accounting frontier series: strategic spend management
TRANSCRIPT
Accounting Frontier Series: Strategic Spend Management© 2020. For information, contact Deloitte China. 2Accounting Frontier Series: Strategic Spend Management© 2020. For information, contact Deloitte China. 2
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Accounting Frontier Series: Strategic Spend Management© 2020. For information, contact Deloitte China. 3Accounting Frontier Series: Strategic Spend Management© 2020. For information, contact Deloitte China. 3
Today’s Speakers
Deloitte SAP Concur Deloitte
Anson Mak
Accounting Operations AssuranceAssociate Director
Victor Hui
Presales SolutionsManager
Christopher Brown
Asia Pacific Controllership Center of Excellence
Director
Accounting Frontier Series: Strategic Spend Management© 2020. For information, contact Deloitte China. 4Accounting Frontier Series: Strategic Spend Management© 2020. For information, contact Deloitte China. 4
Contents
01 Catalysts for Spending Reduction 05 Case Study
02 Barriers to Successful Spend Management 06 How Deloitte Can Help
03 Save-to-Transform 07 Q&A
04 Spend Management Solution
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01Catalysts for Spending Reduction
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The next 12 months are not looking goodThe ongoing pandemic and the increasing geopolitical tension have led many organizations to anticipate a gloomy year ahead:
68%At least another half year to go
68% of companies expect COVID-19 to remain at least for another half a year or more
48%Revenue continues to decline
48% of companies expect decline in revenue over the next 12 months
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This gloomy future is boosting the focus on spending reduction, with more organizations regard spending reduction as one of the top priorities in the next 12 months relative to the pre-COVID-19 levels.
Spending reduction is now a top priority
Organizations undertaking spending
reduction over the next 12 months
Organizations with annual spending
reduction targets exceeding 10%
2019 survey response
70% 70%
2020 survey response
42% 47%
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if history is any indication, most organizations will have difficulties in reducing that much spending and find themselves falling short of their reduction targets.
Yet most organizations are likely to fail
80% 59% 6-8%
Unable to Meet Target
80% of companies failed to meet their reduction target
Fall short by 25% or more
59% of companies fall short of their target by 25% or
more
Average Savings at 6-8%
Traditional initiatives willhave difficulty delivering more than 10% saving
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COVID 19 transforms consumers’ behaviors, forcing consumers to adopt digital at a pace that normally takes a decade to do in a matter of months. These drastic changes impact different industries structurally and are likely permanent.
And COVID-19 is not making this any easier…
70%
Demand for certain services may not recover, such as travel, hospitality, retail, property
rental, etc.
drop in consumer demand
62%
The way how people consume will change: e.g. digital channel, remote work, on-demand
services, etc.
shift in consumer behaviours
65%
Everything going digital comes with a higher risk of cyber security: stable connection, 7X increase in phishing, privacy, etc.
cyber security vulnerabilities
69%
Lockdown exposes current supply chain network’s high concentration risk, which cause various sourcing & distribution issues
supply chain challenges
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02Barriers to Successful Spend Management
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Barrier #1: Inflexible Cost Structure
76%Inflexible Cost
Structure
High Fixed CostsSignificant portion of existing costs comes are fixed in nature, such as
office rentals, Finance function, IT infrastructure, etc.
Lack of ScalabilityOrganizations cannot adjust its structure freely to meet the changes
in demand (e.g. keep adding more people to meet higher demand)
Long Term Impact on Future GrowthAny hard cut on spending / cost structure will have a prolonged
impact on the organizations, potentially hindering future growth
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Barrier #2: Implementation Challenges
71%
Inadequate Executive SponsorshipWithout leader being held accountable and actively involved in the reduction initiatives, reduction initiatives often fail to gain traction.
Lack of Spending Control PoliciesWithout proper spending policies and controls in place, employees
often fail to execute the required spending behaviors.
infeasible Reduction TargetReduction targets are often unrealistic / demotivating, as they are set
top down without rethink of the operating model.
Failure to Monitor ProgressMany businesses fail to set KPIs to track the progress of its reduction
initiatives. This leads to failure in monitoring and adjustments.
