Utilize Process Improvement Methodologies

to Improve Finance and Accounting

Tom Sonde, CPA

Greater Philadelphia Conference

Widener University

Friday, May 18, 2012

Conducting Process Reviews

Introduction

Designing the Future State

What to Look For

Other Keys to Success

Agenda

Utilize Process Improvement Methodologies to Improve Finance and Accounting

Process Improvement Methodologies

Process Improvement

Six Sigma

Business Process Management (BPM)

Enterprise Process Management (EPM)

Lean

Reegineering

Total Quality Management (TQM)

Improvements are can be Achieved Across your

Organization

Accounting

Payroll

Pro

cess

es

Travel & Entertainment

Co

nso

lidat

ion

s

Billing

Credit & Collections

Accounts Payable

FP & A

Gen

eral

Led

ger

Processes

Evidence Process Improvements are Needed

Simple tasks take too long to complete

Too much time is spend validating data

Employees constantly complain

Too much paper is being used

Backlogs exist

There is a significant amount of manual keying and

rekeying of data

Is this Occurring in your Organization?

Evidence Process Improvements are Needed

Information is not easily accessible

Senior management information requests result in

constant fire drills

System workarounds and renegade processes exist

Excessive use of spreadsheets

External databases / data warehouses supplement the

accounting system

Does senior management even realize

how many inefficiencies exist?

Is this Occurring in your Organization?

Conducting Process Reviews

Introduction

Designing the Future State

What to Look For

Other Keys to Success

Agenda

Utilize Process Improvement Methodologies to Improve Finance and Accounting

Process Reviews

The key to resolving process issues is to:

Obtain an Understanding of the Underlying Cause of Process Issues by Conducting Process Reviews

Process Reviews

The key to resolving process issues is to:

Address the end-to-end process.

Obtain an Understanding of the Underlying Cause of Process Issues by Conducting Process Reviews

Addressing the End-to-End Processes is the Key to Success

Salary and

Benefit

Expense

available for

transfer VAC

system

Green Bar Report

printed from

Specials Database

Postage, and

Supply Expense

report sent bi-weekly

The data from these

reports are manually

entered into an

Excel spreadsheet,

Excel Spreadsheets

are turned into a text

file then transferred

into the VAC

Disbursement System VAC System is

updated

MOD Budget

Report used to

prepare MQ

(1)

( 1) Report shows MTD and YTD Expenses, Encumbered-unpaid expenses, $ Free

Balance, and % Free Balance. This report is used to create MQ. (2) Report shows General Funds

Departments, account #, recommended budget, current appropriations, YTD

expenses, and YTD % budget used. Attachment also includes Outside General Funds with all categories plus estimated

revenue, YTD revenue received, and YTD % collected. Report generated by

Controllers office and given to John Murphy (12th Floor room 1243) for

review. The report is reviewed with the CFO by the staff and Controller. (3) Other daily phone bills are sent through

on an AP voucher to be paid (4) Fleet Management supports 3

departments and generates approximately 100-150 work orders each month. (5) This report shows monthly receipts and

expenses by departments. Any request for adjustments are sent via hardcopy to the

Controllers office.

General Fund

Quarterly

Summary Report

(2)

Medicare Expense

from Payroll

Telephone bills are

received from Nynexl,

Nextel, Sprint, Arch

wireless, and Ameritech

(3)

Total for each

department is

entered on Excel

Spreadsheets.

One sheet per

company

Each department

receives an

itemized list of

charges to their

department

Any disputes are

reported to the

Telecommunication

s dept. and a credit

is granted.

Telecommunications - Phone

Expense

Fleet Management - Gas and Maintenance

Expenses Work Orders are

generated as work is

done in Fleet

Management

(4)

At month end,

work orders are

summarized by

department and

entered into Excel

Printed report is

sent to each

department and

Controllers office

One copy is sent to

the department, the

other is used to

record expense/

billing

AP and

Disbursement

transactions

Risk Management - Life, Health, Dental Expenses

Payroll - Salary and Benefits Expenses

Central Supply - Xerox, Postage, and Supplies Expenses

Spreadsheet

is sent to

Controllers

office

Health Enrollment

Database with all

employee health,

life and dental data

Report of all

enrollment is sent

to departments for

update/correction

Changes are input

on Excel

Spreadsheet

which calculates

chargebacks

Departments

return hard copies

to Risk

Management for

changes

John Murphy uses

report to record

expenses and transfer

funds between

departments

Payroll System

Specials

Account

maintains

mileage

Departments

receive blank

report listing

Department

completes mileage

and total

department

reimbursement

Report is returned

by 9th of month to

Payroll

Payroll inputs

mileage, system

calculates

reimbursement.

