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Appendix 5.1 Redesigning Processes and Organisation Structures Version 1.0 The following slides provide an illustration of how finance process and responsibilities.

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Presentation on theme: "Appendix 5.1 Redesigning Processes and Organisation Structures Version 1.0 The following slides provide an illustration of how finance process and responsibilities."— Presentation transcript:

1 Appendix 5.1 Redesigning Processes and Organisation Structures Version 1.0 The following slides provide an illustration of how finance process and responsibilities might be redesigned on an end-to-end basis and shared between the shared service and the retained corporate function. Although they focus on finance, they provide an illustration of the sort of work that will be needed in redesigning work for any shared service. © CIPFA 2010.

2 Supplier Reconciliation/AP Reporting Process Overview: Purchase to Pay Supplier Master File Maintenance Purchase Ordering & Goods Receipting Invoice Processing Payments Processing Purchase to Pay Audit Controls & St ewardship New Supplier identification/request Align with Preferred Supplier Initiatives Supplier database maintenance Amend Supplier Records Housekeep Supplier Records Maintain strong audit controls to prevent fraudulent setup Process payment run Transmit payment to Bank Reconcile supplier statements Analyse debit balances and secure repayment Issue standard AP reports electronically to procurement and service departments Close AP/ GL and reconcile Raise purchase orders Receipt goods and services Make adjustment s and track outstanding purchase order commitments Receive and process invoices Scan invoices and issue for electronic authorisation EDI Invoice Uploads Error resolution Authorise invoices and inform SSA of reasons for mismatches Discrepancy resolution and process adjustments on system Supplier and Service Department s Calls & Queries Record to Report Combined responsibility SSA responsibility

3 Split of Effort: Purchase to Pay Record to Report 1.Supplier Masterfile Maintenance 2.Purchase Ordering 3.Goods Receipting. 4.Invoice Processing 5.Payments Processing 6.AP Reconciliation 7.AP Reporting 8. Supplier Related Queries 9. Control/ Stewardship Effort Split Local Finance SSA Respective roles of Local Finance and SSA Supplier Masterfile Maintenance-SSA will receive notification from Local Finance for a new supplier to be setup. Amendments to suppliers details received at SSA Purchase Ordering- Service Departments / procurement raise purchase orders for all Goods & Services Goods Receipting- Service Departments Receipt Purchase orders and deal with variances where possible Invoice processing-SSA will receive invoices centrally and scan in for electronic authorisation by Service departments via . Maximise electronically received invoices and EDI. Discrepancy resolution - jointly resolved with primary onus on purchase orderer to notify when goods receipting ( defined in SLAs) Payments Processing- automated when PO matches GRN and invoice according to terms & conditions contained in the system. Automated links for transmission to bank for payment by BACS AP Reconciliation - Integrated system should ensure integrity. Supplier statement reconciliations performed on exception basis AP Reporting – AP reports available online Internal/External Supplier Queries- Service departments & suppliers information and queries will be satisfied with secure web online access for uptodate status Control/Stewardship- SSA will coordinate the external auditing and will provide information when required in coordination with Local Finance. 10% Business and SSA equally responsible 100% 90% 100% 10% 95% 5% 100%

