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Transforming Financial Back-office Processes to Optimize Working Capital Veena Gundavelli

Transforming Financial Back-office Processes to Optimize Working Capital Veena Gundavelli President & CEO Emagia Corporation. Emagia – Introduction. Leading Provider of Working Capital Management Software Solutions to Global 2000 companies.

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Transforming Financial Back-office Processes to Optimize Working Capital Veena Gundavelli

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  1. Transforming Financial Back-office Processes to Optimize Working Capital Veena Gundavelli President & CEO Emagia Corporation

  2. Emagia – Introduction Leading Provider of Working Capital Management Software Solutions to Global 2000 companies

  3. Leadership in Working Capital Management Solutions Emagia Customers Include: • In Business Over 8 years • Unlocked over $10.3 Billionin Working Capital • Have Delivered Over $150 Millionin Bottom Line Savings • Have Managed Over $30 Billionin Receivables • Are Used By Over 2000Global Users • Process Over 100 Million Transactions Per Month • Have Been Deployed Across Over 53 Countries • Have Been Implemented in Over35 Different Languages and in Over 30 Different Currencies

  4. Agenda • Top Priorities for Today’s CFO • Working Capital – A Key Competitive Advantage • Transformation of Financial Back Office: 3 Step Approach • Case Studies: Highly Effective Finance Organizations

  5. Transformation of Role of Finance

  6. Performance – Managing enterprise-wide performance to maximize share holder value Growth – Partnering with the enterprise to support new growth strategies Risk – Strengthening process controls and streamlining processes to reduce risk and meet fiduciary/regulatory compliance standards Top 3 Areas of Finance Focus

  7. Structural Complexity – Multiple Disconnected Operations, Lack of Standardized Processes, Lack of Collaboration within and outside of Finance Departments Fragmented Information – Disconnected Systems, Lack of Information Insight, Lack of Consolidated Information in Timely Order, Lack of Integrated or Global View of Processes, Lack of “Single version of truth” Top 2 Challenges in Finance Departments

  8. Roadmap to an Agile Finance Organization

  9. Components of the Working Capital Cycle

  10. Cash is the life blood of any business Cash-to-Cash Cycle is the largest consumer/source of cash Cash Flow from Operations – “Free” measurement of health of any business Receivables – One of the top 3 largest assets of any business “Free Cash Flow” has stronger influence on share price compared to “Earnings” Unlock Working Capital From Your Financial Operations

  11. Situation Hi-tech Company with over $500M in revenues Serious failures in receivables management High DSO (> 110 days), Bad debt write-offs increasing Depressed Stock Price Speculations that either the new products are not working or sales reported were not true Solution Streamlined entire order-to-cash processes, staff, management focus and adopted specialized technology Working Capital Management focus right from Board and C-level executives Impact of Better Working Capital Management: Case Study

  12. Result Reduced DSO to high 50s Increased cash by equivalent of four month of sales Reduced bad debt expense by millions of dollars Increased stock price dramatically Impact of Better Working Capital Management: Case Study Source: Parson Consulting

  13. Cash Tied in Financial Operations “Working capital remains top of mind for many CFOs. Indeed, continued working capital improvement — or even a controlled, temporary reduction — can ultimately drive growth.” 2005 Working Capital Survey Magazine $162 Bn Opportunity toDrive Cash Flow Improvements Source: McKinsey & Co. Studyof Top 24 U.S. Corporations Working Capital Improvements In Receivables, Payables and Cash FlowForecasting Can Be A “Hidden Reservoir” To Drive Financial Excellence

  14. Regulate Cash Outflows Improve Disbursements Forecasting Close the Short-term Liquidity Gap Short-term Liquidity Gap • Greater Need to Borrow • Higher Interest Expense • Higher Debt-to Equity Ratio • Lower Return on Invested Capital Accelerate Cash InflowsImprove Cash Receipts Forecasting Cash Inflows Receivables Payables Time Cash Outflows Cash Flow Visibility, Control and Predictability Ensures Better WorkingCapital Management and Cash Conversion Cycles

  15. Barriers to Working Capital Excellence

  16. Transforming the Enterprise to Drive Sustainable Value Decision Support WorkingCapital Optimization Best PracticesBased Standardization Cash FlowProcess Management TransactionManagement Cash Flow Transactions Management From Working Capital Vision