Payroll - Mileage Expense

Payroll - Medicare Expense

Payroll System

Medicare Expense

adjustments are

posted after

payroll run

Report printed by

department/

account

Department

sends

spreadsheets

to the Controller net

of any

adjustments

RollOver Monthly

Report sent to

departments

(5)

Manual log of copy

requests by

department (+10%

surcharge)

Departments

request supplies

via phone/fax and

they are tracked

via VAC system

Postage machine

tracks postage by

Department

Supply and postage

expenses per

department are entered

into VAC system

Meet with Individual process owners

• Obtain an understanding of how day-to-day activities are accomplished

• Conduct workshops, benchmarking and/or surveys

Follow the data and/or paper trail

• Obtain an understanding of the content and requirements for each piece of data/paper

Remember the 80/20 rule

• Address all processing procedures especially the exceptions

Follow the process from department to department

• Review the process end-to-end both internally and externally

80 / 20 Rule

Data / Paper Understand

Current Processes Multiple

Departments

Review the end-to-end process

Conduct Process Reviews to Obtain an Understanding of the End-to-End Processes

Identify all inputs and outputs

• Examples include: manually keyed data, electronically fed data, reports, A/P checks, invoices, statements, etc

Pay careful attention as to all the steps that go into a process

• Look for the unusual one-off processes

Understand what procedures are accomplished by the system

• More importantly identify manual processes that the system should be handling

Be Observant Non System

Data Inputs / Outputs

System Utilization

Review the end-to-end process

Identify data being stored or analyzed outside the system

• Examples include: spreadsheets, databases, index cards, etc.

Conduct Process Reviews to Obtain an Understanding of the End-to-End Processes

Review existing policies, procedures and user manuals

• Obtain an understanding of what is documented and then compare it to what you have observed

Create current state process maps (if necessary)

• There is no need to create a process map for every process – the focus should be on the future requirements

Develop a future state

• Develop future state process maps that document process steps and requirements

• Document depending on the level of detail required (Visio, PowerPoint)

Develop Process Maps

P Policies and Procedures

Future State

Review the end-to-end process

Document current requirements

• Identify what processes need to be accomplished, what data needs to be generated, etc.

Current Requirements

Conduct Process Reviews to Obtain an Understanding of the End-to-End Processes

Don’t Assume Always Ask Why

End-to-End

Processes

Understand the Need

for all Inputs and

Outputs

Key Steps when Sitting with a Process Owner - Question Every Activity

Always Ask Why

What is the activity trying to accomplish?

Is it is necessary

Does it add value?

Question why

Always ask and then continue to ask

Why a process or procedure is being performed?

Why isn’t the system performing it?

Why an output is needed?