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6 Service Department Buyers & Authorisers, Goods Receiving, Procurement & Local Finance Departments Shared Services Manage supplier base: Control & maintain suppler database Supplier set up on ERP Block suppliers / invoices Purchase to Pay Policies Strategic / tactical procurement Manage supplier base: Identify & select suppliers Define terms Approve new suppliers Approve vendor modifications Catalogues / prices Monitor supplier performance Place purchase orders: Determine requirements Raise requisition Approve requisition Place order (all types) Notify supplier Amend / cancel orders Goods Receipting: Inspection GRN raising Goods Receipting: Upload GRN to AP for matching Invoice processing: Receive invoice Register / enter invoice Scan invoice Obtain valid PO number Match to PO and/or GRN Query mismatches Create asset projects Review for payment Claim discounts Release for payment Copy invoices Maintain authorisation lists and hierarchies Issue for authorisation / process pre-authorised invoices Validate authorisation Monitor / chase ‘issued’ invoices Employee expenses: Receive expense report Process credit card statements Check / validate Raise / progress queries Notify payment date Process payments Petty Cash processing: Manage cash float Check / validate PC requests Input Miscellaneous processing: Customer refund requests Proforma invoices Acquisitions Self-billing Process upfront payments Process nett-off payments Process EDI bills,etc. One-time vendor processing Commissions Utilities invoices Recurring invoices Document scanning and workflow Authorise Invoices Validate and authorise expenses Resolve queries / disputes Process Payments: Receive Non-AP payment requests Cheque requisitions Upfront payments Part payments Reimburse cash Debt payments Interest /loan payments Settle inter-ledger balances Payroll payments Foreign currency payments Run payment proposals Review payment proposals Check funds availability Authorise payment run Manage local/emergency payments Generate remittance advices Recall payments Financial Control: Ensure data accuracy / quality Maintain authorisation hierarchy Run / check control a/cs Perform supplier reconciliations Invoice control log Controls in place & operated? Produce control information Process corrections, journals & invoices PO / GRN control Process vendor queries Adjust invoices / request credit notes Process part payments Produce VAT documentation Management information: Standard financial control reporting SSC service level reporting Management Information: Service Dept Finance analysis SLA / service management Financial control: Maintain / approve authorisation hierarchy Ensure data accuracy / completeness Payment / Cash Control: Approve funds release SLA / service management

7 Redesigning Processes and Organisation Structures Sales Order to Cash

8 Cash Application Processing Process Overview: Sales Order to Cash Customer Master File Maintenance Sales Order Processing Sales Invoice Processing Credit Control & AR Reconciliation/ Reporting Customer to Cash Audit Controls & Stewardship New customer request Set credit limit criteria & agree exceptions Credit Control Assessment Customer database maintenance Amend customer Records Housekeep customer records Chase debts Respond to queries Process adjustments within agreed rules/tolerance Apply cash against customer account Raise sales orders Deliver goods and services Generate sales invoices Despatch invoices Issue statements Customer and Service Department Calls & Queries Record to Report Combined responsibility SSA responsibility Dispute resolution and agree adjustments to debts outside tolerance Bad debt provisioning Issue reminders Deal with legal Close AR period Run & Issue AR reports Process journal adjustments eg bank charges/ write offs Bank reconciliations Bank cheques and transmit banking details to SSA to apply to Sales ledger

9 Split of Effort: Sales/Fees Order to Cash Record to Report 1.Customer Masterfile Maintenance 2.Sales Ordering 3.Deliver Goods/Service 4.Sales Invoice Processing 5.Credit Control 6.AR Reconciliation /Reporting 7.Cash Application 8. Customer Related Queries 9. Control/ Stewardship Effort Split Local Finance SSA Respective roles of Local Finance and SSA Customer Masterfile Maintenance-SSA will receive notification from Local Finance for a new customer to be setup. Amendments to customer details received at SSA Sales Ordering- Service Departments raise sales orders for all Goods & Services Deliver Goods/Services Service Departments deliver goods & services –system to trigger sales invoices Sales Invoice Processing-SSA will generate invoices centrally and despatch electronically or via automatic mailroom. Credit Control – Debt chasing with automated scheduling software. Clear rules based escalations process for dispute resolution. Automated bad debt provisioning and write-offs within tolerance. Electronic links with legal to effectively chase old debts AR Reconciliation - Integrated system should ensure integrity. Customer statement reconciliations available online AR Reporting – Make AR DSO and aged debt reports available online Customer Related Queries- Service departments & suppliers information and queries will be satisfied with secure web online access for up to date status Control/Stewardship- SSA will coordinate the external auditing and will provide information when required in coordination with Local Finance. Business and SSA equally responsible 90% 100% 10% 95% 5% 100% 80%20% 5% 95%

