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Australian Finance Group – A Cloud ERP Implementation Case Study Uma  Pachipala,  Director  UFUSION  Pty  Ltd    

 

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UMA PACHIPALA

o  18  years  in  IT  and  in  Oracle  Applica3ons.  o  B.Sc.    from  the  Osmania  University  in  India  o  2  successful  Oracle  ERP  Cloud  implementa3ons  o  A  strong  advocate  for  improving  processes  through  innova3on  and  deriving  insights  

from  business  data.  o  Uma  lives  in  Perth  (Australia)  with  his  wife  and  one  son,  and  siJng  back  and  watching  

Bollywood  movies.  

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WHO IS AFG?

Australian  Finance  Group  Ltd  (AFG)  is  Australia’s  largest  mortgage  broker,  and  one  of  the  country’s  leading  financial  services  companies.    With  more  than  2,000  members  na3onally,  AFG  processes  more  than  $4  billion  of  mortgage  finance  every  month,  accoun3ng  for  11.4%  of  the  total  Australian  mortgage  market.  

AFG  was  established  in  1994  as  an  aggregator,  a  company  that  provides  mortgage  brokers  with  access  to  products,  plaWorms,  business  tools  and  support  and  listed  to  the  ASX  in  May  2015.  

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WHO IS AFG?

THE  IMPORTANCE  OF  TECHNOLOGY  o  Conduc3ng  sales  across  2300  brokers,  and  in  the  2014  calendar  year  

AFG  accounted  for  around  one  in  every  twelve  mortgages  in  Australia  –  this  makes  us  reliant  on  technology.  

o  We  also  pay  around  600,000  commission  payments  per  month  to  8,000  en33es.  

o  Not  just  a  typical  use  of  the  Finance  system  we  also  need  it  to  process  the  commission,  people  like  being  paid  on  3me,  in  fact  our  reputa3on  is  made  on  this.  

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AFG Core Applications

o  Siebel  CRM,  Siebel  ICM  and  E-­‐Business  Suit  and  integra3on  with  brokers  and  financial  ins3tu3ons  

o  AFG  defined  a  strategy  to  implement  a  new  technology  plaWorm  for  growing  the  business  

o  Applica3ons  implemented  in  2002  o  Enabled  AFG  to  achieve  10x  growth  in  their  residen3al  mortgage  

aggrega3on  business  o  Enabled  AFG  to  grow  their  business  with  new  products  and  services  o  Siebel  ICM  and  EBS  -­‐  business  cri3cal  applica3ons  o  Missing  broker  commission  payments  results  significant  reputa3on  

damage  

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EBS Overview

o  GL,  AP,  AR,  CM,  FA  o  3  func3ons  of  EBS  -­‐  commission  payments,  revenue  genera3on  from  

broker  fees  and  corporate  finance  o  AFG  effec3vely  has  two  finance  func3ons  o  Finance  Department  -­‐  responsible  for  corporate  finance  and  

accoun3ng  o  Commissions  Department  -­‐  responsible  for  broker  commission  

payments  and  broker  fees  o  EBS  11i  had  reached  the  end  of  its  supported  life  -­‐  a  high  business  risk  

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The Business Problem

o  Significant  business  growth  using  a  system  designed  for  a  single  legal  en3ty  a  decade  ago  resulted  in:  

o  Configura3on  of  financial  management  func3ons  not  mee3ng  current  business  requirements  for  more  than  25  legal  en33es  and  mul3ple  lines  of  business  

o  Different  types  of  legal  en33es  -­‐  Public  Listed,  Private  Limited,  Trust  and  Trust  Management  

o  Commission  payment  processing  had  increased  to  an  unacceptable  level  -­‐  assessed  as  a  high  business  risk  at  the  execu3ve  level  

o  Duplicated  master  data  resul3ng  from  poor  process  control  o  Increasing  number  of  inefficient  off-­‐system  processes  o  Financial  management  and  statutory  repor3ng  performed  off-­‐system  using  data  extracted  

from  EBS  -­‐  not  suitable  for  a  company  that  had  recently  listed  on  the  ASX  o  Limited  insight  into  strategic  and  opera3onal  performance  o  Inability  to  support  ad-­‐hoc  informa3on  requests  o  Siloed  and  replicated  effort  across  business  processes  o  Limited  automa3on  of  tasks  

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Why Oracle ERP Cloud

o  AFG  decided  in  May  2014  to  implement  Oracle  ERP  Cloud  o  This  decision  was  consistent  with  AFG’s  technology  strategy  of  moving  

business  applica3ons  to  the  cloud  o  Reasons  for  selec3ng  Oracle  ERP  Cloud  included:  o  AFG  experience  with  Oracle  applica3ons  -­‐  easier  migra3on  and  less  

change  management  o  Easy  license  migra3on  and  shelving  o  Enterprise-­‐grade  robustness  and  support  o  No  legacy  support  issues  and  quicker  access  to  new  func3onality  o  Func3onally  rich  -­‐  zero  custom  func3ons  needed  