End-to-End

Processes

Key Steps when Sitting with a Process Owner - Question Every Activity

Don’t Assume

Don’t assume anything

Ask “dumb” questions

Politely challenge

Validate what you have been told

Compare it to the data or paper trail and/or documentation

Check with other process owners / departments

Check with other staff performing the same or similar tasks

Key Steps when Sitting with a Process Owner - Question Every Activity

End-to-End

Processes

Understand the Need for All Inputs and Outputs

Review all inputs and outputs

Question what the data is needed for

Determine it’s accuracy

Question what users or other departments do with the data

Ask the user what they would like in the ideal world

Question if the frequency is appropriate

Key Steps when Sitting with a Process Owner - Question Every Activity

End-to-End

Processes

Question Every Activity

Identify the root cause of problems rather than

the symptoms

Question whether the activity is necessary

Question if the frequency is appropriate

Determine if the activity could be

accomplished in another fashion

Always question why a manual process is not

being performed by the system

Key Steps when Sitting with a Process Owner - Question Every Activity

End-to-End

Processes

Conducting Process Reviews

Introduction

Designing the Future State

What to Look For

Other Keys to Success

Agenda

Utilize Process Improvement Methodologies to Improve Finance and Accounting

Self Service

Paper

Integration

Utilize system self-service functionality whenever possible

Take advantage of vendor provided self-service capabilities

Question why every piece of paper in a process is necessary

Wherever possible replace paper with an electronic solution

Fully integrate all systems

Require large volume vendors to provide electronic feeds

Provide electronic feeds to vendors

Improvement Opportunities - What to Look For

Training

Access to Data

Reporting

Obtain a through understanding of the process before developing training

Training should incorporate both process and technology

Training should be developed with the process owners skill sets in mind

Anyone that requires access to data should have the appropriate access

Ideally access should be provided electronically rather then on paper

Access to data should be timely

Reports should be developed with the user in mind

Review how process owners are using their reports

Identify user needs that are not being met by current reports

Reports for routine activities should include all required data on a single report

Improvement Opportunities - What to Look For

User Manuals, Policies &

Procedures

Data Input

Develop user manuals, policies and procedures that cover the entire process

rather then a “How to use the software” solution

Ideally all data should be fed to the system electronically

Manually input data should never be keyed more then once

Eliminate manual forms by requiring staff to complete electronic forms via the web or directly into the system using self-service functionality

Improvement Opportunities - What to Look For

Question Every Activity

Manual forms

Multiple reviews and approvals

Manual tracking of documentation

Labor intensive processes

Excessive handoffs

Duplication of effort

Unnecessary use of paper

Manual file folders

Huge piles of papers on desks

Excessive need for file cabinets

Routine missed deadlines

Non-value added activities

Always Ask Why

Errors / mistakes

Unreasonably long cycle time

Multiple data entry points

Manual keying of data

Duplicate keying of data

Bottlenecks

Unnecessary procedures

Unused data or reports

Shadow processes

Excel spreadsheets

Shadow systems (e.g. data warehouse)

Routine Delays

Potential Clues to Lookout for:

Accounting System Not Delivering

Many system issues are not the result of the software.

Is your Accounting System Working the way it’s Supposed to?

Accounting System Not Delivering

Many system issues are not the result of the software.

They were caused by a flawed implementation.

Is your Accounting System Working the way it’s Supposed to?

Implementing new technology does not guarantee efficiency

Teacher

completes

requisition form or

fills out pre-printed

list for items

needed

School clerk

enters data into

system from

requisition

Principal or Dept.

Head approves

and signs

requisition

After data is

entered,

requisition will be

funneled into the

following

Non site-based budget

purchases goes to an

approver initially

Based on the type

of purchase,

requisition is

routed to one of

the following:(1)

Finance Dept. (2)

Site-based budget purchases

go directly to Finance

Custodial - Plant

Operations

Exceptional

Children Division

Applied

Technology

Career

Development

Library Services

Chief Academic

Officer-Textbooks

Teaching &

Learning Assmt.

Interscholastic

Supplemental

Funds-Budget &

Management (3)Type 1

Purchasing Dept/

Senior buyers

receives

purchases in

"requisition proof"

Senior buyers

review requisition

proof, checks for

errors (4)

Other purchases

are routed to a

buyer - based on

assignment

Buyer receives

buyer's copy

Buyer requests

quotes/bids from

vendors (fax, mail,

or phone) Request

for Quotation form

Requisition proof

is generated from

information

entered into

system

If no errors found

on requisition proof

If errors

are found

Purchase order is

generated from the

requisition proof

the next day

Senior buyers will

correct errors and

another proof is

generated

Purchases orders

printed at

Southside location

and delivered to

Admin Bldg.

Senior buyers

separate POs (5

copies)

Orange copy kept

on file at

purchasing office

White PO copy

routed back to

original buyer

Blue copy sent to

Controllers Office

Brown/yellow copy

sent to school

(brown copy is

receivers report)

Buyer signs and

dates PO; sends

to vendor by mail

or fax

Vendor receives

PO and ships

order to school

Vendor sends

invoice to Finance

Dept.

