Finance at AstraZeneca — a global biopharmaceutical company with manufacturing, distribution, and research facilities in more than 100 countries and $26.1 billion sales in 2014 — has thousands of accounts spread across all its global legal entities. A core team of about 300 record-to-report finance employees operate the reconciliation process within Finance as well as other shared services from the company’s outsourced and captive shared services centers. They help to support a total workforce of more than 57,000 people, including scientists and researchers developing lifesaving medicines.
SAP ERP Financials is the company’s financial system of record, with five regional SAP ERP instances in the UK, Europe, Latin America, North America, and Asia-Pacific regions. Until recently, account reconciliations and financial reporting processes were regionally based. When account reconciliations were submitted, the various manual processes involved made it difficult for the team to reconcile quickly, or to have full oversight and visibility into the status of the reconciliations at month-end or compliance with the Global Balance Sheet Reconciliation Policy.
Achieving global standards and simplification has been an AstraZeneca priority for a few years, for all lines of business, which includes major investments in the centralization of key research and development centers. This also includes the company’s financial services operations, which about five years ago embarked on a transformation project to move toward leading levels of efficiency and effectiveness in its finance processes. One of the major components of the project entailed a mixed shared services center model with the majority of transactional finance activities outsourced to a partner.
Shortly thereafter, AstraZeneca’s transactional finance teams (Global Finance Services or GFS) launched Project Pearl, with a mission to move to world-class standards in finance processes to achieve four main objectives: enhance customer service, improve working capital, reduce costs, and improve compliance. With the requirements established, the GFS global process owners then brainstormed and identified roughly 40 ideas for how to simplify, streamline, and optimize month-end closing operations for the record-to-report process.
“We were managing a $58 billion balance sheet with too many manual processes and spreadsheets, and at the time, we had no global policy in place,” says Natalie Childs, AstraZeneca Global Process Owner, Record-to-Report and Fixed Assets. “The idea to put a global balance sheet reconciliation policy in place first and then find an application that could reinforce compliance with that policy moved to the top of the priority list rather quickly.”
So Long to Spreadsheets
Without a global account reconciliations policy, a standard global process focused on risk and materiality could not be assured. To gain visibility and oversight of this centrally, a global tool needed to be implemented. The same held for compliance; reinforcing compliance and ensuring quality over balance sheet reconciliations was paper-based, with documents stored in disparate file systems, making any audit a daunting task. Often, only the people responsible for a reconciliation and their manager knew its status, and if a deadline was missed, there was no uniform notification procedure to escalate the issue.
“Everyone was reconciling differently and had their own definitions for what they considered a good reconciliation. And the only way to know for sure that everyone was compliant with the global policy was to look at every single reconciliation,” says Childs. “To have that global visibility and a world-class reconciliation process, we needed to simplify, standardize, and automate. Integration with our five regional SAP instances was a key requirement and ensured we could design and implement a global tool with extracts from those five SAP instances. We wanted to ensure we picked a tool that would reinforce compliance with the policy based on both the risk and materiality of an account. This dynamic account maintenance and automatic workflow to the various approvers was key to meeting our month-end deadlines for reconciliations.”
By analyzing how long it took the teams globally to submit and approve reconciliations and how many hours were spent manually reconciling, reviewing, approving, and filing, AstraZeneca was able to build a strong business case for automation. This analysis served a dual purpose; by working with the various accounting teams, GFS secured buy-in from stakeholders eager to save a considerable amount of time preparing reconciliations. Also appreciated was the prospect of using a tool with built-in compliance checkpoints, relieving finance of having to remember the policy each month, and the burden of having to store reams of paper-based backup.
“What got this project through the steering committee and approved by upper-level management was that it was shown to clearly add the most value to record-to-report process improvements in reducing the cost to serve, improving compliance, and smoothing the month-end for the teams thereby resulting in better work-life balance,” says Childs. “We could show and benchmark how much money and time it would save each year, as well as significant improvements in compliance.”