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Why Oracle ERP Cloud

o  Purpose  built  integra3on  with  Excel  o  Strong  analy3cal  capabili3es  o  Integrated  documents,  social  and  analy3cs  o  Modern  user  experience  -­‐  UI,  Workflows  for  easier  data  entry  o  Reduced  risk  -­‐  embedded  disaster  recovery  and  security  o  Remove  database  administra3on  du3es  o  Remove  hardware  costs  to  support  the  applica3on  o  Realign  resource  3me  and  budget  to  innova3on  

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Project Initiation

o  Project  commenced  in  August  2014  with  Oracle  ERP  Cloud  Release  9  o  Leveraged  project  ac3vity  for  migra3ng  to  EBS  R12  o  Project  scope  covered  the  implementa3on  of  the  General  Ledger,  

Accounts  Payable,  Accounts  Receivable,  Fixed  Assets,  Cash  Management,  Tax  and  Inter-­‐company  modules  

o  AFG  varied  the  project  scope  in  February  2015  to  include  an  upgrade  to  Oracle  ERP  Cloud  Release  10  

o  A  lower  risk  op3on  compared  to  upgrading  to  Release  10  aier  implementa3on,  and  enabled  upgrade  tes3ng  to  be  performed  as  part  of  planned  project  tes3ng  ac3vity  

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Project Scope - Finance Department

o  The  project  scope  for  the  Finance  Department  was  to  rebuild  the  current  solu3on  with:  

o  Redesign  the  enterprise  structures  to  enable  internal  and  external  control  and  repor3ng  -­‐  new  configura3on  for  all  legal  en33es  in  AFG’s  business  

o  Redesign  the  tax  configura3on  to  enable  GST  repor3ng  from  the  tax  repository  

o  Restructure  the  Chart  of  Accounts  -­‐  restructure  the  GL  account  code  to  realise  the  full  benefits  of  FRS  

o  Redesign  the  current  solu3on  for  AP,  AR  and,  FA  business  processes  o  New  configura3on  to  move  accoun3ng  func3ons  from  Siebel  CRM  and  

integra3on  func3ons  to  Oracle  ERP  Cloud  o  Enhance  the  func3onal  configura3on  to  drive  process  improvement  

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Project Scope - Commissions Department

o  Build  new  end-­‐to-­‐end  solu3ons  for:  o  Broker  commission  payments  -­‐  a  business  impera3ve  to  manage  risk  o  Charging  broker  fees  -­‐  direct  debit  broker  bank  accounts  

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Approach

o  Configuring  a  new  system  is  the  only  op3on  for  implemen3ng  Oracle  ERP  Cloud  -­‐  there  is  no  op3on  to  upgrade  from  Oracle  E-­‐Business  Suite  

o  Core  project  team  of  three  people,  a  func3onal  consultant  with  extensive  E-­‐Business  Suite  exper3se,  a  developer  with  comprehensive  business  knowledge  of  the  commissions  system  and  a  project  manager  who  also  performed  the  role  of  business  analyst  

o  Core  project  team  was  complemented  by  experts  in  Oracle  FRS  and  Business  Intelligence  repor3ng,  AFG  developers  who  built  new  integra3on  func3ons  and  people  from  the  business  who  performed  tes3ng  

o  New  configura3on  and  processes  were  implemented  in  the  test  instance,  and  aier  ini3al  tes3ng  migrated  into  the  produc3on  instance  

o  Test  instance  was  from  the  produc3on  instance  for  each  round  of  tes3ng,  with  change  control  managing  changes  to  the  produc3on  instance  configura3on  

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Data Conversion - General Leger

o  FBDI  used  for  migra3ng  posted  journals  o  FBDI  used  for  migra3ng  budget  data  to  FRS  o  AFG  migrated  14  years  of  GL  and  budget  history  to  Oracle  ERP  Cloud  o  Reason  -­‐  provide  trend  informa3on  for  financial  analysis  from  FRS  o  Extracted  posted  journal  history  from  EBS  and  summarised  by  journal  and  account  code  

to  reduce  transac3on  volume  o  Translated  account  codes  to  the  new  legal  en3ty  and  account  code  structure  o  To  manage  the  risk  of  migra3ng  a  large  volume  of  journal  history,  a  migra3on  ledger  

was  created  in  Oracle  ERP  Cloud  o  Journals  were  first  posted  to  the  migra3on  ledger  and  reconciled  by  journal  and  

account  balance  with  EBS  o  Journals  migrated  from  the  migra3on  ledger  to  the  primary  ledger  and  reconciled  