Type 2

Finance Dept.

matches invoice to

receiver's report

System generates

payment when

both invoice and

receiver's report

are entered into

systemSchool confirms

purchase by

sending receivers

report to Finance

Dept. (5)

Type A

Type B

Purchases from a contract

company or pre-printed list

Purchases not from a contract

company or pre-printed list

regardless of price

Teacher

completes

requisition form or

fills out pre-printed

list for items

needed

School clerk

enters data into

system from

requisition

Principal or Dept.

Head approves

and signs

requisition

After data is

entered,

requisition will be

funneled into the

following

Non site-based budget

purchases goes to an

approver initially

Based on the type

of purchase,

requisition is

routed to one of

the following:(1)

Finance Dept. (2)

Site-based budget purchases

go directly to Finance

Custodial - Plant

Operations

Exceptional

Children Division

Applied

Technology

Career

Development

Library Services

Chief Academic

Officer-Textbooks

Teaching &

Learning Assmt.

Interscholastic

Supplemental

Funds-Budget &

Management (3)Type 1

Purchasing Dept/

Senior buyers

receives

purchases in

"requisition proof"

Senior buyers

review requisition

proof, checks for

errors (4)

Other purchases

are routed to a

buyer - based on

assignment

Buyer receives

buyer's copy

Buyer requests

quotes/bids from

vendors (fax, mail,

or phone) Request

for Quotation form

Requisition proof

is generated from

information

entered into

system

If no errors found

on requisition proof

If errors

are found

Purchase order is

generated from the

requisition proof

the next day

Senior buyers will

correct errors and

another proof is

generated

Purchases orders

printed at

Southside location

and delivered to

Admin Bldg.

Senior buyers

separate POs (5

copies)

Orange copy kept

on file at

purchasing office

White PO copy

routed back to

original buyer

Blue copy sent to

Controllers Office

Brown/yellow copy

sent to school

(brown copy is

receivers report)

Buyer signs and

dates PO; sends

to vendor by mail

or fax

Vendor receives

PO and ships

order to school

Vendor sends

invoice to Finance

Dept.

Type 2

Finance Dept.

matches invoice to

receiver's report

System generates

payment when

both invoice and

receiver's report

are entered into

systemSchool confirms

purchase by

sending receivers

report to Finance

Dept. (5)

Type A

Type B

Purchases from a contract

company or pre-printed list

Purchases not from a contract

company or pre-printed list

regardless of price

Teacher

completes

requisition form or

fills out pre-printed

list for items

needed

School clerk

enters data into

system from

requisition

Principal or Dept.

Head approves

and signs

requisition

After data is

entered,

requisition will be

funneled into the

following

Non site-based budget

purchases goes to an

approver initially

Based on the type

of purchase,

requisition is

routed to one of

the following:(1)

Finance Dept. (2)

Site-based budget purchases

go directly to Finance

Custodial - Plant

Operations

Exceptional

Children Division

Applied

Technology

Career

Development

Library Services

Chief Academic

Officer-Textbooks

Teaching &

Learning Assmt.

Interscholastic

Supplemental

Funds-Budget &

Management (3)Type 1

Purchasing Dept/

Senior buyers

receives

purchases in

"requisition proof"

Senior buyers

review requisition

proof, checks for

errors (4)

Other purchases

are routed to a

buyer - based on

assignment

Buyer receives

buyer's copy

Buyer requests

quotes/bids from

vendors (fax, mail,

or phone) Request

for Quotation form

Requisition proof

is generated from

information

entered into

system

If no errors found

on requisition proof

If errors

are found

Purchase order is

generated from the

requisition proof

the next day

Senior buyers will

correct errors and

another proof is

generated

Purchases orders

printed at

Southside location

and delivered to

Admin Bldg.

Senior buyers

separate POs (5

copies)

Orange copy kept

on file at

purchasing office

White PO copy

routed back to

original buyer

Blue copy sent to

Controllers Office

Brown/yellow copy

sent to school

(brown copy is

receivers report)

Buyer signs and

dates PO; sends

to vendor by mail

or fax

Vendor receives

PO and ships

order to school

Vendor sends

invoice to Finance

Dept.

