The preparation of information in Times of big data is becoming increasingly important. Incorrect data and discrepancies usually lead to extra work and additional costs that significantly disrupt the workflow. Company A acts as a metrology service provider for a group in the food industry. The service includes the installation, removal and operation of the measuring point. The service is billed via the master data. However, incorrect billing can occur due to differing data from the two companies. To solve the problem, the entire process is to be outsourced to an external service provider. In the following article, the relevant factors for optimizing the billing process are taken into account and run through using a scenario. It becomes clear that a special focus must be placed on individual details that affect the organizational structure within the company.

Where the numbers have to add up: Description of the billing process

First of all, the initial situation: if there are data discrepancies, these affect two sub-processes, the invoicing process on the one hand and incoming payment management on the other. A number of preparatory steps must be taken before invoicing. For example, the monthly master data report, with all the necessary information for billing and allocation, is manually compared with the market partner's list. The deviating metering points are sorted out and recorded using a list. After clarification, these metering points are invoiced manually in addition to the total invoice.

1. invoicing

In this example, the cleansed list is uploaded to the EDIFACT billing tool to create the invoice for the monthly metering point operation. Two files are created in the billing tool - a PDF file and an INVOICE file, i.e. an invoice file. The PDF file is sent to billing with the corresponding booking document and uploaded from there to the SAP system. The INVOICE file is loaded into the EDIFACT converter to check for correctness. The file is then uploaded to ArcMind, the market communication system, and sent to the customer.

2. incoming payment management

After the invoice has been sent, the invoice is checked by the market partner and either paid in full or the invoice is rejected due to incorrect metering points. In the event of rejection, the partial amount of the meter points found to be correct is transferred. The reasons for the rejected meter points are sent to company A by e-mail and require further clarification.

If the invoice is rejected, the first invoice must be canceled and a new paper invoice issued. The paper invoice will be sent to the customer by post.

Error-prone billing process

The high susceptibility to errors in the example company makes frequent manual interventions necessary. Potential errors can already be found in the respective master data - for both market partners: Company A receives the grid operator's data as the installation or expansion date. However, the customer enters its own data in its master data. In addition, this process is repeated every month due to the contractually agreed monthly billing.

An additional source of error is the change in the metering point designation to the market location, which came into force in February 2018 (see BDEW, in particular page 11). The changeover results in allocation problems for the individual metering points, which again cause a rejection in the event of discrepancies.

Options for optimizing the billing process - outsourcing and its variants

In this case, the solution for optimizing the process is outsourcing, as it is the simpler and more cost-effective option compared to automation. The reason for this decision lies in the high susceptibility to errors and manual interventions with individual decisions. The implementation of automation would mean a significant investment that would not be amortized due to the limited contract terms. In addition, automation would not be able to guarantee an error-free process.

Outsourcing is intended to enable the finance department to focus on core competencies, control and planning as well as management support, which would otherwise be lacking for capacity reasons. The service provider, on the other hand, has more free capacity to check the metering points more closely and thus reduce the susceptibility to errors.

Strategic dimensions in make-or-buy decisions

The usefulness of outsourcing can generally be determined by three factors:

• Strategic dimension
• Cost dimension
• Qualitative dimension.

The strategic dimension means handing over processes that a service provider can perform more competently. The Costsdimension provides a comparison of the costs between in-house and external procurement. The qualitative The second dimension states that the process should have the same qualitative value as in its own implementation. Capacity utilization and risk-economic considerations also play a decisive role in the qualitative characteristics.

Capacity utilization is the department's bottleneck asset. Assuming the same value, it therefore makes sense to outsource the process to an external service provider.

Types of outsourcing: The concrete path to process optimization

The implementation type of outsourcing can be defined by the following five influencing factors:

• Company affiliation
• Location
• Scope of services
• Number of service providers
• Time.

Regardless of the specific reference to the billing process in the example scenario, these five influencing factors probably play a role in the decision between the outsourcing variants for every process optimization measure.

