FINANCE (FEI)

download FINANCE (FEI)

of 42

  • date post

    14-Jan-2016
  • Category

    Documents

  • view

    224
  • download

    0

Embed Size (px)

description

Transforming the Enterprise to Drive Sustainable Value, Working Capital – A Key Competitive AdvantageStructural Complexity,Fragmented Information,Fragmented Information

Transcript of FINANCE (FEI)

PowerPoint PresentationOPTIMIZE WORKING CAPITAL
Transforming Financial Back-office
Veena Gundavelli
President & CEO
Emagia Corporation
OPTIMIZE WORKING CAPITAL
Emagia – Introduction
Leading Provider of Working Capital Management Software Solutions to Global 2000 companies
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
Emagia Customers Include:
Unlocked over $10.3 Billion
in Bottom Line Savings
in Receivables
Global Users
Over 30 Different Currencies
Emagia has world class customers spanning the Fortune 2000. A representation of our customers is shown here. We cater to many different industries including:
Manufacturing
Chemicals
Service Providers
All of our customers have seen rapid and quantifiable ROI after using our solutions.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
Transformation of Financial Back Office: 3 Step Approach
Case Studies: Highly Effective Finance Organizations
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
OPTIMIZE WORKING CAPITAL
OPTIMIZE WORKING CAPITAL
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
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
Working Capital Management focus right from Board and C-level executives
Impact of Better Working Capital Management: Case Study
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
Increased cash by equivalent of four month of sales
Reduced bad debt expense by millions of dollars
Increased stock price dramatically
Source: Parson Consulting
OPTIMIZE WORKING CAPITAL
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.”
Magazine
Forecasting Can Be A “Hidden Reservoir” To Drive Financial Excellence
Source: McKinsey & Co. Study
$162 Bn Opportunity to
Drive Cash Flow Improvements
OPTIMIZE WORKING CAPITAL
Accelerate Cash Inflows
Capital Management and Cash Conversion Cycles
Payables
Receivables
OPTIMIZE WORKING CAPITAL
Working Capital Process
Disconnected A/R Systems and Processes Ineffective Credit Risk Extension Slow Customer-to-Cash Cycle Manual Processes Unattended Disputes
Higher DSO Increased Bad Debt Expense Slower Quote-to-Cash Cycle Higher Operational Expenses Higher Revenue Risk
Accounts Payable
Sub-optimal DPO Increased Administrative Expenses Lost Discount Savings
Cash Flow Forecasting
Inaccurate Short-term Forecasts Sub-optimal Investment Strategies Reduced Efficiencies Lowered Returns from Cash Management
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
Cash Flow Transactions Management
OPTIMIZE WORKING CAPITAL
Managing
Complexity
OPTIMIZE WORKING CAPITAL
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
Cash Flow Transactions Management
From Working Capital Vision
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
Advantages
Faster access to information for decision making
Working Capital
Legacy
Systems
BaaN
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
Cash Flow Transactions Management
From Working Capital Vision
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
Advantages
Enhances compliance and reduces process control risks
Mitigates and manages corporate risk
Improves Free Cash Flow
Cash Flow Transactions Management
From Working Capital Vision
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
Standardize Dispute Resolution and Deductions
Management 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
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
Cash Flow Transactions Management
From Working Capital Vision
In order to better manage cash flow and optimize working capital, SLR looked at three stages to the solution.
First, it was important to look at the accelerating the cash inflow side. SLR decided to start with this because it would bring the highest positive impact to the business in a very short period of time. By streamlining the invoice to cash cycle, SLR was able to reduce DSO, reduce bad debt writeoffs, reduce revenue leakages and accelerate cash onto the balance sheet
The second stage would be to strategically regulate the cash outflows. SLR would carefully manage DPO and float and thereby minimize cash consumption.
Lastly, the final stage would be to tie the inflow and outflow ends together to improve liquidity and optimize working capital.
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
Level 3 Transformation : Optimization
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
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
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
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
OPTIMIZE WORKING CAPITAL
$12 Billion Global Electronics Contract Manufacturer
A/R Shared Services spans across 3 continents and across multiple
disparate systems
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
OPTIMIZE WORKING CAPITAL
Solectron: Mastering Global Cash Flow
As part of the implementation, SLR partnered with the Emagia team to assess how to rollout the Emagia solution.
Integrated Financial Back Office Across 30 Countries
& 3 Continents
Addressed multi-currency, multi-language and
Global visibility drove improved cash forecasting accuracy
After assessment, Americas sites were chosen for the initial deployment
This was because they had largest AR balances and would benefit from the rapid deployment
Initial phase went smoothly allowing for repeatability at later phases around the world
Shared Services for Americas was deployed at same time
Percent AR over terms for Americas dropped from 15% to 2% of total balance after the Emagia implementation
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
Solectron: Sustainable Value
Interest Expense Savings from Improved Cash Flow
Acceleration of collections Reduction of DSO by 15 days and compressed Cash-to-Cash cycle Improved cash forecasting accuracy
$14 Million
Direct Cost Reductions
Consolidation of direct costs Wider support with fewer resources Reduce SG&A and overhead costs
$1 Million
Common Business Processes & Shared Services Enabler
Streamline invoice-to-cash System used by collectors at over 45 sites on three continents
Estimated $20 Million
The actual ROI was composed of three different components.
First, the hard dollar savings were derived from Interest Expense savings from improved Cash Flow. This was roughly $14 million dollars of savings to the bottom line due to acceleration of collections.
Second, with the consolidation of direct costs and reduction of SG&A, there was a direct cost reduction of $1 million
Lastly, there were estimated soft savings of over $20 million due to elimination of redundant processes, automation of cash flow functions and better decision making based on access to real time cash flow information
EMAGIA CORPORATION 2005 – PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITAL
“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…