Creating a Truly "Cross-Functional" Team
There has been a great deal of literature, discussion, case study history and debate onthe significant opportunity that comes with shared services to standardize and automate processes and leverage economies of scale. Accounts payable (AP) and accounts receivable (AR) are processes that can be readily optimized through shared services and the appropriate use of supporting technology. There are, of course, many excellent examples of effective shared service organizations the world over. But one very interesting question that was raised at a recent shared services event was whether there has been much "multi-skilling" and process task sharing between, specifically in this case, the AP and AR functions? The answer to date is: no, not really.
On the other hand, there has been a great deal of merging of customer account management and business process improvement teams within SSOs, which then support both the AP and AR functions; and there has also been merging of processes into one disbursements team (e.g. combining accounts payable, payroll and travel and expense management activities). However, there has not been a wave of actual merging of the AP and AR processing teams themselves. So why not?
Conceptually, the opportunity is definitely there. SSOs could aim to "multi skill" processing teams to arrive at a final structure whereby an administration team takes care of a range of processes spanning across BOTH payables and receivables, including areas such as:
- processing of both sales and purchase invoices
- collections and payments
- management of purchasing card activity
- management of direct debits on both the AP and AR ledgers
- new account set ups on both the AP and AR ledgers
- legal matters for both AP and AR
- statement reconciliations
Effectively, the SSO would then end up with a "processing team" to process all purchase and sales transactions, with separate "account management teams" to manage the business, key customers and supplier relationships. The benefits of being able to merge the AP and AR processing teams include the following:
- The opportunity to leverage further economies of scale and thereby reduce costs through "centralizing" more processing activity into one processing team
- Would allow cross-training and cover between AP and AR staff which would then reduce the risks associated with a smaller number of employees specializing in certain key activities (e.g. during holiday periods, sick leave, times of significant change in the organization, etc.)
- Would actually provide more career development and learning opportunities for shared services processing staff across both AP and AR
The ability to look to leverage integration between AP and AR that is becoming more and more accessible through today’s ERP and technology enablement solutions. For example:
- Automated cash forecasting and cash management through interrogating the AP and AR modules and upstream activities such as purchasing and sales order management
- Dynamic balanced discounting between paying suppliers earlier or later to receive discounts and manage Days Payable Outstanding (DPO), and obtaining cash earlier from customers to improve cash balances and Days Sales Outstanding (DSO)
- Resource management and optimization across the AP and AR functions through workbenches and management cockpits
- Extending "end-to-end" from purchasing of goods and services right through to collection of cash from customers, as opposed to the more traditional "functional" end-to-end processes in shared services encapsulated by Procure-to-Pay (P2P) and Order-to-Cash (O2C)
So what has been stopping this trend? In practice, while there is a great deal of understanding of "best practices" in shared services, in reality many organizations have not yet fully leveraged existing end-to-end processing opportunities within the separate P2P and O2C functions, with functional, regional and divisional silos remaining in place.
This is sometimes a timing issue, sometimes a technology issue, and in many other cases it is a political one. For example, true end-to-end P2P includes the purchasing, receipting and payment processes, as well as "traditional" accounts payable, but all too often accounts payable is mislabelled as "P2P". The same also applies for order-to-cash with many end-to-end processing opportunities being left alone, at least initially, with the separation of various parts of the true end-to-end process such as order management, billing, AR and credit & collections. As a result, many organizations are, quite rightly, more focused on mining these opportunities first rather than extending to merging processing between AP and AR.
Another oft quoted reason for not doing something with "true" end-to-end processing is the concern with segregation of duties. While this is, of course, a legitimate concern that needs to be understood and addressed, in my opinion segregation of duties can always be managed if understood fully, with clear definition of roles and responsibilities, robust policies and procedures, and effective use of technology.
Another reason why this has not happened as much in practice is that it requires a different mind-set within the shared services team itself. The teams need to be of the quality and skills (e.g. in both AP and AR activities) and have the "open mindedness" that will allow and indeed encourage cross-training across payables and receivables.
Furthermore, many shared services teams are still working on achieving a true customer service delivery framework on a daily basis in their existing operations. Change management would also be more important than ever if the AP and AR processing teams were to be merged. This is not a significant constraining factor but nevertheless would need to be fully engaged in support of such a move. It is also worth noting here that the BPO providers have attempted to do more of this cross-functional processing than internal SSOs have, and to some extent have been successful.
However, many BPOs have not even achieved "cross-client" multi-skilling due to a number of restricting factors such as client confidentiality, different technology platforms and because of needing to meet the request for dedicated teams from clients themselves.
Summary and Conclusion
The reality is that most advanced shared services organizations have not yet embarked on merging the accounts payable and accounts receivable processing teams. This is for good reason, because the existing opportunities "within" the separate P2P and O2C processes stream should be targeted first. However, I do know that some SSOs are at least considering the opportunity to combine the AP and AR processing teams.
Furthermore, as highlighted at the start of this article, there already has been a great deal of merging of activities and multiskilling of roles within the customer account management and cross functional business process optimization teams, including activities supporting both AP and AR. There are also many examples of merging of activities and tasks into an SSO "disbursements" team, to pick up additional activities beyond AP, such as payroll and T&E.
It is also the case that there is sometimes organizational defensiveness around the more"external" customer facing processes (such as order processing and collections) than there is with the more "internal" customer facing processes (such as payables). However, there isno reason why more external customer facing processes can’t be optimized through shared services (and a great deal of organizations have already achieved this). This could then also develop further into merging the AP and AR processing teams.
I believe that with the continuing expansion and development of shared services, with the continued demands being placed on SSOs to further reduce costs and improve service levels, with ever improving technology, and with the additional opportunities provided by the business process outsourcers, the merging and multi-skilling of the more traditional transactional activities, such as AP and AR, will grow. This may only start slowly with the more advanced SSOs, but may well gather speed as the early adopters prove the opportunity.
This will be an interesting one to watch in the coming years.