accounting frontier series: strategic spend management

18 December 2020

Accounting Frontier Series:Strategic Spend Management

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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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


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

Accounting Frontier Series: Strategic Spend Management© 2020. For information, contact Deloitte China. 5

01Catalysts for Spending Reduction


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


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%


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


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


02Barriers to Successful Spend Management


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


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


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


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


03Save-to-Transform


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


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


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.)


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


“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


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


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


04Spend Management Solution


05Case Study


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


06How Deloitte Can Help


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:


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

mailto:[email protected]




06Q&A

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