Limited Stakeholders Buy-inWithout getting stakeholders’ buy-in, any reduction initiatives will
often fail, as employees will not align their behavior.
Implementation Challenges
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Barrier #3: Lack of an Effective Spend Management System
67%
Disparate Systems & Silo ProcessesVery often different types of spending are managed via different
systems and processes. This make gathering spend data difficulty.
No Visibility on SpendingSignificant time is often spent on gathering and reconciling data from
different sources. This limits visibility over your spending.
Lack of Budgetary & Compliance ControlExisting applications often lack the ability to check the budget available or compliance
requirements during approval. This renders many spending control useless.
Lack of an Effective Spend Management
System
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Barrier #4: Overly Tactical Focus
64%
Lack of strategic imperativeMany businesses cut spending without any strategic rethink of their business model. All cuts come from quick wins (e.g. salary freeze, no
non-essential spending, cut staff benefits, termination, etc.)
Limitation on savingsThese quick wins can generate limited savings (often within 10% of
reduction). Moreover, since business model remains unchanged, the savings are not sustainable.
Hindering Future GrowthTactical cut on spending is often shown to harm staff morale and
productivity. Moreover, businesses are not improved as a result. This may hinder businesses from bounce back and thrive after the pandemic.
Overly Tactical Focus
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03Save-to-Transform
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Save to Transform
So what set those succeed in managing their spending apart from the rest? Instead of relying on tactical short-term moves to reduce spending, those businesses decide to transform their business, such as through automation, that can help the companies achieve sustainable saving and position themselves better to thrive once the virus is contained.
TOP DOWN
THINK BIG START SMALL ACT FAST
1. Appoint a Leader 2. Set up Governance
3. Start with Strategy
4. Deploy Spend Management System
5. Set Realistic Target
6. Engage Stakeholders
7. Pick One or Two Plays
8. Prove it Works
9. Market Your Success
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Top Down
01Appoint a Leader
02Set up Governance
All successful spending reduction programs have in common are a dedicated leader to transform the business and reduce costs.
Characteristics of a good leader:• Executive level (e.g. CFO, COO, etc.)• Understand digital and can map it into the business questions• Hold accountable for the spending reduction target
To drive a successful spending program, the leader should put in place proper governance framework to drive and monitor the different reduction initiatives
Characteristics of a good program governance:• Clear objectives and KPIs• Cross-functional team members• Robust spending policies and procedures to drive desired behaviors• Regular tracking and reporting of progress and KPIs
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To achieve sustainable saving and to thrive in the “Next” Normal in the post COVID era, you need to radically rethink and transform your operating model and adopt digital technology.
Think Big: 03 – Start with Strategy
74%Believe the
next normal is here to stay
Remote WorkRemote work is here to stay. To retain talents, businesses need to put in
place infrastructure to enable distance working, while reduce office space.
Digital ExperiencesTo cater to changing consumer behaviors, businesses need to go digital
(sales channels, marketing, CX, etc.) while reduce physical stores).
Supply Chain ReformTo mitigate the concentration risk, businesses need to reform their supply chain (regional hub, domestic sourcing, diversified vendors)
Change of Product / Service MixWith change in consumption patterns, businesses need to adjust their
product mix (e.g. health oriented, on-demand, larger package, etc.)
Cyber Security ControlTo mitigate the higher cyber security risk, businesses need to put in stronger
cyber security controls (e.g. perimeter security, MFA, training, etc.)
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To win in the “Next” Normal era, many leading organizations have opted for the three technology choices below:
Think Big: 03 – Start with Strategy (Continued)
80% 72% 35%
Cloud• Data processing capability
• Innovation
• Quick deployment
• Real-time accessibility & visibility
• Scalability
• Cost saving (via less manpower and total cost of ownership)
Automation• Elimination of manual work• Improve efficiency & user experience• Non-stop working @ 24/7/365• Error reduction• Cost saving (via less man-hours)
Analytics• Data processing capability
• Generation of sights
• Real-time visibility
• Improvement of decision making
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“Know the enemy and know yourself; in a hundred battles you will never be in peril.” You cannot manage spending effectively without knowing clearly why, what and where you spend and whom you spent on or with. To do so, you need to first put in place an effective spend management system.