1. company affiliation

The Company affiliation distinguishes between internal outsourcing, i.e. within the company or Group, and external outsourcing, i.e. outside the Group. External outsourcing is intended to improve the value chain by making the outsourced processes more variable, innovative, cost-effective and optimized. Internal outsourcing usually takes place in the form of a shared service center and takes over certain similar functions or processes for several business units.

2nd location

The location analysis is divided into offshoring and nearshoring. In offshoring, the central aspect is to outsource the service to a company. for example in India to outsource. Various options here are an in-house branch or outsourcing to an external service provider in the offshore region. Nearshoring describes the outsourcing of the process in countries close to the outsourcing company. Experience has shown that this involves from a European perspective increasingly to Eastern European countries.

3. scope of services

The scope of services is about the amount of outsourcing. The three options are partial outsourcing, total outsourcing and business process outsourcing. Partial outsourcing is characterized by the outsourcing of individual tasks of a process, whereas total outsourcing involves the entire process. With Business Process Outsourcing In addition to the entire process, the technology required for operation is also outsourced.

4. number of service providers

Weighing up how many service providers to outsource a process to is the decision between single-sourcing and multi-sourcing. The advantages of single sourcing are greater transparency and standardization and better control options. The disadvantages are the risks of service disruptions or failures and the lack of competition, which has a negative impact on productivity. Multi-sourcing can reduce costs through open competition between several service providers and guarantee the best possible quality. However, the high level of negotiation effort and possible complications in interface management have a negative impact.

5. time

The time factor, with the aspects of insourcing and back-sourcing, deals with the return or integration of externally provided services into the company. Insourcing differs from back-sourcing in that the process is newly integrated into the company and is not back is relocated*.

Optimize the billing process: For implementation in the company

The billing process described above is a highly individualized process with a high level of manual effort and enormous communication requirements between the companies. As a result, capacity utilization is all the higher. In turn, the capacities used up as a result are not available for other activities.

In the specific application to the invoicing process, this has a noticeable impact on company A: the small size of the team makes it more difficult to find a replacement and take on additional tasks in the event of incidents such as illness, vacation or additional workload on individual projects or processes. Outsourcing the process would therefore not only allow the finance department to focus on its core tasks, but also provide greater planning security for time management.

The right approach to outsourcing invoicing

The high complexity and individuality of the process makes it difficult to find an optimal solution, which means that an individual assessment of the company's individual factors is necessary. The optimal approach from the factors described above for company A is composed as follows:

In the present case, a total Outsourcing the most suitable way, with the addition that the external service provider has access to the necessary data from the system. This would be a mixture of total and business process outsourcing.

Due to the special requirements and frequent customer communication, the process is suitable for the issue of internal or external outsourcing better for external outsourcing. Processes that can be highly standardized and are not very close to the customer are particularly suitable for internal outsourcing to a shared service center. However, the high susceptibility to errors does not allow this standardization.

The question of the Number of manufacturers is easier to answer. The process can be divided into a maximum of two parts, invoicing and incoming payment management. Due to better specialization and communication, the process is ideally transferred to another company. To optimize costs, the invitation to tender should apply to several service providers, although multi-sourcing should not be practiced.

Finally, the Location determined. Outsourcing just one process to a low-wage country would not justify the costs and risks compared with the returns. The same applies to nearshoring. Both alternatives could possibly lead to communication and quality problems. Outsourcing the service in your own country appears to be the most suitable method in this scenario: the benefits offset the higher costs and, in this case, the main reason for outsourcing is capacity utilization - not cost reduction.

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For the introduction of new processes, see also the article "Project marketing - the key to interest, acceptance, commitment and support" here on the TCI blog.

This article was written by Professor Dr. Peter Steinhoff in collaboration with Maximilian Plutka. Mr. Plutka completed his B.Sc. in Economics at the Julius-Maximilians-Universität in Würzburg and is currently studying for a Master's degree in Business Administration with a focus on International Accounting at the Hochschule für angewandtes Management in Ismaning/Munich. He works as a working student at E.ON Metering in the Controlling department.

(Cover image: © sebra | stock.adobe.com)