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Data Conversion – Accounts Payables

o  FBDI  used  for  migra3ng  Accounts  Payable  data  o  Migrated  current  supplier  master  data  to  Oracle  ERP  Cloud  o  Required  a  significant  data  clean  up  to  extract  master  data  for  current  suppliers,  and  to  renumber  suppliers  

and  merge  duplicate  supplier  records  to  resolve  the  error  caused  by  supplier  records  with  a  duplicate  ABN  o  Migrated  open  invoices  due  for  payment  to  Oracle  ERP  Cloud  o  Linked  invoices  to  the  new  supplier  numbers  o  Translated  the  GL  account  code  on  invoice  lines  o  Translated  tax  codes  on  commission  invoice  lines  o  Recalculated  tax  on  commission  invoice  lines  -­‐  resulted  in  a  small  rounding  error  o  A  large  number  of  open  commission  invoices  in  EBS  had  a  payment  status  of  hold  o  Did  not  migrate  these  invoices  as  the  volume  of  data  could  not  be  processed  within  the  3me  scheduled  for  

rollout  o  Migrated  AP  sub  ledger  journals  for  these  invoices  to  enable  the  AP  control  accounts  in  the  Oracle  ERP  

Cloud  GL  to  reconcile  with  E‑Business  Suite  o  Approach  enabled  these  invoices  to  be  paid  or  cancelled  subsequent  to  rollout  aier  deciding  on  their  

payment  status  

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Data Conversion – Accounts Receivable

o  FBDI  used  for  migra3ng  Accounts  Receivable  data  o  Migrated  current  customer  master  data  o  Required  a  significant  data  clean  up  to  extract  master  data  for  current  customers  o  Migrated  open  invoices  o  Translated  the  GL  account  code  on  invoice  lines  

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Data Conversion – Fixed Assets

o  ADFDI  used  for  migra3ng  Fixed  Assets  data  o  Migrated  fixed  assets  for  three  books  -­‐  the  Corporate  book,  the  Tax  book  and  the  

Prepayment  book  o  Translated  deprecia3on  rules  and  GL  account  codes  on  fixed  assets  migrated  for  all  

three  books  

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Integration

o  A  web  service  interface  for  loading  invoices  into  the  AR  module  for  commission  lenders  paid  to  AFG  

o  A  web  service  interface  for  loading  invoices  into  the  AP  module  for  broker  commission  payments  

o  A  web  service  interface  for  loading  journals  into  the  GL  for  recognising  commission  income  

o  A  web  service  interface  for  loading  tax  documents  into  Oracle’s  cloud  document  management  system  

o  Three  web  service  interfaces  for  loading  invoices  into  the  AR  module  for  charging  broker  fees  

o  A  File  Based  Data  Interface  (FBDI)  for  loading  budgets  created  in  Hyperion  into  FRS  o  A  func3on  for  extrac3ng  actual  income  and  expenditure  for  loading  into  Hyperion  

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Rollout

o  Rollout  strategy  based  on  cutover  to  Oracle  ERP  Cloud  aier  month-­‐end  closing  for  June  2015in  EBS  to  coincide  with  the  financial  year-­‐end  

o  Preferred  approach  for  managing  the  impact  of  the  restructured  GL  account  code  on  the  produc3on  of  year-­‐end  financial  accounts  -­‐  produced  from  EBS  

o  Followed  a  staged  rollout  due  to  the  volume  of  data  migrated  from  EBS  •  Dec  2014  -­‐  migrated  GL  history  data  for  all  financial  years  up  to  FY  14  •  March  2015  -­‐  migrated  the  first  6  months  of  FY  15  GL  data  •  June  2015  -­‐  migrated  AP  and  AR  master  data  •  Aier  June  month-­‐end  closing  in  EBS  -­‐  migrated  open  AP  and  AR  invoices,  AP  sub  ledger  journals  for  

open  commission  invoices  with  a  payment  status  of  hold  and  the  second  six  months  of  FY  15  GL  data  •  First  week  of  July  -­‐  cutover  tes3ng,  which  consisted  of  produc3on  processing  for  June  trail  commission  

payments  and  July  week  1  up-­‐front  commission  payments  in  Oracle  ERP  Cloud  •  Commission  payments  reconciled  with  payments  processed  in  EBS  test  system  •  Post  cutover  to  ERP  Cloud  -­‐  migrated  fixed  assets  and  budget  history  to  produc3on  

o  Journals  posted  in  EBS  for  FY  15  year-­‐end  processing  also  posted  to  period  13  in  Oracle  ERP  Cloud  o  Ensured  year-­‐end  balances  reconciled  between  the  two  systems  o  Managed  risk  of  corrup3ng  migrated  and  reconciled  GL  data  

