A supra-regional hospital group from the UAE with a turnover in the billions planned to transfer seven decentralized HR and accounting departments to a central Shared Service Center (SCC) in 2022. The Manager ad Interim, then employed as Group Internal Audit Director, was tasked with identifying best practice approaches for the shared service center. As an audit expert, he was also tasked with recommending internal controls for the SCC.
Millions of transaction data examined with process mining software
The state hospital group aimed to save at least 20 percent of costs. Particular attention was paid to process optimization, improved accounts payable and accounts receivable management and efficient approval processes in the new Shared Service Center.
In order to find the best approach, the interim manager began with a benchmark analysis of the processes in the seven decentralized departments to date. With the help of process mining software, among other things, he examined several million transaction data.
Diverse optimization potential identified to reduce costs
The interim manager identified various optimization potentials:
- The performance of the decentralized departments proved to be very different: The average number of bookings per employee/year was between 4.the further investigation revealed that these differences in performance had both process-related and individual causes.
- Significantly different process throughput times were key cost drivers. Due to different processes (e.g. number of approvals, automated versus manual process steps) for vendor invoices, the Group was only able to utilize around ten percent of the possible supplier accounts.
- The dunning process generated further unnecessary additional costs: Overdue receivables were not consistently pursued. The departments had sales outstanding values of between 47 and 68 days.
Weaknesses in internal control uncovered and rectified
The interim manager also identified weaknesses in internal control. These included, for example, a lack of dual control in certain areas, incorrect accounts payable and accounts receivable master data, duplicate payments of accounts payable invoices and weaknesses in internal controls over payroll processes.
Recommendations presented for setting up the new shared service center
Based on the results of his analysis, the interim manager developed recommendations for the new central shared service center.
He designed an accelerated process for the approval of supplier invoices, which provides for a downstream dual control principle for prioritized transactions. The average time required for approval was reduced from 13 to eight days thanks to the recommendations of the Manager ad Interim. In addition, he developed internal controls aimed at a stringent dunning process and adherence to credit limits.
When filling the team leadership positions, the interim manager recommended candidates who had performed particularly well in the benchmark analysis.
Savings target significantly exceeded
The company fully implemented the interim manager's optimization suggestions. Costs fell by almost 30 percent (around USD 900,000). This meant that the savings rate was half of what the client had originally aimed for. The new accounts payable management system improved cash flow: the shorter processing times increased cash discount utilization by almost 750 percent. In addition, the average duration of outstanding receivables fell from 58 to 51 days. In addition, it was possible to successfully reclaim supplier invoices that had been paid twice.
