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Up Close Riddim Mix

Leveraging Your Outsourcing Advantage in General Ledger Processing

General ledger excellence in an outsourced arrangement is challenging but achievable. Why?

• The hand-offs between the client and provider are many and can be complex.
• The provider is “once-removed” from the day-to-day local business issues and environment/culture.
• Heterogeneous processing–the provider has many different accounting issues for many different customers.
• Resources are leaner. Studies indicate that the providers’ full-time equivalents (FTE) process 30 percent more general ledger entries and reconciliations than in-house general ledger groups.
• Relationships with the end-customer are typically newer and attaining a working trust level takes longer.

Clients can take steps, however, to mitigate the risks associated with the list above. However, we would suggest, at a minimum, the following four steps toward general ledger excellence in outsourcing:

1. Work Plan Each Month, Every Month: All good GL managers have a close checklist. Similarly, all good finance and accounting providers have them as well. The reality is that pre-close, close and post-close takes two weeks in a fairly well-run outsourcing GL shop. That leaves two weeks to get other work done. Most GL shops we have worked with use that window to breathe a sigh of relief, fix prior-month entries and gear up for the new monthly close. Instead, take four hours after every monthly close to pre-plan the new month with your provider. Leverage those 14 days to wisely allocate the scarce resource of time, with a daily plan mapped to each deliverable or objective.
2. Have the Provider Improve One Thing Every Month: All providers’ GL operations have room for improvement. Pick one thing every month and work with them to fix it. Here’s a quick list of items that are typical candidates:

   • Creating automatic data feeds for select balance sheet reconciliations to minimize manual and redundant data entry
   • Automating 10 manual journal entries every month
   • Designing and imbedding a process to start measuring one new “thing” that impacts service levels every month that has not been measured before
   • Reconciling the fixed asset ledger to identify candidates for write-offs
   • Identifying one enterprise resource planning (ERP) screen that is unused and could add process value, and then designing a process
   • Updating approval and routing tables
   • Identifying three bottlenecks in the close process and eliminating them

1. Insist that the Provider Learns Your Internal Customers’ Business: Once a quarter, ensure that the provider either spends a week in person with your clients or conducts a series of calls at a customer’s location learning their business and building trust. Work with your customers and the provider to build an agenda that will add value to them and execute against it. If your customer is a merchandising business, have the provider go to their site and work with them to streamline the inventory process. If the customer is a construction company, have the provider work to educate their project engineers on good capital management. The idea is for them to spend time at the site, add value and build trust. The key takeaway for the provider will be a better appreciation of the business and a longer list of allies out in the field.
2. Review Your Service Level Agreements Twice a Year: Your service level agreement with your provider is your guarantee of service, and your guarantee of their participation. As your service improves, so must their level and quality of participation (and vice versa). At least twice annually, dust of the agreements, compare service levels against historical performance, and work with the provider to set new standards for your organization and new expectations for the businesses. This option to reset service levels, however, must be built into the outsourcing contract. This will serve to improve performance, build a greater level of trust with the businesses and ensure that you stay on the leading edge in the marketplace.

Although these four steps will never be a replacement for a full-blown re-engineering effort, they are relatively low-cost, low-pain techniques for ensuring continued success with your processing and maintaining good relationships with your F&A provider.

About the Author

Steve Kopp is a Managing Director with Alsbridge, Inc., an independent advisory firm that helps organizations conduct thorough evaluations of outsourcing options for operating their information technology, finance and accounting, and human resources organizations.