Think Big: 04 Deploy Spend Management System
Automated Invoice
/ Receipt CaptureAutomated Matching
& Compliance Check
Real-time
Budget CheckAutomated G/L
Entries
Mobile-enabled
Workflow
Real-time Spending
Analytics
One Source of Truth
for All Spending
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Start Small
Setting realistic spending targets is crucial as unrealistic ones will demotivate your staff members or worse motivate fraudulent behaviors.• Top-down & bottom up approach• Activities and timeline mapping• Goals specified within a timeframe• Regular review and adjustments
05.Set Realistic Target
By engaging stakeholders from design to launch, non only the initiatives will be more realistic and comprehensive but the stakeholders will also be bought in as they are involved in the design.• Identify stakeholders early on• Hold various workshops to engage
stakeholders on every step of the way• Seek their inputs and concerns
06.Engage Stakeholders
The program should be:• Designed to prioritize a batch of near-
term (quick wins), medium-term (6-12 months) and longer-term (12+ months) initiatives
• Pick just one or two quick win initiatives to get started in order to establish proof of concept (Don’t be greedy)
07.Pick One or Two Plays
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Act Fast
Use an agile, iterative piloting approach to move from strategy to delivery as quickly as possible – “fail fast”, fine tune and achieve rapid results
08 Prove it Works
Seek opportunities to share successful experiences with stakeholders – regular knowledge share & promotion
09 Market Your Success
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04Spend Management Solution
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05Case Study
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Case Study: A Fortune Global 100 biopharma company
Strategy:
Start from Finance to Operation Units
Develop a practical global digital strategy touching both the front office and back office—starting from Finance and expanding to R&D
Governance Model
Establish a scalable enterprise governance model.
Roadmap
Develop and execute an ambitious transformation roadmap.
Goal:
Aligned with the overall organizational transformation the company was going through, the key objective of the new cost reduction effort was “save to transform,” further improving margins while maintaining best-in-class leadership. The margin improvement strategy included transformation of the overall operating model, enabled by digital.
300+ RPA automations in-flight
Natural language generation, block chain
Technology used:
Situation:
A Fortune Global 100 biopharma company was a best-in-class leader in many areas—operational efficiency, staffing
efficiency, cost structure and compliance/control performance. However, after a decade of extensive cost reduction
using traditional efficiency levers—and facing continued cost pressures—the company wanted to explore the next
frontier of digital cost solutions.
Robotics and AI/Cognitive
Center of Excellence
Build an enterprise hub (AI/Cognitive center of excellence) to translate business owners’ use cases into prototypes and production-ready solutions
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06How Deloitte Can Help
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Regardless whether you want to digitally transform your finance, enhance spending control or implement spend management system, such as SAP Concur, we can help.
How can Deloitte help?
Use Case Identification
Help you to assess the current state of your processes, identify use cases for digitalization and formulate a deployment plan
Policy & Process Development
Assist you to develop policy and future workflow to ensure consistent usage of the digital tools (e.g. spend control, financial close, etc.)
System Design & Configuration
Support you to establish a design blueprint and configure the digital tools accordingly, aligning with the policy requirements
Roll-out Support
Support you in user testing, setup of roll-out plan to improve adoption, training on future workflow and providing go-live support
How We Can Help Why Deloitte?
• End to end project management across accounting and IT
• Extensive experiences in spending control and deployment of SAP Concur (115+ across APAC)
• Accounting at the heart of the project
• Navigating design decisions to avoid rework
• Maximizing user adoption with training and support
• Time-boxed delivery
• Working with leading technology solutions, such as:
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Anson MakAssociate DirectorEmail: [email protected]: +852 2852 6738
Deloitte is at the forefront of defining, researching and transforming the accounting function today. If you’re ready to move from abstraction to action:
Let’s talk Christopher BrownDirectorEmail: [email protected]: +61 7 3308 7255
Ted HoPartnerEmail: [email protected]: +852 2852 6489
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06Q&A
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