Optimizing Back Office Operations

According to industry experts, a typical one billion dollar company spends approximately $27 million on unnecessary working capital and inefficient processing functions because they lack visibility into the financial supply chain. Optimizing Back Office Operations: Best Practices to Maximize Profitability uses examples and case studies to show how cost optimization—and not cost reduction—in the core back office operations is the right approach to maximizing profitability and enterprise value. Implementation guidance is provided for Executives, CFOs, and Controllers on transitioning from outdated processes to a fully-optimized financial supply chain.

Preface ix

CHAPTER 1 Profits: The Reason a Business Exists 1

Profitability Defined 2

Profitability Equation and Related Metrics 9

Liquidity, Growth, and Financial Flexibility 19

Conclusion 25

CHAPTER 2 Cost and Capability: Strategic Choices 27

Capability: One Size Does Not Fit All 28

Cost: You Get What You Pay For 34

Measuring Capability 41

Conclusion 44

CHAPTER 3 Financial Supply Chain: Entering the Gold Mine 45

What Is the Financial Supply Chain? 45

Working Capital Defined 50

Working Capital Processes 59

Conclusion 65

CHAPTER 4 Platform for Execution: A System for Maximizing Profits 69

Process Benchmarking 74

Process Optimization 86

Process Automation 86

Process Integration 88

Process Standardization 89

Conclusion 92

CHAPTER 5 Optimizing Accounts Payable 95

Implications of A/P Effectiveness 97

Best Practices 99

Enabling Technologies 115

Conclusion 122

CHAPTER 6 Optimizing Accounts Receivable 125

Implications of A/R Effectiveness 126

Best Practices 130

Enabling Technologies 137

Conclusion 144

CHAPTER 7 Optimizing Purchasing 147

Implications of Purchasing Effectiveness 149

Best Practices 152

Enabling Technologies 160

Conclusion 168

CHAPTER 8 Optimizing Treasury Operations 171

Implications of Treasury Effectiveness 175

Best Practices 179

Enabling Technologies 193

Conclusion 200

Epilogue 203

Index 207

ZAHID KHALID is Managing Partner at The Hardstone Group, a management consulting practice specializing in helping clients increase profitability through improvements in financial supply chain processes. He has authored numerous articles on finance and technology in various industry publications and is a frequent presenter at events related to working capital optimization. He can be reached via the firm's Web site: www.hardstonegroup.com.

OPTIMIZING BACK OFFICE OPERATIONS

One of the key reasons for a company's failing to meet its profitability expectations lies in its back office. Think about it: a typical billion- dollar company spends approximately $27 million annually on unnecessary working capital and inefficient processing functions when they could be meeting profitability expectations with an increased concentration on their Financial Supply Chain.

Changing the focus from profits to profitability, Optimizing Back Office Operations: Best Practices to Maximize Profitability uses examples and case studies to show how cost optimization and not cost reduction in the core back office operations is the right approach to maximizing profitability and enterprise value.

Discover how you can put these best practices to work in the areas of:

• Profits—the reason your business exists
• Liquidity, growth, and financial flexibility
• Cost: you get what you pay for
• Capability: one size does not fit all
• Financial supply chains
• Working capital processes
• Measuring capability

Optimizing accounts payable, accounts receivable, purchasing, and treasury operations

Other topics of special importance include the profitability equation and related metrics; measuring capability; process benchmarking; process standardization; and enabling technologies. Invaluable cases illustrate that cost optimization is a viable strategy for sustainable profit maximization.

For company controllers, assistant controllers, and financial executives, Optimizing Back Office Operations is both an important source of useful, innovative ideas and a handy quick reference for day-to-day use. It is also an indispensable guide for financial analysts, internal auditors, public accountants, and anyone concerned with company financial and accounting operations.

Bringing together the science of process im-provement, the art of finance, and the enabling powers of information technology to make the case for a dependable approach to maximizing profitability and cash flow, Optimizing Back Office Operations illustrates the best practices to achieve sustainable profitability.

OPTIMIZING BACK OFFICE OPERATIONS

One of the key reasons for a company's failing to meet its profitability expectations lies in its back office. Think about it: a typical billion-dollar company spends approximately $27 million annually on unnecessary working capital and inefficient processing functions when they could be meeting profitability expectations with an increased concentration on their Financial Supply Chain.

Changing the focus from profits to profitability, Optimizing Back Office Operations: Best Practices to Maximize Profitability uses examples and case studies to show how cost optimization and not cost reduction in the core back office operations is the right approach to maximizing profitability and enterprise value.

Discover how you can put these best practices to work in the areas of:

• Profits—the reason your business exists
• Liquidity, growth, and financial flexibility
• Cost: you get what you pay for
• Capability: one size does not fit all
• Financial supply chains
• Working capital processes
• Measuring capability
• Optimizing accounts payable, accounts receivable, purchasing, and treasury operations

Other topics of special importance include the profitability equation and related metrics; measuring capability; process benchmarking; process standardization; and enabling technologies. Invaluable cases illustrate that cost optimization is a viable strategy for sustainable profit maximization.

For company controllers, assistant controllers, and financial executives, Optimizing Back Office Operations is both an important source of useful, innovative ideas and a handy quick reference for day-to-day use. It is also an indispensable guide for financial analysts, internal auditors, public accountants, and anyone concerned with company financial and accounting operations.

Bringing together the science of process im-provement, the art of finance, and the enabling powers of information technology to make the case for a dependable approach to maximizing profitability and cash flow, Optimizing Back Office Operations illustrates the best practices to achieve sustainable profitability.