With the pressures of today’s economy still mounting worldwide, Asian corporations continue to seek out methods of simultaneously focusing on efficiency in operational execution and control, compliance, and cost management – all while striving for growth.
But as the sheer volume of transactions within the corporate general ledger increases among corporations in Asia and globally, technology will play an increasingly important role in controlling costs and improving visibility over their operating environment.
What are the options for corporations seeking the perfect blend of new technology while controlling costs, improving visibility and driving efficiency and consolidation?
Case for Automation
As business and transaction volumes increase, tremendous strain is placed on the workflow and processing requirements for reconciling the general ledger. This heavy lifting can be labour-intensive – and such manual processing requires a significant investment of resources and cash.
It is under this scenario that automated, real-time reconciliation and exception management can have a dramatic impact through increased efficiency, streamlined operations and cost savings.
Automating these processes reduces transaction disparities and also provides greatly improved visibility over operations and cash. By taking this step toward increased control, corporations can also significantly reduce their operational risk and vulnerabilities, in addition to the general benefits that come with automating processes.
Reconciliation solutions today are capable of assisting with automating processes, identifying exceptions earlier and reducing the total cost of those exceptions. Automation gives a company increased control by delivering the ability to identify, assess and control exceptions in the matching and reconciliation process, thereby promoting a more efficient and effective workflow.
For example, automating intra-day reconciliation allows corporations to identify a possible transaction break before it has the opportunity to develop into a full-fledged error that may incur unnecessary fees. Real-time access to information provided by a technological solution allows corporations to make appropriate adjustments sooner in the process, reducing costs in the long term.
With automated solutions offering real-time views and trend reporting, corporations are given a greater ability to utilise funds with vastly improved auditing ability and control. At the same time risk exposure is significantly reduced because the company is able to perform intra-day reconcilement.
Slow-to-settle transactions are identified early on and are examined before the end of the day. As regulatory controls tighten, operational efficiency requirements continue to become more and more important.
How can companies automate? The traditional model is to install the software locally. If a company does not already have them, it will need to buy a file server and, since most applications are now web-enabled, a web server and a database server. It will also need IT staff to operate and maintain the servers, as well as troubleshoot problems in both hardware and software.
This in-house on-premise solution is particularly applicable to companies with large transaction volumes or institutions such as banks that are more comfortable storing sensitive data in their own premises, not on remote servers outside the country.
Automation and straight-through processing can help promote the steady growth of corporations in Asia and provide the necessary audit trails, text matching for confirmation and more. But there are actually additional ways to reduce costs and burdens on internal IT resources.
Instead of doing everything in-house, virtualised environments, Software as a Service (SaaS) and application hosting services are all trending upward as corporations take note of the benefits provided by consolidating and simplifying their business operations.
Virtualised Environments. One of the lynchpins of virtualised environments is partitioning, defined as the ability to run multiple operating systems on a single physical system, fully isolated from each other but able to share the underlying hardware resources.
By avoiding the purchase of more physical hardware in favour of virtual environments, companies do not only save money. Virtual environments have been proven to operate more efficiently as well, achieving increased utilisation by running multiple workloads on the same server hardware.
The traditional method for increasing space by increasing the number of physical servers – known as ‘server sprawl’ – can be inefficient. Some physical servers do not fully maximise their processing capabilities, often running well below the percentage of CPU usage deemed efficient.
The addition of more physical servers also means an increase in costs, and not simply the new hardware. Physical servers can consume massive amounts of energy and create tremendous heat, leading to surging energy bills.
Disaster recovery is also a concern. With files stored on physical hardware, it can quickly become expensive to back up data and information in multiple locations.
Hosted Services. Another of the more popular trends around new technology implementation and cost/resource saving is hosted or managed services. Instead of doing everything in-house, companies outsource hardware and system administration to internal shared-services or third-party providers.
Hosted services provide an attractive option for corporations because they free up IT resources, allowing internal IT teams to focus on the core business and customers, and have a greater impact on the continued success of the organisation.
Even a business-critical application such as reconciliation and exception management can utilise hosted services. If done right, it can be a solution that is closest to those who know it best – meaning not only is the response time for issues or upgrades greatly lessened, but the solution is managed by true domain area experts in a controlled and structured framework.
Hosted services provide corporations with a number of other benefits. A lower total cost of ownership is achievable and nearly always ensured. By removing the application from the corporations’ hardware, valuable energy and data constraints are reduced.
Corporations opting for a hosted solution from the ground up will likely see a far shorter implementation timeline compared with in-premises implementation. That, in turn, means a faster return on investment.
Software as a Service. With SaaS, there is no upfront hardware cost. Companies spend on the software on a rental or per-transaction basis. This model may be attractive to smaller enterprises that do not have the huge volumes of a multinational and do not really want to invest in hardware and associated costs, such software licenses and IT people.
Software as a Service is a practical way to start automating transactions at a low start-up cost. But companies that become a consumer of SaaS need to have all their data in electronic form, not paper-based.
How can companies decide which automation model is the best fit for them? The key determinant is the volume of transactions. Transnational corporations with tens of thousands of transactions may do best with in-house implementation, possibly with virtualisation features. If the rules allow them to store data outside of their premises or country, they may also look at hosted services, either via a captive shared-services centre that serves the company’s different departments, subsidiaries and affiliates, or third-party outsourcing providers and even the software vendors themselves, some of whom provide managed services.
Smaller firms with light transaction volumes can consider SaaS providers, provided their data is in electronic form. If volumes rapidly increase as the business grows, that will be the time for them to invest in their own infrastructure or move on to hosted services.
About the Author
Suzanne Sisolak is vice president, global product management for SunGard. Working closely with customers and product development teams, she helps drive the evolution of the Ambit Reconciliation, Exception Management and Report & Document Archiving solutions. With over 20 years experience in banking and technology product management, she has held positions at JPMorgan in treasury operations and FX and derivatives middle- and back-offices.