Organizations have relied on an ERP system as an important part of their financial capabilities ecosystem to handle standard financial operations such as sending out invoices, managing documents, and processing payments. However, organizations still continue to grapple with non-standard financial processes. These include deductions management for invoices that are not paid in full, exceptions handling in accounts payable processing, effective credit controls enforcement, and accurate expense recognition based on when goods are received. In order to handle these, excel spreadsheets have to be manually managed and shared through e-mail or the ERP software needs to be altered from fundamental process ﬂows, which is expensive and time consuming.
For instance, for revenue recognition and reporting challenges, because contract element risks are not being captured, quantiﬁed and properly associated with forecast and sales data, a team of expensive ERP specialists may have to be hired to modify the ERP system for new capture methods, contract review and approval steps, database interactions, reporting and other functions all tied together with new process ﬂows. The effort can easily require enough elapsed time that the nature of the business and contracts change to the point where the modiﬁcations become irrelevant.
Another limitation of ERP systems that is most visible to companies are the ‘process gaps’ created when a business process extends beyond the ERP system’s capabilities. For instance, in a typical accounts receivable function, if the payment doesn’t match the invoice amount, an exception is created which must be handled manually outside of the ERP system. The exception is now an un-audited manual process with no visibility leading to slow resolution, redundant customer touches, increased DSO, lost staff time, and costly write-offs.
A BPM system provides a more agile way for ﬁnance departments to enforce policies, track compliance, and capture performance statistics across both standard and non-standard financial processes. BPM systems afford business analysts the flexibility to changes processes based on their needs and have documentation produced immediately. Well-designed BPM systems include the integration hooks necessary to layer a ﬂexible and dynamic process across existing ERP investments that store invoice and payment information.
As an example, BPM systems allow improved handling and communication for short payments thereby reducing days of sales outstanding (DSO) by including:
- A secure platform that allows both the vendor and customer to collaborate freely
- Enforcement of key ﬁnancial rules and controls to ensure compliance
- Dashboard visibility and audit-ability of all historical decisions and information exchanged in a dispute
- Real-time reporting on the status of all vendor disputes
- Flexibility to handle exceptions and apply process changes on-the-ﬂy by appropriate ﬁnancial analysts and decision makers
Leading companies have already found that BPM is the technology that allows them to master financial performance. Does your organization also include BPM in its financial capabilities ecosystem?
*Sources and References:
Achieving Dramatic Improvements in Financial Operations through BPM by Appian