HP: Fruitful Finance - Les Mara
Expediting business performance improvement by making intelligent use of a BPO partner's operational expertise, capabilities and assets is a strategy that is fast gaining attention, says Hewlett Packard's head of BPO, Les Mara.
While cost pressures continue to drive business process outsourcing (BPO) decisions, chief financial officers are increasingly seeking improvement in business outcomes and transformative advantages when outsourcing their finance and accounting organisation.
The advantages to be gained by leveraging the operational excellence capability of partners – including better business outcomes and results, process innovation, efficiency, standardisation, improved quality, data privacy, security, continuity, and compliance – can be as important as the traditional outsourcing benefits of lower labour costs and asset transfer.
Accelerating business performance improvement by leveraging a BPO partner's operational expertise, capabilities and assets is a strategy that is gaining attention among organisations that outsource business processes. Business functions such as finance and accounting, traditionally viewed as support functions, are now seen as areas of opportunity. A strategic partner's ability to improve process quality, speed, security, continuity and compliance can deliver significant additional cost savings, reduce risk, and enhance competitive advantage. As such, operational excellence is fast becoming a critical factor when selecting a BPO provider.
'Cost savings, significantly through labour arbitrage, were the driving force for most of the early BPO relationships,' says Bob Cecil, the executive director of global operations and business and financial advisory services for EquaTerra. 'However, with inflation and exchange rates dampening the labour arbitrage benefit, buyers and providers of BPO services are increasingly looking at enhanced operational capability and improved business outcomes as the more sustainable benefits of an outsourcing relationship. It is now common to see these business outcome benefits, such as improved cashflow through working capital management or integrated business intelligence, far exceeding simple operational cost savings.'
Streamlining and automating accounts receivable (AR) processes, for example, can significantly reduce a company's days sales outstanding by removing millions of dollars of debt from the corporate balance sheet, decreasing working capital levels and freeing up cash for investment or debt reduction.
Automating and improving the procure to pay function can maximise days payable outstanding, optimise cash management and increase discounts taken. This leads to an improved cash position, lower cost of goods sold and additional cash freed up for investment and debt reduction.
DEFINING OPERATIONAL EXCELLENCE
Operational excellence is something every business says they want to achieve and every service provider claims to provide. But what is it and what should one look for when evaluating a BPO partner? Because different organisations use different terms and approaches, defining operational excellence can be almost as difficult as achieving it.
At its simplest and most universal, operational excellence can be defined as the ongoing optimisation of processes (and the superior execution of those processes) in order to improve quality and efficiency while reducing risk and cost.
Regardless of terminology, it is becoming clear that making an impact on business performance requires excellence that spans the entire process, including inputs and outputs from the client and the service provider. Thus, to gauge the operational excellence of a potential BPO partner, outsourcing organisations need to look beyond point improvements and the ability to administer specific business functions at a transactional level. A realistic evaluation requires looking at the experience of the service provider, the quality of their process and technology and their commitment to continuous excellence, backed by investment in an ongoing and formal programme.
Important questions to ask when assessing a provider include:
- Can the partner help to benchmark existing operations and identify, quantify, and prioritise areas of improvement?
- Is the focus on constant process improvement or just on steps in the process?
- Are financial controls transparent and robust enough to simplify regulatory compliance?
- What kind of visibility into operations is provided, for informed and timely decision making?
- Does the partner have the infrastructure, global resources and flexibility to support rapid growth, mergers and acquisitions and other business restructuring?
A HOLISTIC APPROACH
Achieving measurable, predictable and sustainable business performance improvements requires a holistic, multi-disciplinary and end-to-end approach to operational excellence – across people, process, and technology – with the ability to respond quickly and effectively to changes over time. When outsourcing critical business processes such as finance and accounting, it is especially important to go beyond the words and evaluate the methodologies, approach, tools and practices used to provide the highest quality, predictability and control. Outsourcing organisations should look for standardised procedures and a formal operational excellence programme that spans the entire BPO lifecycle – from initial benchmarking, assessment and analysis to process design, transition and ongoing improvement that includes:
- Knowledge management and transfer
- Business continuity planning
- Data privacy and security
- Organisational development and training
- Industrial engineering and continuous process improvement
- Business controls
- Process engineering
- Audits – internal and external
Achieving real business performance improvements through a partner's operational excellence requires more than a serial, single-methodology or single-function approach. Look for a holistic framework that integrates methodologies and tools across the entire BPO lifecycle.
For companies outsourcing finance and accounting, as well as other critical business functions, when it comes to ensuring predictable, consistent delivery of a high-quality operation, operational excellence in their BPO partner is a must. This requirement, combined with the opportunity to leverage the investments of a partner to accelerate business transformation, makes careful scrutiny of the operational sophistication, practices, investments and quality of resources of that partner more important than ever.
Optimised, compliant, and resilient business processes that maintain secure and well-protected information assets significantly reduce legal exposure and the possibility of a negative impact to the brand's reputation. They also lead to improvements in cost, customer satisfaction and productivity.