AstraZeneca had several vendor requirements for an automated reconciliation tool, including SAP certification, experience with large enterprises, and an ability to be used globally. For the tool itself, AstraZeneca preferred a cloud-based application. A search led the company to purchase and implement an application from Trintech called “Cadency” that has SAP-certified integration with SAP ERP. (For more information about the Trintech application, refer to the sidebar at the end of the article.)
Beginning in mid-2013, AstraZeneca began what became a year-long phased implementation by region, beginning with the UK. Each region implemented and uses Cadency in the exact same manner — driving simplification and standardization.
“From day one, knowing this was to be a global solution, we wouldn’t tolerate individual wishlists — the only exceptions being local or regulatory requirements,” says Childs. “Very early on, everyone was on board and signed up to the user requirements, and we held them to that. Having just one design helped us keep to a standard and harmonized process.”
Minimizing exposure to risk was another reason for a phased approach; as regions went live with Cadency, AstraZeneca also maintained the spreadsheet-based reconciliation process as a backup for the first month or two. By having parallel account reconciliation processes in place, it became apparent rather quickly that Cadency was indeed going to work and deliver what it was tasked to do including the time and money saved.
Childs says that AstraZeneca will realize the $2.5 million in savings promised in the business case, much of that in productivity improvements and hours saved for roughly 300 users. Reconciliation processes were streamlined and automated for more than 26,000 accounts, and accounts were consolidated and grouped for ease of review into approximately 6,000 reconciliations. This automation and consolidation helped to improve balance-sheet integrity by reinforcing the Global Balance Sheet Reconciliation Policy, identifying profit and loss exposure, and giving global visibility and reporting on the status and health of the balance sheet.
All of the manual processing, which often involved duplication and time-wasting steps, and is a by-product of spreadsheet-based reconciliations, has now been eliminated. Previously, compliance for individual accounts relied on a combination of self-reporting and audits. When reconciling cash-based accounts that were due on the fourth day of the close cycle, for example, there was no automatic notification if the account hadn’t been prepared, and the teams struggled to meet deadlines.
“Now, the Cadency dashboard will show when a reconciliation is due, who is responsible for its review and approval, and where it is in the system,” says Childs. “If it’s not completed as expected, there are alerts. So there is a completely independent identification if something hasn’t been completed on time. It’s easy to identify issues and get into root-cause analysis if people aren’t meeting deadlines. The solution offers reinforcement throughout the process versus relying on people to remember and comply with the global policy.”
Now, the Cadency dashboard will show when a reconciliation is due, who is responsible for its review and approval, and where it is in the system. If it’s not completed as expected, there are alerts. It’s easy to identify issues and get into root-cause analysis if people aren’t meeting deadlines.
— Natalie Childs, Global Process Owner, Record-to-Report and Fixed Assets, AstraZeneca
On Board with Automation
Because the reconciliation teams were so accustomed to using spreadsheets, there was initial skepticism about adopting the global standard tool, which was expected and managed through effective change management. This reluctance to embrace the new process and solution waned quickly, Childs says, when the monthly close no longer meant working past midnight.
“Being able to strike a better work-life balance is definitely one of those benefits that you can’t quantify in terms of dollars,” says Childs. “We’ve received good feedback from people who now appreciate that they’re not just going home earlier, but that they have a tool that helps them reinforce compliance, check controls, and easily identify any issues. Process improvements like this support our wider business effectively so it can focus on the science.”
The team that implemented the tool (named AstraZeneca’s Reconciliation Assurance or ARECA) has won two awards for the Cadency project. One was internal — with AstraZeneca bestowing a CFO award recognizing overall simplification of what had been a fairly laborious closing and reconciliation process. Additionally, AstraZeneca was jointly awarded an Alsbridge Innovation Award with Trintech and Genpact in July 2014, for their collaboration in driving innovation with technology.
“Originally, I feared reaching our goal was going to be difficult,” Childs says. “Now, large companies are approaching us asking how we did it, so we’ve definitely caught up to where we’re one of the leaders in the space.”