THE NEW ECONOMY IS DRIVEN SOME COMPANIES TO CHANGE GLOBAL OPERATIONS

Surviving recessions and crises means that many North American businesses continue to face new challenges. Layoffs, skyrocketing stock prices, and the underlying need to seek alternative ways to cut costs are key issues ruling many boardrooms these days. Personal management at companies of all sizes struggle to find money-saving startups, and for some, the answer lies in centralizing their financial operations and processing systems.

The American business community is made up of large, medium and small companies, but to date, mainly the large ones have taken advantage of the centralization of their financial operations. The main reason is the exorbitant expense that has traditionally been required. But thanks to the Internet and modern technology; Switching to a centralized processing system has become much more attractive, and businesses of all sizes can reap the financial rewards.

Some small and medium-sized companies have operations abroad, making them especially well-suited for centralized processing. When implemented correctly, this financial management option can help these companies establish a competitive advantage around the world.

NEW POSSIBILITIES

Much of the business community has already discovered the tremendous benefits inherent in centralization, as evidenced by recent trends in centralizing call centers and back office functions. Significant savings have been achieved as a result of these moves, and companies have been able to offer investors better results.

Today, small and midsize business leaders are taking that concept one step further by centralizing their companies’ financial operations and processing systems.
Centralizing financial operations and processing systems allows companies to create virtual shared service centers where they can process all financial data in one database through one server or multiple servers using the Internet.

An example is Accelio Corporation. Headquartered in Ottawa, Canada, Accelio has about 600 employees and eight million users worldwide. It provides sophisticated online electronic process software frameworks and applications to automate business processes. The centralization of financial systems and processes gave the company the flexibility to work with multiple currencies and streamline financial management. The vendor had a global presence and provided scalability so the system could grow as the business grew.

Accelio CFO Jeff McMullen says the experience made him a firm believer in shared services, especially those that operate in several different languages. “It used to be very painful when it wasn’t automated,” he says. “Now it has transformed the entire process of multinational consolidation.”

GLOBAL ADVANTAGES

Centralization, or shared services, allows companies to deploy a standard or uniform software package out of the box that can be used by all of their site locations. Creates a standard global chart of accounts, implements standard global processes, and offers centrally controlled procurement and shared services.

So how does this affect your business? First, it translates into significant cost reductions.
There’s the immediate elimination of up-front costs like duplicating hardware, software, and valuable IT resources. There is also less need for individual specialists trained in the complex rules and regulations of various countries’ tax laws. One person can now run five or six different site operations from one location.

Another key benefit is the additional degree of control available to the user. Because the entire database is in one central location, the user has access to data from any site. He or she can study it in a “granular” way to find specific details, such as salary expenses in the Germany office for the month of July.

Greater control over data manipulation also translates into the added ability to generate detailed management reports in a matter of seconds. The worldwide shutdown can be reduced from up to 25 business days to five.

This greater detail and faster report delivery also comes with a range of other simplifying efficiencies, such as:

* Less IT maintenance is needed at global offices,

* Lower administrative costs,

* Reduced administrative costs, and

* Lower customer service costs.

In addition, due to the increased use of the Internet, companies can move their financial operations to any part of the world to capitalize on the best real estate option.

IMPORTANT CONSIDERATIONS

One of the main obstacles for companies that take the lead in business strategies, such as centralized financial operations and system processing, is the “trial and error” factor. The market has not yet differentiated between the good and bad solutions available. .

If your company is interested in seeking new efficiencies through centralizing its financial operations, here are some points to consider when selecting a provider.

First, due to the multinational nature of your business, be sure to look for a provider that offers multi-currency and multi-lingual capabilities. You need to be able to adapt to all the different locations of your business sites, no matter where they are.

Integral to this is the need for all your site locations to have local IT support so that if the system struggles, help is just a local phone call away. Businesses today cannot afford the downtime that comes with waiting for a supplier to fly halfway around the world to meet their needs.

Price is certainly another factor, and an important one. Review all upfront costs and be sure to check for any hidden costs (such as flying the provider halfway around the world).

