Danske Bank in Denmark has improved their process efficiency during several years. They went through detailed analysis and found that electronic invoicing, workflow processes and ultimately e-invoicing will be key in future development. Ib is an inspirational leader who will share his and his organisations ideas and process experience on improved efficiency.
The article will cover:
Electronic invoice choices – organisational opportunities and challenges
In the spring of 2007, the Danske Bank Group decided to establish a unit that would work to optimise and standardize the Group’s external invoice management process.
In the years 1997 to 2006, Danske Bank had acquired foreign banks, and its main focus was on product systems and processes. The time had arrived for a more detailed analysis of how the internal Group-based processes functioned.
This led to the following conclusions:
- In invoice processing, neither the systems nor the processes achieved the desired Group standardisation, and resource consumption in the area remained unnecessarily high.
- The wide range of system ownership on the ERP platform had led to less than optimal development for the Group.
- The expenses chart of accounts was dominated by local desires, and this made it difficult to focus on Group responsibility and to implement internal benchmarking.
On the basis of a recognition that it was not only a matter of adjusting a system or process but the relation between an organisation and a process, the following strategy was chosen for FSSC:
- Deliver World-class Service through Consolidation and Automation
In order to anchor the strategy in something more stable, the Group also decided to prepare a strategic roadmap covering five years that described the desired objectives with specific KVIs and KPIs.
The plan extends from 2008 to 2012, when the following objectives should be achieved:
- Timely payment percentage of 100%
- Electronic invoicing for 80% of total invoice flow
- STP for 50% of electronic invoicing
- Direct synergy target for the process equal to 22 FTEs, or a reduction of total resource consumption for invoice processing and entry by one third
With these strategic clarifications in place, in May 2007 FSSC became the Group owner of the entire ERP platform, process owner of the flow from invoice receipt to payment, and responsible for the expense chart of accounts.
On the basis of the existing ERP platform used in the Danish part of the Group, the department began developing a flow that was as fully automated as possible. For e-invoices, development focused on the receipt of the standard format that the Danish state had recently set as a requirement for collaboration with public authorities. In our judgement, the selection of this format would give the Group the fastest progress in an area in which we otherwise had no special expertise.
Danske Bank therefore chose from the start to use a third-party service provider to convert various formats that the Group would face in the rollout.
The activation of creditors, on the other hand, was done by FSSC so that the department could become more familiar with that market and build up a more detailed knowledge of the e-invoice area.
From 2007 to 2010, FSSC in-sourced invoice processing from the Group’s banks in Ireland, Northern Ireland, Norway and most recently Sweden (1 April 2010) and has gone from processing some 110,000 invoices in 2007 to processing around 200,000 invoices annually now. In connection with this centralisation, the Group have been able to achieve net synergies of 10 FTE.
The invoice flow in Finland is managed by an independent AP department in Helsinki and therefore not covered in the figures in this memorandum, but it builds on the use of the same system as FSSC and generally works on processes in a manner similar to FSSC.
As mentioned above, an assumption for achieving the synergies was the commencement of an effort to achieve full automation. The key factors in this are as follows:
- The construction of an internal web shop on the ERP platform to manage office purchasing. The web shop is based on EDI linkage to regular suppliers and manages 1,200 to 1,400 orders a day in about 7,000 product groups. On the basis of the system setup selected, order-invoice matches can be created, and about 35,000 to 40,000 invoices go through a fully automated process from order to entry and payment.
- In relation to the receipt of more common e-invoices, 400 of the Group’s largest suppliers are now linked to this programme, accounting for a total of around 45,000 invoices annually.
- Finally, a small contract database has been set up to manage invoices related to specific case flows. This contract database is currently used to manage about 2 million invoice lines fully automatically on an annual basis.
Altogether, the structure described above has enabled the Group to achieve an e-invoice percentage of 40% in three years, with 47% of these invoices being processed fully automatically.
In the same period, FSSC has improved its efficiency in primary invoice processing by 27% and in the associated entry process by 48%. These improvements cannot be attributed solely to system changes but have rather been achieved by a broad effort to improve systems, processes and the organisation. In this process, the Group also worked purposefully with lean, and the knowledge and understanding of this area was also based in FSSC.
If we wish to gather the “lessons learned” from the overall process from 2007 to 2010, they would be the following:
- It is extremely important to determine at the start the objectives we want from a changed process – and to think through the opportunities for technical improvements and the consequences throughout the process.
- We should make the objectives manageable through intermediate goals throughout the process so that we can follow up and adjust.
- We should work on an ongoing basis with open communications so that the objectives we want to achieve become clear for the entire Group.
- We should allocate resources to process optimisation and development internally in typical production unit.