Type 2

Finance Dept.

matches invoice to

receiver's report

System generates

payment when

both invoice and

receiver's report

are entered into

systemSchool confirms

purchase by

sending receivers

report to Finance

Dept. (5)

Type A

Type B

Purchases from a contract

company or pre-printed list

Purchases not from a contract

company or pre-printed list

regardless of price

Teacher

completes

requisition form or

fills out pre-printed

list for items

needed

School clerk

enters data into

system from

requisition

Principal or Dept.

Head approves

and signs

requisition

After data is

entered,

requisition will be

funneled into the

following

Non site-based budget

purchases goes to an

approver initially

Based on the type

of purchase,

requisition is

routed to one of

the following:(1)

Finance Dept. (2)

Site-based budget purchases

go directly to Finance

Custodial - Plant

Operations

Exceptional

Children Division

Applied

Technology

Career

Development

Library Services

Chief Academic

Officer-Textbooks

Teaching &

Learning Assmt.

Interscholastic

Supplemental

Funds-Budget &

Management (3)Type 1

Purchasing Dept/

Senior buyers

receives

purchases in

"requisition proof"

Senior buyers

review requisition

proof, checks for

errors (4)

Other purchases

are routed to a

buyer - based on

assignment

Buyer receives

buyer's copy

Buyer requests

quotes/bids from

vendors (fax, mail,

or phone) Request

for Quotation form

Requisition proof

is generated from

information

entered into

system

If no errors found

on requisition proof

If errors

are found

Purchase order is

generated from the

requisition proof

the next day

Senior buyers will

correct errors and

another proof is

generated

Purchases orders

printed at

Southside location

and delivered to

Admin Bldg.

Senior buyers

separate POs (5

copies)

Orange copy kept

on file at

purchasing office

White PO copy

routed back to

original buyer

Blue copy sent to

Controllers Office

Brown/yellow copy

sent to school

(brown copy is

receivers report)

Buyer signs and

dates PO; sends

to vendor by mail

or fax

Vendor receives

PO and ships

order to school

Vendor sends

invoice to Finance

Dept.

Type 2

Finance Dept.

matches invoice to

receiver's report

System generates

payment when

both invoice and

receiver's report

are entered into

systemSchool confirms

purchase by

sending receivers

report to Finance

Dept. (5)

Type A

Type B

Purchases from a contract

company or pre-printed list

Purchases not from a contract

company or pre-printed list

regardless of price

New Technology

Inefficient Old Process

New Technology

Inefficient New Process

Why Doesn’t your System Perform as Promised?

Who’s to Blame

Project ImplementationTeam

Process Owners

Training

Consultants

Other

1

2

3

4

5

The Foundation of a Successful System Includes Process and Best Practices

Pro

cess

Tech

no

logy

Be

st P

ract

ice

s

Successful Implementations Address more then Technology

Best Practices

Professional organizations

Conferences

Other companies

Books

Consultants

System Functionality

Best Practices and System Functionality Knowledge

How do you obtain knowledge of Best Practices and

System Functionality?

User manuals

Vendors web site

Books

Consultants

Conducting Process Reviews

Introduction

Designing the Future State

What to Look For

Other Keys to Success

Agenda

Utilize Process Improvement Methodologies to Improve Finance and Accounting

Your Logo

• This is an example of a to-be process map.

• Process maps may be prepared using Visio, PowerPoint

or on paper depending on the level of sophistication required.

