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IR4.0 adoption for SME Finance and business processes: what can be learned from GBS

Updated: Mar 12, 2022

(Published on SME Malaysia on February 16 2019)

One of the best question that had been thrown to me whilst speaking on Finance transformation was this: “On the business benefit and efficient way of working which you have accentuated- how can it be effectively applied to SME organisations?” A great question but a persistent challenge it is.

The first step has to be awareness, across all levels within the organization. It should be understood by the business owner, management team and operational team in terms of WHY is Finance transformation necessary within the organization. This understanding is the core of an effective change management within an organization.

The true value of Finance Transformation Imagine this scenario: A car dealer sells 3 brands of car and has 3 different front end sales system, either being dictated by the principal or by a convenient choice at the point of implementation. Car sales and service charges are not integrated with the financial system. There is a need to download data from the front end sales system and upload to the financial system on a daily basis. This task may however not be done on a timely basis if the single finance staff is either away or need to attend to other priorities; e.g. urgent payments.

As a result, it is rather common for the management team to have a mental picture of their daily, weekly and monthly sales and profitability. Physical reports may only be available 3 months after it is due, often exacerbated by the necessity to manually find and input the relevant purchase invoices and to record the salaries, which is sourced from another system or excel file.

And now imagine this: The car dealer evaluated a front end sales system and decide on one single platform. This is being done in stages over 2 years, with careful planning and step by step implementation. A “pipe” is built to connect the front end sales system to a ERP (Enterprise Resource Planning) which will house the sourcing, purchasing, supply chain, Human Resource, expense claim and accounting module. Information flow is seamless and happens in the background by “software robots”. Staff is being trained on this new ERP system, with a “super user” being reskilled. There is a direct communication line to the ERP vendor for re-training and issues resolution. With the “freed time”, finance staff began to generate on-time monthly financials and could even try out forecasting. Time is being spent to analyse differences between budget spend and actual spend with overspending being investigated. The resulting benefits are cost savings, a more informed management team, enabled by timely financial report and analysis. This is a significant step up compared to before.

The same concept is what Fortune 500 organisations have executed; except they have started much earlier; over 2-3 decades ago. With an integrated ERP system, productivity can be enhanced by up to 30-50%. Staff now spend their time managing the system, resolving exceptions and do deeper analysis which help to identify profitability of different product line, ways to improve cash flow through better customer management and potential cost saving through understanding spend patterns of the organization.

The key benefit lies more in opportunity to upskill Finance talent by allowing them the time to focus on value added analysis which will support business growth or productivity drive. This in turn will generate far greater benefit (e.g. in the form of increased sales) compared to effort saved from the conversion of manual to automated platform.

Learning from GBS and Global FSS leaders Finance transformation is what Global Business Services organisations of Fortune 500 companies have achieved by leading these initiatives. And as many as hundreds of them are being based in Malaysia, silently humming and pushing this agenda of transformation to achieve efficiency and effectiveness and driving value for the rest of their subsidiaries around the world.

It will be beneficial for the SME to continuously learn from the leaders of GBS organisations who have successfully steered their organisations through this transformation.

Be it MNCs or SMEs, the concept and type of benefits are the same. The difference lies in the scale and degree of complexity in the implementation. And having the right talent to help push through the required transformation agenda.

The starting point

However, before we get too excited with the promise of robotics and artificial intelligence, it is important to get the house in order. The fundamentals and foundation has to be put in place.

Business owners and management team should be asking themselves: Is payment made on time to vendors? Has cash flow been well managed, billing to customers made on time and receivables within the 30 days overdue? Are monthly financial reports available by the 5th working day?

If the answer is no, the first step is to review the existing process for these activities and identify areas for improvement. It will be useful to do a benchmarking exercise and compare to similar organisations within the same industry to understand the gap vs industry practices. Processes need to streamlined, enhanced or redesigned with efficiency, effectiveness and governance in mind. With the agreed processes, the features of IR4.0 can then be layered underneath the processes as an enabler.

The key aspect to remember is that business requirements ( e.g. growth, productivity) drive the relevant processes within an organisation, and technology will then come in as a critical enabler to make this happen. It should not be the other way round: where business processes are flexed to accommodate a particular process as set by solution provider. At least not for critical business processes.

The true understanding of this and a successful implementation will transform an organization by making it more agile to in responding to the world’s competitive landscape.

Join us in a robust discussion about RPA at the upcoming AGOS Finance Summit 2019 to find out!

Date : 9 & 10 April 2019

Venue: Connexion @ Vertical, Bangsar South, Kuala Lumpur, Malaysia

(An event brought to you by AGOS Asia)


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