Financial Services

Build a winning strategy with an integrated transformation approach

The major reason that transformation programs do not go the full length, more often than not, is due to a ‘lack of an integrated approach’.  Programs without an integrated approach result in issues such as duplication of efforts, work being done at cross purposes, missing sustainable solutions, lack of efforts that complement each other and delays or abandonment of initiatives/projects.

What is an integrated approach?

An integrated approach is typically focused on the following two dimensions simultaneously and this dual focus is essential in unleashing its full potential. 

1. Theme-focused with links between key levers such as Digital and Domain & Analytics.
2. Functional focused with links between upstream and downstream processes such as ‘Source to Pay’ and ‘Order to Cash’.

It is often experienced that different teams work in silos even when they are all driving towards the same objectives within a particular function. Elaborating further on the need for the first dimension, theme focus, here are a few examples:

• The E-Invoicing program in ‘Source to Pay’ where domain-related insights are vital to maximizing touchless transactions.  Similarly, ‘Analytics’ can act as a catalyst with insights for smart prioritization and categorization.
• The collections strategy in ‘Order to Cash’ where domain-related insights are a key enabling factor in incorporating a robust collections strategy as the baseline strategy within the corresponding digital system.  
• Auto-bank statement processing in the ‘Record to Report’ where domain-related insights provide crucial inputs to tweak the auto-matching algorithm in the corresponding application.

It is a well-known fact that Finance Teams are heavily dependent on upstream processes to deliver successful outcomes.  As a part of the functional focus, we understand that the links between various factors of the processes play a key role in delivering defined performance levels. These examples give us a better idea of the impact of this dimension in an integrated approach.

• An issue with Vendor Master Data or PO accuracy can result in the need for reworking the details within Accounts Payable. However, the required changes have a knock-on effect that creates ripples within other activities in the value chain such as rework required in invoice processing, a spike in queries, payment delays, shipments being put on hold, a need for accruals, intercompany imbalances, loss of early payment discounts, etc.
• Similarly, an issue within a Customer or Item Master record or a sales order inaccuracy can lead to billing disputes, rework in the form of additional effort required around coordination and resolution, and blockage of the credit limit resulting in delays in order processing and fulfillment. As the disputes/inaccurate deductions get older, the difficulty involved in sorting them out increases, and the probability level of issue resolution decreases. Ultimately, this could result in the need for provisioning as a part of the financial statements.

Turn intent into action

The implementation of an integrated approach has been a topic of discussion for many years. However, the conversion of intent into action has been carried out only by a few enterprises. The strategy put in place by these organizations to successfully ‘turn intent into action’ involved the following factors.

Inculcate a transformation mindset: 

Move away from the approach of looking at the process in silos to having an ‘end-to-end’ view of the value chain.

Establish joint accountability for delivering on KPIs: 

Identify and deploy metrics that measure and reflect success. For example, metrics such as payment on time, touchless invoice processing, average delinquent days, intercompany imbalances, forecasting accuracy, etc.

Use agile operating models: 

Look out for pockets of work where ‘Integrated Teams’ could be deployed, for example, in a P2P Helpdesk or an O2C Disputes Council.

Set up Centres of Excellence (CoE): 

Invest in the formation of CoEs to ensure an unceasing focus on driving transformation and strengthen the rigor in identified areas such as a Cash Excellence CoE for tighter monitoring and administration of business events impacting working capital and effective cash flow management.

Finance and Accounting services are fast becoming a commodity. It is imperative for business process management service providers to buckle up and tighten their transformation approach to ensure that proposed solutions are implemented as planned. This will enable them to modernize client operations and guarantee that top-line profitability targets are not only met but also surpassed, thus staying relevant.