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11 Service/ Local Finance Departments SSC Policies Strategic customer decisions Set up specific agreements with customer: credit terms rent / deposits general terms / pay plans pricing & discounts Customer approval and set up: credit limit contract Customer set up: credit checking contract details / changes DD authorisation Set up on system Contract management Account closure Authorisation Customer maintenance: Maintain customer data on system Close account System archives Automation / bespoke routines Maintain paper / doc image records & archives Invoicing: Raise invoice Credit notes / invoice adjustments Issue refunds Recharges / refunds Issue statements Initiate invoice / credit note / recharge process Payments & Cash: Receive payments Allocate cash Credit control: Dunning / chasing activities Monitor credit status Agree escalation actions with service departments credit suspend/stop Payment plans Legal referral Referral to collections agency Credit control: Customer dialogue Approve CC actions Review CC issues Query management Management & financial control: Ensure data quality/accuracy Ensure timeliness of billing Financial Controls operated Update GL from SL Reconcile control a/cs Produce control info. Produce customer statements Process corrections, journals, etc. VAT documentation Produce management information: Cash & Bank: Receipts processing Receipts reconciliation Financialcontrols Maintain master data Internal control reports Treasury policy Banking relationships Sales Order to Cash Monitor/sign off financial controls Analyse management information Ensure data accuracy / completeness Produce statutory information Cashiers Management information: Standard SO2C reporting SSC service level reporting Management Information: Service Dept SO2C analysis SLA / service management

12 Redesigning Processes and Organisation Structures Hire to Pay

13 Payroll Reconciliation/ Payroll Reporting Process Overview: Hire to Pay Employee Records Master File Maintenance Manager/ Employee Self Service Payroll Processing Payments Processing Hire to Pay Audit Controls & St ewardship New employee contract details Changes to existing employee records Employee record maintenance Amend employee records Housekeep employee records Maintain strong audit controls to prevent fraudulent setup Process payroll payment run Transmit payroll payments to bank Make payroll related payment deductions eg PAYE/NI Reconcile payroll accounts Issue standard payroll reports electronically to service departments Close payroll and reconcile payroll GL accounts Submit authorised employee changes requests eg promotions Submit authorised employee pay adjustments- eg overtime, annual review Receive and process pay changes on payroll system Run gross to net payroll Make adjustments Error resolution Authorise payroll and inform SSA of changes/ adjustments on system Employee and Service Department s Calls & Queries Record to Report Combined responsibility SSA responsibility Run Final authorised gross to net payroll

14 Split of Effort: Staff Hire to Pay Record to Report 1.Employee Masterfile Maintenance 2.Manager Self Service 3.Employee Self Service 4.Payroll Processing 5.Payroll Payments Processing 6.Payroll Reconciliation 7.Payroll Reporting 8. Payroll Related Queries 9. Control/ Stewardship Effort Split Local Finance SSA Respective roles of Local Finance and SSA Employee Masterfile Maintenance-SSA will receive notification from HR for a new employee to be setup. Amendments to employees details updated via employee self service Manager Self Service - Service Departments submit employee changes eg promotions online Employee Self Service – Employees make changes online eg address / bank details Payroll processing-SSA will receive payroll changes from service departments electronically online. After gross to net payroll run, submitted electronically to authorised individuals for sign off Payroll Payments Processing- automated when electronic authorisation received. Automated links for transmission to bank for payment by BACS Payroll Reconciliations- Integrated HR system with Finance should ensure integrity. Payroll reconciliations performed on exception basis with automated checks Payroll Reporting – Payroll reports available online in secure environment Employee Payroll Queries- Service departments & employees information and requests/ queries will be satisfied with secure web online access Control/Stewardship- SSA will coordinate the external auditing and provide information when required in coordination with Local Finance. 10 % Business and SSA equally responsible 100% 90% 100% 10% 100% 80%20%

