Financials OnDemand; Using Collaboration to Streamline Finance
According to the latest IBM CFO survey, Finance departments spend almost half their time processing transactions. The disturbing news reported in this survey is this number hasn’t changed in 6 years. As you finance professionals know, “transaction processing” is a generic term but lends itself to easier categorization. Perhaps a better way to describe it is the time engaged in manual data entry, document retrieval, gathering or validating data and reconciling numbers in order to complete an accounting process. Anytime an accountant uses a spreadsheet, whether creating a report, reconciling numbers across several systems or using it as a revenue recognition schedule, this is transaction processing—and more importantly, it is time that’s not spent interpreting, analyzing and drawing conclusions that could help the business improve its performance.
The time spent in manual data gathering or entering invoices into a financial management system is proportional to how “manual” the system is. Modern financial management systems use many functions to help automate and streamline an accountant’s work. In my opinion, one of the most powerful system functions is workflow. In a generic sense, workflow is a sequence of steps performed to complete a particular business task. Workflows also model business processes. Finance processes are often described as “record-to-report”, “order-to-cash” and “procure-to-pay”. Let’s take a deeper dive into “procure-to-pay” more commonly referred to as the accounts payable process. When I used to do this for a living, it was a hair-pulling exercise starting soon after I’d receive an invoice from a vendor and then I’d try to match it to a PO (invariably, there wouldn’t be one). Then I’d have to track down the purchaser to determine whether the invoice was legitimate, correct and to what project I needed to allocate the expense (this was a real estate management firm) and finally, have the purchaser sign the invoice as an approval to pay. Then I could enter the invoice into our accounting system and queue it up for the next check run (this was before electronic payments). I often fumed “there must be a better way!”
Example: “Procure-to-Pay” in SAP Financials OnDemand
Well, there is a better way. SAP Financials OnDemand, a cloud-based, integrated financial management system that uses workflows (in addition to other advanced functionality) to automate financial business processes. Within the system, purchasers create a PO (or an employee can initiate the process via self-service procurement), and send it to the supplier. When the goods or services are received, the purchaser or requesting employee can verify receipt through the system’s workflow. At the same time, when the accountant receives the vendor’s invoice, they’ve received the receipt notification in their workflow. If more precise verification (matching) is required, the accountant can ask the receiving department to pull up the PO in the system, verify the quantity received and create a goods receipt to notify the accounting department that the invoice is OK to pay. This is an ideal method because it shifts the matching task to the people who are in the best position to do it and significantly decreases the workload on the accounting staff. Discrepancies in the payment amount can be easily handled by either creating variance thresholds (i.e. if the difference between the PO and the invoice amount is under 2%, the accountant can simply accept the variance and process the payment.). However, in the case of more significant variances, the accountant can use the system’s workflow to request clarification from the purchaser. Once the accountant receives the authorizations she needs, she simply approves the invoice and schedules it for the next payment run.
Audit Trails, Internal Controls and The “Document Flow”
The great news is all of these process steps and verifications are recorded in SAP Financials OnDemand’s document flow view. This not only provides a full visual representation of what steps have been completed, they also a full audit trail showing the sequence of steps, approvals (and by whom) all the way to the journal entries and accounts to which they we’re posted. More importantly, when internal controls are so critical, the whole process can be designed–the steps, approvals and authorizations– in a graphic “business configurator” that business people can use without the help of IT staff. The end result is its more automated, documented and streamlined and document flow makes everyone’s job, including the auditor’s job much easier. Companies using accounting point solutions should consider the benefits of SAP Financials OnDemand to help streamline core business processes. This is one example of how it’s designed to reduce the accounting staff’s transaction processing burden and allows us finance professionals to focus on higher value-added activities to help drive better business performance.
how is this different from today's BKPF and FIPP workflow objects and how many steps are there in the P2P process?
What is BKFP and FIPP? Sorry, I'm just a finance guy!
BKPF is the object for journal entry and FIPP is for the voucher, both trigger the approval workflow.
OK, thanks for the education. Regarding the number of steps in the process, that will be entirely up to your business. It could be as little as "create PO", "match invoice to PO" and "pay". The system is flexible enough to accomodate that. However, if your company requires approvals, such as after "create shopping cart" or "purchase request", that can be accomlished as well. Some companies also require a final approval before the payment is released (even after the invoice is approved to pay). I hope that helps.