance tests by end users and SMEs Lack of follow up of improvements – involve supervisors Implementation risks
- 14. Goal: Expedite theproduction of the statements (fast close) Use a financial closing checklist assigned to each accounting employee – create templates for recons and footnotes (variants in SAP) – automate recurring journal entries (SAP FBD1+F.14+SM35) – implement peer reviews on recons and manual journal entries to free accounting managers – document detailed tasks, controls, reports inputs and contacts in closing work papers – advance bank recons to the 25th (compare balances to the 30th) Adjust operations to support the cutoff (e.g. billing and I/C transactions before the 24th) – reduce complex operations in the closing dates – refer routine work in the accounting department on closing dates – automate accruals with reports on purchase orders, good receipts and invoices (SAP F.13+MR11, MIGO type 501 ) Accounting
- 15. Goal: Expedite theproduction of the statements (fast close) Eliminate operational data from financial reports – balance with the objectives of integrated reporting – eliminate reports available in the ERP – separate and delay non-critical operational reports Solve the causes of long waiting times and delays – structure activities in parallel (rather than sequentially) Accounting
- 16. Goal: Reduce thenumber of tasks in the closing Eliminate small accruals – use standard estimates for accruals – use global and general accruals Reduce the number of low-value manual entries – centralize the posting of manual entries – solve the root causes of manual entries – study cases for reversals, corrections, discrepancies and open items Reduce the investigation level of open items in recons – for low value or balance percentage Use cycle counting to avoid month-end inventory counts Centralize I/C transactions and its documentation Accounting
- 17. Goal: Eliminate mostof the account payable dpt. by dispensing their 3-way match control The receiving staff checks the delivery slip against the approved purchase order – If there are not differences, the ERP automatically schedules the supplier payment (using the purchase order price) → voucher on receipt – If there are differences (ie. +5% at line item > 100 USD), the shipment is rejected at the receiving dock It is not a 0-way match! Accounts Payable
- 18. Goal: Expedite paymentsfor lean accounting Eliminate the manager’s signature on a supplier invoice (single approval focused on purchase orders) Only approve invoices – with differences with purchase orders, or – from vendors showing discrepancy history Develop a web portal for vendors to enter invoices Digitalize vendor invoices to email them to approvers Automate travel expense reporting Automate contract- based payments with repetitive invoicing Accounts Payable
- 19. Goal: Reduce thenumber of transactions Implement (annual) blanket purchase orders and master agreements with key vendors Get purchasing cards for employees with frequent low-value purchases Clean up the master file to inactivate suppliers – with 180 days without purchases – unapproved, duplicated, with missing tax info Eliminate advances for travel and non key suppliers Group adjustments for claims and returns Accounts Payable
- 20. Goal: Expedite billingfor lean accounting e-Invoicing: more than a PDF invoice via email – reduce manual data entry to generate the invoice – automatize shipments to issue packing slips Issue the invoice by the delivery person Early billing of contract-based recurring invoices Early validation of hours to be billed Approve exceptions between shipped goods and billed goods Billing
- 21. Goal: Reduce therejected invoices Use data entry validation rules for billing – reject duplicates, limits, taxes with country, formats Simplify the pricing scheme – review and proofread invoices Remove unnecessary information from invoices such as salesperson and job numbers Add necessary information on invoices such as early and late payment amounts, and receipt signature Billing
- 22. Goal: Reduce thenumber of transactions Issue monthly summarized invoices for low-dollar shipments Limit special discounts for key customers – early payment discounts and other adjustments Simplify the pricing structure – single price for all clients, adjust with monthly deductions Billing
- 23. Goal: Reduce thenumber of transactions Consolidate bank accounts – use of concentration accounts – consider legal requirements and anti-fraud practices Set monthly general deductions – simplify marketing promotions Implement a periodic payment schedule Write off low-value pending balances Cash management
- 24. Goal: Expedite thecollection Stratify clients for collection actions Log, classify and avoid causes for nonpayments – incorrect prices/quantities/articles, missing shipment documentation, returns, delayed paperwork or booking, exceptions Transfer collection responsibilities to the sale dept Prioritize cash applications Use a collections agency Cash management
- 25. Reduce data-entry errors –scanning with optical scanning recognition OCR, radio frequency identification tags RFID, bar coding – digital approvals and signatures, MS Outlool approval traking – numeric identifiers reduce errors from alphanumeric Digitalize documents – integrate SAP with EMC Documentum Review the document retention and destruction policies Filling and data capture
- 26. Transformation activities Define thestrategy Collect baseline data (as is) Define future state (to be) Plan the implementation phases Define a business case Perform a post implementation review
- 27. Transformation activities Define thestrategy Define the scope – processes – business units – organizations Define saving targets Define how to measure savings
- 28. Transformation activities Collect baselinedata (as is) Requirements Transactional volume Systems, vendors and clients Costs – employees by function (FTEs) – productivity measures Benchmark
- 29. Transformation activities Define futurestate (to be) Vision – improve inefficient controls, or – change full processes Define best practices Analyze options to reach best practices (scenarios) Define technologies
- 30. Transformation activities Plan theimplementation phases Calculate implementation costs – Validate budget assumptions Calculate savings Plan for resources Focus on deliverables Monitor objectives in time – minutes to book an invoice
- 31. Transformation activities Define thebusiness case Calculate cash flows for investments and savings – cumulative – sensibility analysis on assumptions Define metrics – financial, efficiency
- 32. Transformation activities Perform apost implementation review Calculate net savings Compare baseline vs. actual impacts Compare actual impacts vs. target Assure the independence of reviewers Survey for quality standards Document lessons learnt
- 33.
- 34.