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16 HR, Service Departments and Local Finance, External Agencies Shared Services Hire to Pay Human Resources Policies Recruitment Hire Requests: Determine requirements Raise jobs requisition Approve job requisition Applications/ Interviews Job Offers & Acceptances Contracts Authorisation New hire details from Service departments New Employee Record Processing: Load New Employee details in payroll system Payroll processing: Process payroll changes Generate payroll run Review for payment Copy payslips Maintain authorisation lists and hierarchies Validate authorisation Respond to queries Document scanning and workflow Authorise Employee Changes Resolve queries / disputes Process Payroll Payments: Process Gross to Net BACs processing Cheques raised Authorise payment run Manage local/emergency payments Generate payslips Recall payments Management information: Standard payroll reporting SSC service level reporting Management Information: Service Dept Payroll analysis SLA / service management Manager Self ServiceEmployee Self Service Staff Overtime etc Processing: Load Overtime details in payroll system Promotions, changes to hours etc Annual / periodic changes to salaries Treasury Payroll Reconciliations & Reporting: Reconcile Payroll/ GL Reconcile Other Payroll Accounts Make payments to external agencies Provide external agencies with periodic/ annual returns Queries from Employees and Service Managers/ Pensioners Queries from external Parties/ agencies

17 Redesigning Processes and Organisation Structures Record to Report

18 Reporting Process Overview: Record to Report Financial Data Maintenance Manual Data Entry Automated Data Entry Reconciliation Closing Control & Stewardship CoA structure identification/request Financial data request Local, Actual, Budget) CoA structure maintenance Maintain different financial data dimensions Finance subsystems criteria maintenance Cost codes maintenance Closing timetable creation Closing timetable validation Execute draft close Validate draft close/Final adjustments Final closing Standard reports generation Reporting information submission to Local management Provision of core financial data and respond to transactional queries Cost centre standard management reporting generation Standard statutory reporting Review & authorise final reports Decision support & adhoc management reporting Non- standard Journal entry identification Standard journal identification Journal entry validation Journal entry posting Journal & back up documentation archiving Finance subsystems Run subsystem cycle Provide sub-system information Sub-system integrity analysis Sub-system entries: Interface validation Error resolution Exception accounts analysis Discrepancy resolution Bank reconciliation Validation Error resolution Requests for Financial Information Record to Report Combined responsibility SSA responsibility

19 Split of Effort: Record to Report Record to Report 1.Financial Data Maintenance 2.Manual journals 3.Automated data entry/Recon. 4.Closing 5.Reporting Standardreporting Adhoc/Mgmt reporting 6. Response to User Queries 7. Stewardship 95% Effort Split Local Finance SSA Respective roles of Business and SSA Financial Data Maintenance- SSA will receive notification from Local Finance and update chart of accounts/financial data dimensions accordingly. Manual Data entry - Business submits journal request/proposal and journals are entered and posted by FSS. If desired, some designated users from Local Finance will be able to post journal entries directly into GL. Automated data entry- SSA will validate interfaces and will solve discrepancies together with Local Finance Closing- SSA will create closing timetable & coordinate closing activities. SSA will perform close procedure, Local Finance will review and validate balance of the accounts Reporting- For local management reporting: SSA will provide financial data to the businesses and they will develop their own customised reports.with BI tools SSA will only provide and design standard reports for Local Finance.SSA will prepare local statutory reporting for review and signoff locally. User Queries- Local Finance & service departments w ll request information from the SSA based on the general ledger data and the SSA will run the queries when necessary. Stewardship- SSA will coordinate the external auditing and will provide information when required in coordination with Local Finance. 10 % 5% Business and FSS equally responsible 100% 90% 10 % 80% 20% 10% Note that the respective roles of Local Finance and SSA are described only when an interactive relationship exists 95% 5% 100%

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22 Service Departments and Local Finance, External Agencies SSC Record to Report Policies Capital and Other Financing Chart of Accounts maintenance: Add cost centres Add account codes Rearrange CoA Chart of Accounts maintenance: Approve changes to structure Processing & Posting: Maintain & allocate profiles Journals - create & post Uplifts / uploads Accruals & prepayments API/ interface management EDI interface management Banking system/ sales adjustments Banking transactions Other GL interfaces Allocations & recharges Journal Adjustments Posting Approval: Approve journals Approve sales adjustments Approve allocations & recharges Budget & Forecast maintenance: Load budgets & forecasts into GL Maintain Forecasts Period End Processing: Close ledgers, sub ledgers and feeder systems GL close and roll-over Re-open sub-ledgers Prior period postings? Period End reporting: Flash reporting Standard management reports & Data extracts KPIs Corporate reporting Consolidation Capital reporting Statutory data / information VAT reporting Tax reporting Management reporting: Reporting commentaries Analysis & dissemination of results Quarterly / Half-Year / Year-end reporting: Flash reporting Standard management reports & Data extracts KPIs Corporate reporting Consolidation Capital reporting Statutory data / information VAT reporting Tax reporting External Returns Management & Financial controls: Balance sheet reconciliations Control / validate data from feeder systems Manual controls Reviews Treasury Management & Financial controls: Review / approve Balance sheet reconciliations Reviews Internal audit Co-ordinate external audit process Business Intelligence Produce Analysis Data: Standard reporting packs Standard performance data Business Analysis & Review: Challenge vs budget/ f’cast Decision support Accounting judgement Risk analysis Capital appraisals Budget & Forecast Agree budgets Maintain Forecasts Period End Processing: Determine / publish cut-offs Annual/ periodic reporting