Another thing to keep in mind is reliability. Look for a provider who has experience in your industry, and preferably someone who can “put your money where your mouth is” by demonstrating their own “buy in” to the concept of centralized financial operations. . An added benefit of going with such a provider is that you’ll be familiar with all the details of the process and can provide valuable information along the way.

THE METLIFE EXPERIENCE

MetLife, a subsidiary of MetLife, Inc. (NYSE: MET), is a leading provider of insurance and other financial services to individual and group customers. MetLife companies serve approximately nine million US households and 70,000 businesses and institutions with 33 million employees and members.

MetLife also has international insurance operations in 12 countries: Argentina, Brazil, Hong Kong, Indonesia, Korea, Mexico, the Philippines, Poland, Portugal, Spain, Taiwan and Uruguay. Each office has local legal and US GAAP (generally accepted accounting principles) reporting requirements.

Although MetLife recently committed to a corporate-wide enterprise resource planning (ERP) system, it also realized that the system would be too costly and unnecessary to implement across all of its overseas operations. After much research, the decision was made to go with SunSystems for international operations. One problem was their ability to interface with ERPs.

“He had the backing of a global organization, he had strong partnerships around the world, and the company certainly understood the market,” says Michael Douglas, MetLife’s chief financial officer of International Operations.

Douglas took charge of the implementation of centralized processing by establishing first Brazil and then Indonesia as Centers of Excellence. Brazil was among the most forward-thinking international offices in terms of its IT ideas, and Indonesia had established itself with its financial accounting capabilities. (At the time, most international offices were working with Excel spreadsheets or proprietary reporting systems.)

A year later, Douglas had all 12 international offices run by three centralized service providers located in Singapore, the Netherlands and Brazil.

Any software upgrades or minor tweaks that need to be done can now be implemented across the company’s operations across all three servers instead of 12 offices as in the past. “Most international companies buy licenses and install them locally,” says Douglas. “But the way we’ve done it means the licenses can be used 24 hours a day. When people in Indonesia leave for the day, people in Mexico can take advantage of those unused licenses.”

Similarly, the move to centralized processing has fostered greater communication between international operations. So, for example, when people in the US are not available to provide assistance, the regional offices are now comfortable calling one of the other offices. “Centralized processing has helped create ‘intra’ relationships,” says Douglas. “Indonesian people are now interacting with Korean people.”

To further increase profitability and streamline financial operations, MetLife’s international subsidiaries have been established as local databases within a shared virtual server or central processing environment.

“We really wanted to promote ownership of local ledgers,” explains Douglas, “but we needed to keep things in a controlled environment so we could go deep and get access to the information.”

To help promote local ownership and build trust between international operations and the US, MetLife installed local databases that the corporate office could access only after a local “launch.” However, the model allows for live access and offers a built-in alarm feature that monitors any significant changes in account activity and balances.
“We also created mirrored databases locally so everyone could work in their own local currency legal operating environment,” Douglas says. “When they need to inform us, they simply change the base currency to US dollars. That way, local currency fluctuations don’t affect the measurement of their results.”

MetLife also gained other benefits. According to Douglas, local GAAP support makes it “much easier” to create an audit trail to view adjustments. The common use of accounts has also been extremely beneficial. Now, if the US needs particular information, a simple phone call, email, or online breakdown can identify the accounting codes for the information being sought.

“Common use of accounts is extremely important when measuring cost reduction,” adds Douglas. “For example, you can be sure that wages and wage-related expenses mean the same thing around the world. And it gives you the ability to keep track of non-accounting accounts like number of employees and space.” .

Taking advantage of reduced labor costs is another benefit of centralized processing, and one that can be easily realized by having functions like report writing in places like Indonesia or India instead of the US. This new model is best described by MetLife’s real-life closing example. “Two years ago, it took us about 30 days to close a month,” explains Douglas. “Today, we can do it in three days. Centralized processing has proven to be a very beneficial offshore tool, certainly adding value both globally and regionally.”