  17. Value WorkingCapitalOptimization Cash FlowProcessManagement Cash FlowTransactions Management Strategic Focus SustainableGrowth &ShareholderValue Controls & Efficiencies & RiskManagement Standardization Simplification Time To Working Capital Actualization Transforming the Enterprise to Drive Sustainable Value Effectively Driving Profitable Growth Balancing Risk And Performance Managing Complexity

  18. WorkingCapital Optimization Cash FlowProcess Management Cash Flow Transactions Management From Working Capital Vision Level 1 Transformation : Transactions Management Simplification and Integration of Enterprise-Wide Information Management • Reduce structural and data complexity • Reduce number of disparate Finance Platforms • Reduce number of ERP instances • Reduce number of point transaction solutions • Rationalize common platforms for consolidation and reporting across receivables, payables, treasury • Deploy solutions that address multi-currency, multi-language, multi-level organizational and customer hierarchies

  19. Transactions Management: Reality Out There

  20. Legacy Systems JD Edwards BaaN Level 1 Transformation : Transactions Management Advantages • Single version of truth • Reduces number of reconciliations • Reduces time and effort needed to gather information • Faster access to information for decision making Working Capital Platform

  21. WorkingCapital Optimization Cash FlowProcess Management Cash Flow Transactions Management From Working Capital Vision Level 2 Transformation : Process Management Standardize Process Management Management with Technology • Streamline and document internal processes for local and globally operations – order-to-cash, procure-to-pay, treasury • Implement enterprise-wide standard policies and rules on credit, collections, deductions, payables, billing, dispute handling • Formulate workflow and collaboration processes across finance, sales, order-entry, customer support, purchasing and other departments • Automate business processes with common technology, platforms • Adopt functional best practices in the industry

  22. WorkingCapital Optimization Cash FlowProcess Management Cash Flow Transactions Management From Working Capital Vision Level 2 Transformation : Process Management • Advantages • Improves productivity and efficiency • Reduces operational costs and increases scalability • Enhances compliance and reduces process control risks • Mitigates and manages corporate risk • Improves Free Cash Flow

  23. Level 2 Transformation : Quote-To-Cash Process Example Standardize Credit Scoring Decision Management with Technology • Credit Policies - Formulate and establish credit extension policies across multiple customers and operating units • Credit Scoring - Implement a standardized and flexible credit scoring approach which takes into account historical payment patterns, external credit data and input from field sales and credit analysts • Credit Information - Integrate with third party credit data bureaus like D&B, Experian, etc to leverage the latest credit information • Credit Reviews - Establish a credit review process using workflow technology to focus credit analysts on high risk accounts • Portfolio Analysis - Measure and monitor credit exposures across global customer base

  24. Level 2 Transformation : Quote-To-Cash Process Example Standardize Collections Management with Technology • Strategy Driven - Enable global collections to be carried out in a proactive manner based on customer segments, regions, etc… • Intelligent Collections - Direct the collections team to focus on high impact accounts • Automation - Focus the team on high value added activities such as customer management by automating repetitive and manual tasks • Collaboration - Align closely with sales and leverage relationships for faster collections. Connect to enterprise systems within the company and outside with trading partners • Portfolio Management - Embed best practices for collections management across multiple divisions and business units

  25. Level 2 Transformation : Quote-To-Cash Process Example Standardize Billing and Accounts Receivable with Technology • Accuracy - Enable accuracy and timeliness of invoice documentation sent to customers • Timeliness - Ensure that invoicing is properly carried out after order fulfillment processes • Consolidation - Consolidate invoice information sent to customers to reduce redundant business processes • Collaboration - Offer customers the ability to view all supporting documents and transactions for the invoice • Self-Service - Offer customer self service functions to strengthen customer relationships and facilitate speedier dispute resolution and payment

  26. Level 2 Transformation : Quote-To-Cash Process Example Standardize Dispute Resolution and DeductionsManagement with Technology • Predict - Proactively manage customer disputes by identifying at-risk accounts and short payments from customers • Reason Codes - Tailor specific resolution approaches across the enterprise based on the type of dispute or deduction • Resolution Workflows - Leverage a collaborative approach to dispute resolution and deductions management using workflow technology • Escalations - Establish a sense of urgency with clear resolution processes and escalation technology • Root Cause Analysis - Drive business process improvements across the quote-to-cash cycle using root cause analysis and process monitoring