23 Redesigning Processes and Organisation Structures Budgeting & Planning

24 Prepare Budget & Forecasting Packs Process Overview: Budgeting & Planning (including Capital Projects) Budgeting & Planning Preparation Budgeting & Planning Assumpti ons & Inputs Budget & Forecast Data Processing & Iterations Generate Budget & Forecast Reports Control & Stewardship Decide on budget process & timetable for completion Notify service depts of their key requirements & commitments Set framework for Capex Project Process Prepare timetable and instructions Liaise with budget / capex holders for any changes and issue instructions, assist with queries Generate & Issue version for review Review,identify and notify changes Finalise Reports ready for sign off including standard commentary Finalise commentary & signoff final version Budget, forecast capex report generation Load information in core reporting / BI systems etc for comparison against actuals/ for tracking purposes Respond to queries Standard periodic reporting Adhoc analysis via BI tools Provide assumptions and framework for budgets, forecasts and capex related projects Maintain budgeting & planning models Process changes to assumptions and calculations in models Validate assumptions Provide impact assessment to budget / capex holders Budgeting & Capex System Input data Generate outputs Error identification & resolution Identify changes required & notify/ assist with error resolution Process changes & iterations Identify changes required and agree final version Finalise Outputs Requests for Budgeting & Planning (including Capex) Information Record to Report Local responsibility SSA responsibility

25 Split of Effort: Budgeting & Planning (including Capital Projects) Record to Report 1.Planning & Preparation 2.Provide Assumptions 3.Data Entry & Processing 4.Iterations 5.Reporting Standard “rules based” reporting Adhoc analysis reporting 6. Response to User Queries 7. Stewardship 95% Effort Split Local Finance SSA Respective roles of Local Finance and SSA Budgeting & Planning Preparation - SSA will receive notification from Local Finance of framework approach and Local Finance / SSA will jointly liaise with service departments in planning etc Provide Assumptions – Local Finance provide assumptions and SSA updates to models with these changes in assumptions Data Entry & Processing- SSA will process the data and validate/ solve certain discrepancies together with Local Finance. Iterations- Local Finance will review and request changes. SSA will process these changes Reporting- For local reporting: SSA will provide standard rules based reports. With BI tools local Finance can generate adhoc reports locally User Queries- Local Finance & service departments will request information from the SSA where elements are under their control Stewardship- SSA will be responsible for quality of data processing and generating outputs and Local Finance will be responsible for the overall final agreement and signoff of figures and commentary. 5% Local Finance & SSA equally responsible 100% 80% 90% 10% 80% 20% 50% Note that the respective roles of Local Finance and FSS are described only when an interactive relationship exists 95% 5% 100% 50% 20%

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29 SSC Compile historic (actual) financial data Budgeting & Forecasting Set budget parameters & assumptions: Inflation Targets Exchange rates Timescales Strategic assumptions Budget /forecasting control: Maintain budget parameters /budget holders, etc. Manage controls Manage budget workflows Compile public sector relevant data eg funding sources Compile overhead data Compile next forecast (actuals to-date + forecast to end of year ) Approve? Upload final budget to budget system Regular reporting: forecasts vs. budgets Management reporting: Analysis & interpretation Compile historic (actual) data Business Intelligence Business Analysis & Review: Budget/ forecast challenge Judgement Risk analysis Compile “initial version” of budget using defined assumptions. Update initial budget to produce “various iterations” Review Approve? Update forecast to produce next forecast Review Upload approved forecast to budget/forecast system Applies to all types of budgets Service Departments and Local Finance/ Corporate Finance

