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December 31, 2014

Shaping Finance ERP and other F&A systems in the new digital world order

Factors impacting the design of future Finance & Accounting (F&A) systems


Despite the advancement of numerous information systems, technology products, the Finance community still grapples with challenges related to the speed and quality of financial information. Ever changing regulations, uncertain economic conditions and technology disruptions are significantly driving the need for much more nimble, effective and cost efficient F&A systems.
 
Let's look at some of the elements affecting the design of F&A systems.
 
The great ERP myth  - Quick view of the evolution of ERP

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In the aftermath of the global credit crisis in 2007-08, CFOs & IT chieftains are questioning multi-year ERP implementations, expensive upgrades. The ask from business line leaders is to have simple & effective systems that are easy to adopt and not much of hit on the P&L. For example: small & medium enterprises in the US are managing day to day activities related to cash flow management, reconciliations on the move by leveraging solutions such as Intuit & Xero.

There is a clear shift happening -  a fine border is emerging for large on-premise Finance ERPs. The speed of ERPs extending to "all" the finance & accounting functions has reduced. Despite enterprises consolidating systems, the next few years will witness  smart cloud & mobile finance applications being adopted and interestingly these applications will be aggressively pushed by large ERP software vendors. More importantly, these applications will be outside of so called "core" ERP.
 
The Digital disruption - Wearables, cloud, mobility & social will significantly impact the way business transactions are recorded and consumed. "Ubiquitous" will be the theme and all finance systems have to operate as per this theme. The finance ERPs & systems in current form are quite far from being truly ubiquitous. Probably it may get more nimble, fast to deploy, fast to adopt. However till such time, gaps will be filled with multiple smart applications each managing specific business process. One might argue that there are point solutions today as well to manage business processes such as collections, payables, cash application, reconciliations etc, The key difference in regard to new digital applications will be:

  • Extremely fast to deploy - it may take from hours to a couple of days to deploy a multi-country, multi- business collections application. 
  • Simple to use, no specific training required, as simple as using LinkedIn.
  • Cost effective - zero cost to either start or end application
  • No e-waste -  no redundant infra, complex database maintenance after decommission

The Millennial influence - Global trends indicate that a high number of millennial(s) will enter the workforce over the next few years. The only way to make them productive quickly, make them effective is to provide tools that are simple & smart. Higher focus & time need to be spent on understanding business, market dynamics and regulatory implications rather than lengthy ERP trainings.  There is a high probability that finance ERP related trainings for a new employee will fade away, ERPs will operate in the background with smart transaction applications in the front end. The design will be such that, there will be no requirement for finance staff to login to ERP. For example:  A famous breakfast chain in US increased sales by 3-5% just by redesigning the menu. Nobody requires training to sign-in to Linkedin / Facebook and setup a profile. Similarly, new finance systems will have a simple design and be similar in common functionalities. Significant productivity can be unlocked just by ensuring all finance applications' interface is similar to personal applications used by millennial(s) outside work. 
 
The Analytics connection - This will be a significant competitive advantage. For this to be true, every finance system has to provide adequate insights and not just data. ERP modules and finance systems will be decommissioned quickly if it does not support "analytics". More finance systems will be de-commissioned for this compared to others. The ability to seamlessly to talk to other transaction systems, highlight relationships, scenarios and publish a predictive outcome will be the core to future F&A systems.
 
It would be beneficial for enterprises in the long term if CFOs can evaluate based on above parameters & factors before signing off on F&A system proposals presented before them.

December 1, 2014

Seven steps to effective enterprise-wide compliance

Outsourcing a few compliance processes is not the solution; it is only part of the solution.


For the folks at BP in the Gulf of Mexico, the day April 20, 2010, remains deeply evocative. Touted to be the largest marine oil spill in the petroleum industry, the Deepwater Horizon oil spill (also referred to as the BP oil spill) claimed several lives and caused extensive and irreparable damage to marine and wildlife habitats. In yet another incident of negligence, 117 garment workers met their unpleasant fates in the infamous Tazreen Fashions factory fire in Dhaka, Bangladesh; in November 2012. Better fire safety and wiring standards could have averted the disaster, said the report.

Business landscape today is dotted with many such cautionary tales of non-compliance and the common refrain that follows is often, it could have been prevented. Holistic compliance is one of the foundation stones of a successful enterprise and a partner who can speed up the journey to effective enterprise-wide compliance is always very sought-after.

Before undertaking compliance initiatives

When commissioning a global compliance program, enterprises are most often clueless about how much it is going to cost them or how complex it could get. To begin with, enterprises should create an action plan that answers the following questions before undertaking compliance initiatives:  

  • What is the cost of setting up an in-house compliance program?
  • Is the all-encompassing expertise for the compliance initiative available?
  • Is data security a cause for concern?
  • Who will monitor risk and compliance in a comprehensive manner?
  • How soon can the desired state of compliance monitoring be achieved?

Many enterprises also prefer outsourcing compliance initiatives to a capable service partner to save cost, time, and effort, while also gaining valuable expertise. A service partner can provide enterprises with a comprehensive framework that will catalyze their journey towards holistic compliance.

A seven-step approach for a holistic compliance framework

With the right people, processes, and tools in place, a holistic compliance program is only seven steps away:  

  1. Step 1 - Understand compliance requirements: An enterprise with a global presence needs to understand different regulations across countries. Remember, compliance is not just about regulations, it also includes organizational policies, contracts, and standards.
  2. Step 2 - Classify requirements into focus areas: Once compliance requirements are established, classify them into focus areas such as ethics, fair labor, medical, workplace harassment, security, environmental, incident response, and so on. 
  3. Step 3 - Identify owners for implementation: Implementing any new initiative is usually met with resistance. To overcome this and ensure that processes are followed, identifying compliance process owners is essential. These owners would have specific responsibilities assigned to them and they would span across business functions and geographies.
  4. Step 4 - Evaluate risk levels: Business impact analysis, root cause analysis, probability or frequency of occurrence, risk mitigation options - these are some of the ways through which risk levels are computed. Once the risk evaluation is complete, the risks can be categorized as very high, high, medium, low, and very low.
  5. Step 5 - Create a compliance program: The compliance program can be industry-specific, geography-specific, country-specific, state-specific, or can even be a combination. While designing the program, ensure that you have factored in elements such as current and aspired compliance statuses, risk scores, timelines, risk management owners, and residual risks.
  6. Step 6 - Monitor / track the compliance program: Use a technology tool that can track and compare multiple compliance entities, generate dashboards and reports, and enable multiple user accounts. A good compliance program should be continuously measured for effectiveness and impact.
  7. Step 7 - Scale the compliance program: As priorities change, the compliance program should also have the flexibility to reconfigure without disrupting day-to-day operations. It should also be easily repeatable across geographies and value chains.

Infosys BPO Compliance Management tool

The best-practices outlined in the seven steps are embedded in the Infosys BPO Compliance Management tool. It is built on a strong risk methodology framework and comes with a pre-configured, workflow-based, and automated technology platform. The compliance management tool follows a four-step approach to address requirements:

  • Identify regulations and process owners
  • Evaluate risks and develop mitigation plans
  • Implement and review compliance programs
  • Increase maturity levels and scale them to match global standards

For more about the Infosys BPO Compliance Management tool, read the white paper http://www.infosysbpo.com/insights/Documents/effective-enterprise-wide-compliance.pdf

Conclusion

Outsourcing a few compliance processes is not the solution; it is only part of the solution. An effective enterprise-wide compliance will become a reality only with a comprehensive framework. A framework that provides the right people, processes, and tools to catalyze the journey towards holistic compliance.

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