  27. Level 2 Transformation : Quote-To-Cash Process Example Standardize Cash Application with Technology • Consistency - Establish a consistent approach to processing remittances and applying cash • Automation - Facilitate faster processing of high volume payments with reduced need for research and reconciliation • Reconciliation - Reconcile payments with erroneous reference information – invoice numbers, purchase order numbers, etc.. • Corrective - Enable cash application personnel to identify and process deductions earlier in the quote-to-cash process

  28. WorkingCapital Optimization Cash FlowProcess Management Cash Flow Transactions Management From Working Capital Vision Level 3 Transformation : Optimization Optimization using Insight and Analysis • Performance Dash Boards, KPIs, Scorecards that are deployed enterprise-wide • Executive attention from CFO, VP Finance, Controller, AR/AP managers, Director/VP of credit collections, credit managers, sales executive managements teams and field sales • Strategic goal setting and proactive management of performance across the board • Analysis of historical performance and changing business practices to eliminate bottlenecks • What-if analysis for predicting future states and setting strategies for growth

  29. Level 3 Transformation : Optimization • Advantages • Enable fact-based decision making with better integration of information • Better insight into overall operations • Strategic planning and risk management • Executive attention on timely basis • Improved cash forecasting and free cash flow management • Drives optimal levels of performance across the entire enterprise The ideal solution for optimizing global Finance and treasury functions is one that combines business intelligence with collaborative process automation to increase world-wide efficiencies - John Van Decker, Senior VP and Principal Research Fellow

  30. Technologies commonly used • ERP systems (Oracle, SAP, PeopleSoft, JDEdwards, Geac) do not cover working capital process management – 67 percent of respondents of survey were not satisfied • Home grown systems are expensive and time consuming • Adoption of specialized working capital management solutions increasing in trend -56 percent of survey respondents indicated plans to implement specialized solutions • Performance management dash boards rank in top 3 projects from IT

  31. Example of Specialized Working Capital Solution Cash FlowPerformanceManagement + Cash FlowProcessAutomation + Specialized Technology Platform Working CapitalOptimization

  32. Case In Point: Solectron Corporation • $12 Billion Global Electronics Contract Manufacturer • A/R Shared Services spans across 3 continents and across multiple disparate systems • CHALLENGES • No single system for global A/R and cash flow visibility • No automation of country-specific A/R processes • No decision support tools for cash flow management and cash forecasting

  33. Solectron: Mastering Global Cash Flow Emagia Working Capital Management Solution Baan SAP Baan MFGPro Legacy Legacy European Asian/Pacific North America

  34. Solectron: Sustainable Value

  35. Solectron: Sustainable Value “We now have a powerful working capital platform that allows us to make better cash flow decisions, empower our Shared Services teams and maintain focus on maximizing profitability.” - Perry Hayes, Solectron VP & Treasurer

  36. Case Study: Mastering Global Cash Flow • Syngenta - $3 Billion leading global manufacturer of Agricultural Chemicals spun off from Astra Zeneca and Novartis • Over 15,000 U.S. customers including agents, distributors, retailers and end users • Agricultural cycle drives seasonality and unpredictability in Syngenta’s cash forecast • Manual customer-to-cash processes adversely impacted Syngenta’s cash conversion efficiency

  37. Key Success Factor: Cash Flow Visibility • Syngenta deals with multiple types of customer roles who can all sell directly to end consumers • Distributors can also beagents in some cases • Collections may be done by Syngenta or agent or etc… • Customers have multiple levels • Global AR visibility requires aggregating portfolio and exposure across different customer roles at different levels Point ofCollection Distributor Dealer End Consumer Agent Point ofCollection Goods FlowPayment Flow

  38. Improved Cash Forecasting Accuracy Mean AbsolutePercentage Error 5%- 55% before Emagia Emagia Go Live Mean AbsolutePercentage Error 2%- 20% after Emagia

  39. Improved Cash Flow Also attained ‘Well Controlled’ rating for internal SOX audit

  40. Solectron: Sustainable Value “Working Capital Platform has given us the consistency and control needed in our cash flow processes. As a result, we have seen a decrease in DSO, and a dramatic improvement in cash forecasting accuracy.” - Bert Cuiston, Head of Credit and Receivables Management, Syngenta

  41. Selected Customer Success Stories

  42. For more information, please contact Veena Gundavelli President & CEO Emagia Corporation veena.gundavelli@emagia.com 408.492.8811 www.emagia.com

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