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Benefits - Finance Department

o  The  new  configura3on  implemented  in  Oracle  ERP  Cloud  provided  AFG  with  a  plaWorm  for  improving  business  processes:  –  Legal  en3ty  structure  -­‐  mul3ple  legal  en33es,  single  ledger  design  –  Tax  configura3on  -­‐  drives  new  func3ons  for  tax  repor3ng  –  Chart  of  account  restructure  -­‐  realise  full  benefits  of  FRS  –  Inter-­‐company  Accoun3ng  –  Fixed  assets  -­‐  rebuilt  deprecia3on  rules  to  meet  audit  requirements  –  Cash  management  –  implemented  new  configura3on  from  the  ground-­‐up  –  AP  and  AR  control  account  reconcilia3on  –  Financial  repor3ng  using  FRS  

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Benefits - Commissions Department

o  The  new  end-­‐to-­‐end  solu3on  for  broker  commission  payments:  o  Realised  a  significant  reduc3on  in  payment  risk  through  improved  processing  efficiency  o  Delivered  improved  commission  payment  informa3on  to  brokers  o  Reduced  compliance  risk  by  storing  a  copy  of  commission  tax  invoices  on  Oracle’s  cloud  document  

management  system  o  The  new  end-­‐to-­‐end  solu3on  for  charging  broker  fees:  o  Improved  process  efficiency  by  crea3ng  invoices  through  an  integra3on  func3on  o  Provided  brokers  with  a  single  invoice  for  all  fees  they  paid  o  The  significant  clean-­‐up  of  Supplier  master  data  provided  a  basis  for  process  change  and  related  

organisa3onal  change  to:  o  Improve  the  accuracy  of  commission  payments  with  a  corresponding  reduc3on  in  adjustment  payments  o  Manage  the  integrity  of  master  data  maintained  in  the  system  o  Separate  responsibility  for  maintaining  master  data  from  the  responsibility  for  processing  broker  

commission  payments  and  charging  broker  fees  o  Moved  role  and  responsibility  for  broker  commission  payments  from  the  Commissions  Department  to  the  

Finance  Department  

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Benefits - Technology

o  Redeveloped  custom  func3ons  in  EBS  using  standard  configura3on  and  BI  reports  in  Oracle  ERP  Cloud  

o  As  a  consequence,  AFG’s  financial  system  is  easier  for  AFG  staff  to  maintain  and  enhance,  requires  less  tes3ng  effort  for  the  regular  patching  and  upgrade  processes,  and  is  fully  supported  by  Oracle  

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Key Lessons o  Cri3cal  to  configure  the  core  func3ons  to  reflect  accurately  the  organisa3on’s  business  model:  

–  Legal  en33es,  ledger  structure  and  intercompany  accoun3ng  rules  -­‐  drives  statutory  repor3ng  o  Chart  of  accounts  -­‐  drives  financial  management  repor3ng  o  Tax  rules  -­‐  drives  tax  repor3ng  o  Business  units  -­‐  determines  default  accoun3ng  rules  and  links  to  the  security  model  o  Configure  standard  func3ons  to  build  a  solu3on  -­‐  product  customisa3ons  are  not  allowed:  

–  Change  business  processes  to  use  standard  system  func3ons  o  Poten3ally  changes  organisa3onal  roles  and  responsibili3es  o  Requires  a  deep  understanding  of  Oracle  ERP  Cloud  func3ons,  and  an  innova3ve  approach  to  building  business  processes  supported  by  a  strong  

change  culture  o  Reflect  security  architecture  in  the  process  design  o  Project  approach  for  implemen3ng  Oracle  ERP  Cloud  should  not  be  based  on  a  top-­‐down  design  and  build  approach  as  it  may  not  be  feasible  to  

configure  the  system  around  current  business  processes  o  Business  process  and  related  organisa3onal  roles  and  responsibili3es  may  need  to  change  to  use  standard  system  func3ons  o  Level  of  benefits  realised  from  implemen3ng  Oracle  ERP  Cloud  depends  on  the  business  mo3va3on  to  adopt  business  prac3ces  inherent  in  standard  

configura3on  o  Data  migra3on  strategy  is  an  important  factor  in  defining  project  scope  o  Structure  the  project  approach  and  work  plan  on  the  implementa3on  project  incorporated  in  Oracle  ERP  Cloud  o  Align  project  ac3vity  with  the  patching  and  backup  processes  performed  by  Oracle  cloud  opera3ons  o  Implemen3ng  Oracle  ERP  Cloud  fundamentally  changes  the  IT  support  model  with  major  upgrade  projects  that  require  large  CAPEX  budgets  being  

replaced  by  ongoing  tes3ng  of  the  monthly  patches  and  the  regular  release  upgrades