30 Redesigning Processes and Organisation Structures Treasury Management

31 Split of Effort: Treasury Mgt Record to Report 1.Annual cash flow forecast 2.Maintain a daily cash flow forecast 3.Maintain the daily cash position 4.Treasury policy & strategy 5. Capital financing 6. Short term borrowing 7. Long term borrowing 8. Debt management 9. Investments 20 % Effort Split Local Finance SSC Respective roles of Business and SSC Annual Cash Flow Forecast- SSC is liaise with relevant service managers to produce draft forecast for detailed review and follow-up by client Daily cash flow forecast- maintain up to date with reference to actual cash flows and anticipated changes. Client to monitor and to be involved by exception Daily cash position – SSC will maintain the cash balance within pre-defined parameters. Treasury policy & strategy SSC to obtain expert advice and advise the Section 151 Officer on all aspects of policy, strategy, implementation and monitoring. Capital financing - SSC to advise the Section 151 officer on the financing of the Council’s capital expenditure. To include evaluation of the various financing options. Short /long term borrowing – SSC to undertake the necessary short term borrowing as part of maintaining the short term cash position. Also to ensure that long term borrowing arrangements are in place in accordance with the requirements of the capital financing strategy. Debt management – SSC to report to the Section 151 Officer on opportunities for debt re-scheduling in order to minimise future costs of borrowing. Investments - SSC to advise the Section 151 Officer and have arrangements in place for maximising the Councils investment opportunities. 20% 80% Overall 80% 20% 80% Note that the respective roles of Local Finance and FSS are described only when an interactive relationship exists 80% 20% 80% 20%

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34 Redesigning Processes and Organisation Structures Internal Audit

35 Split of Effort: Internal Audit Record to Report 1.Review of internal controls 2.Management audits/reviews 3.External audit 4.Internal audit strategy 5.Internal audit reports 6.Systems auditing 7.Computer auditing 8. Contract auditing 9. Fraud & corruption 90% Effort Split Local Finance SSC Respective roles of Business and SSC Review of internal controls- SSC to undertake audit tests to assess and evaluate strength of internal controls. Evaluate the extent to which the Council facilitates good practice in managing risk. Management reviews- Undertake reviews and examine the extent to which performance and best value reviews are incorporated into business processes. External audit- SSC to liaise with external audit in compliance with the audit code of practice and managed audit requirements. Involvement of the client in ensuring an effective managed audit process is essential. Internal audit strategy- SSC to undertake a risk needs assessment to inform the audit strategy and to produce an annual audit plan. The Section 151 will undertake a detailed review of this work. Internal audit reports- SSC to draft all internal audit reports in compliance with the agreed format, content and timescales. Systems auditing- SSC to undertake a risk based approach to systems audits including testing and reviewing controls as well as providing a professional opinion on the adequacy, effectiveness and reliability of the system. Computer auditing- Specialist work undertaking an assessment of the adequacy of controls in a complex environment Contract auditing- SSC to undertake tests in compliance with standing orders and financial regulations Fraud & corruption- Bringing to the attention of the Section 151 Officer any primae facie evidence of fraud and corruption 10% 80% 90% Note that the respective roles of Local Finance and FSS are described only when an interactive relationship exists 90% 10% 20% 90% 10%

36 Process ERP Application Architecture: Total Finance SSC ERP System Actual Journal Data Invoices Payroll Systems Payroll Payments AP GL Budgeting Data Reporting Database Consolidated Data Budget Data FA Billing Collection AR Workflow Manual journal entry proposals and financial data updates will be sent to SSC using workflow Where local budgeting systems exist, a standard capability to load budget balances into the GL will be provided The ability to extract data will be provided for local management reporting purposes Budgeting Systems Record to Report SSC Interface PO P.O. Receipts FA CoA Bens/Allow Housing Data Extracts Ctax Services Council Tax Other Systems


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