Visioning

Whiteboard

Strawman

Developing a Future State

Payroll Process (High Level View) - Pre Software Interface

PS

Pro

ject

Opera

tions-

ISO

pera

tions-

Data

Entr

yP

ayro

llH

RF

ield

Budget

Prepare Supp

Time Reports &

Overtime Reports

Review and

approve

Review and

correct Supp Time

Reports and OT

Reports

Input Supp Time

Reports & OT

Reports

Prepare T&L

Reports

Review and

correct T&L

Reports

Input T&L reports

Run Pay & Time

files into PS

Provide Account

Codes as needed

Prepare Payroll

Notification Forms

to process

adjustments

Create Paysheets Update Paysheets

Produce checks,

advices & DD file

for bank, and print

reports

Run final calc and

confirm

Distribute checks

and advices

Reconcile payroll

Conducting Process Reviews

Introduction

Designing the Future State

What to Look For

Other Keys to Success

Agenda

Utilize Process Improvement Methodologies to Improve Accounting

32

Potential Threat

It is important to Understand why People are Resistant to Change

Fear of the Unknown

Potential Threat

It is important to Understand why People are Resistant to Change

Fear of the Unknown

Potential Threat

Threat of Obsolescence

It is important to Understand why People are Resistant to Change

Fear of the Unknown

Loss of

Kingdom / Status

Potential Threat

Threat of Obsolescence

It is important to Understand why People are Resistant to Change

Fear of the Unknown

Loss of

Kingdom / Status

Potential Threat

Threat of Obsolescence

Fear of Something

New

It is important to Understand why People are Resistant to Change

Fear of the Unknown

Loss of

Kingdom / Status

Potential Threat

Threat of Obsolescence

Fear of Something

New

Change May

Uncover Hidden Issues

It is important to Understand why People are Resistant to Change

Fear of the Unknown

Loss of

Kingdom / Status

Potential Threat

Threat of Obsolescence

Fear of Something

New

Changes May Result

in Additional Workload

Change May

Uncover Hidden Issues

It is important to Understand why People are Resistant to Change

Change

Management

Politics

• Understand the political

landscape

• Use politics to your

advantage

Quick Wins • Fix the easy things first

• Gain traction

Resources

• Make sure the proper resources are on

the team and that there is an adequate

budget with realistic timelines

Communicate

• Communicate positive

results

• Communicate as

appropriate – Remember

the who, what, where,

when and why

• Communicate regularly

Understanding Project Dynamics

Build Alliances

• Win over adversaries

• Make IT part of the team

• Get Finance involved

Executive

Sponsorship

Support Provides funding, appropriate resources and opens doors when necessary

Values Sets the tone, communicates the importance of the project to the organization

Leadership Provides direction, advice and credibility

Stick Provides the appropriate leverage when necessary

Carrot Provides rewards and incentives for success

Executive Sponsorship Plays a Key Role

The Time Required For Improvement Varies

Improvements can be accomplished within a day or can

take months

– Quick hits

– Process adjustments / realignment

– Significant changes

Implement quick wins to gain credibility and traction.

Improvements are Easier to Address then Many Believe

You’ll be Amazed at What You Find!

I Challenge You to Try This!!

Set aside five to ten hours over the course of a week or two

and see what you can uncover!

Free “How to”

Helpful Hints for Improving the

Productivity of Accounting

Tom Sonde, Principal

(973) 722-9304

tsonde@silverroad.net

SilverRoad.net

Thank you for

your attention!

Any Questions?

Tom Sonde Biography

Tom Sonde

Tom is a principal with Silver Road Solutions, a management consulting firm specializing in helping accounting & finance organizations be more productive. He began performing process improvement work while at The Dun & Bradstreet Corporation. He subsequently worked at KPMG Consulting and was VP Global Business Transformation at Misys where he redesigned their global accounting and finance processes during an SAP implementation.

Tom has extensive experience in designing and implementing process improvement initiatives and has published several articles on this topic. Including one in the December issue of the Journal of Accountancy.

For additional information lease visit silverroad.net

Tom Sonde, Principal

SilverRoad Solutions

1362 Tamarack Road

Manasquan, NJ 08736

(973) 722-9304

tsonde@silverroad.net

Silverroad.net

Copyright © 2012 SilverRoad Solutions.

About Us

SilverRoad Solutions is an innovative management consulting firm specializing in,

Accounting System Optimization, Expense Reduction, Process Improvement and Business

Process Management services. We assist organizations in successfully implementing

transformational change.

To learn more about how we can lower your costs while improving the productivity of your

organization please contact us at info@silverroad.net or by calling (973) 722-9304.

Copyright © 2012 SilverRoad Solutions.

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