Edcon: Finance and Accounting BPO

Two years into a 10-year relationship with Accenture, Edcon had achieved significantly improved performance, operational excellence and cost savings.

Edcon (Pty) Ltd. is a leading clothing, footwear and textiles retailing group in Southern Africa, with a market share of more than 30 percent. The company has grown to 10 retail brands trading in more than 1,200 stores in South Africa, Botswana, Namibia, Swaziland and Lesotho. Through recent acquisitions, Edcon’s retail business has added top stationery and houseware brands as well as general merchandise to its portfolio. For fiscal year 2009, Edcon’s consolidated revenues were approximately $3.4 billion.

Over the past decade, Accenture and Edcon have built a highly effective relationship to transform Edcon’s IT operations through an innovative application outsourcing arrangement. The success of the relationship is not only reflected in Edcon’s continuous cost improvement, operational excellence and enhanced service delivery but also in the way the two companies have worked together to position the business for long-term success.

Based on the success of the initial application outsourcing relationship, Edcon chose to expand the relationship in 2008 to include end-to-end accounts payable services. The company’s existing accounts payable function was marked by inadequate disciplines and inefficiencies largely due to lack of automation and poor service delivery.

Further challenges included the need for excessive manual intervention, lack of data visibility and insufficient reporting. Rather than making the significant up-front investment in tools, infrastructure, business process re-engineering and the up-skilling of employees required to transform this non-core finance function, Edcon chose to embark upon a strategic relationship with a trusted service provider.

Edcon chose Accenture as its outsourcing service provider based on our proven track record of delivering measurable improvements in business performance through finance and accounting business process outsourcing; our research-based understanding of the role that outsourcing can play in driving high performance; and the proven capabilities of thousands of professionals across the Accenture Global Delivery Network.

Find out how Accenture helped transform Edcon’s IT operations through an innovative application outsourcing arrangement: Edcon: Application Outsourcing.

The 10-year accounts payable business process outsourcing relationship began when Accenture transformed and automated Edcon’s data capture, processing, payment and reconciliations functions, as well as other ancillary services for its third-party expenditure. Edcon then transitioned the optimized functions to a dedicated Accenture delivery center in Johannesburg.

During the transformation and transition phases, Accenture:

• Created a managed environment in which effective controls could be applied to minimize risk.

• Standardized, automated and optimized the end-to-end accounts payable process, from supplier master file maintenance and invoice receipt through to supplier reconciliation based on Accenture’s in-depth knowledge of Edcon’s business.

• Defined the roles and responsibilities of both Accenture and Edcon, providing transparency and accountability for service delivery.

• Implemented a structured reporting and risk management framework.

• Trained the Accenture staff members who would be providing the service to Edcon.

• Introduced a structured governance body to review operational performance and agree on continuous improvement initiatives.

"Accenture has implemented tools and processes that have given us much greater visibility into our operations, thus enabling much greater control," says Steve Binnie, Edcon’s CFO. "Through increased data visibility, we are also able to use the enhanced information at our disposal to extract insights that can further enhance our ability to apply operational excellence improvements."

Since transfer of service in 2008, the outsourcing of Edcon’s accounts payable function to Accenture has already delivered impressive results:

• Edcon has realized annual operational savings of 25 percent.

• Through process re-engineering and automation, 95 percent of Edcon’s invoices and 65 percent of its vendor reconciliations are processed electronically.

• Improvements in Edcon’s control environment have created measurable improvements in the quality of accounting processes, as demonstrated by the first-year reduction of invoicing exceptions by 13 percent and the implementation of a risk management framework for managing invoice disputes.

• Focus on innovation and continuous improvement initiatives have resulted in a significant reduction in working capital. Some of the continuous improvement initiatives include the reduction of early/pre-payments, complemented by discounts for early payments. These are benefits over and above those quantified in the initial business case for outsourcing.

Says Edcon CFO, Steve Binnie: "The significant transformation process of the accounts payable function, supported by enabling technologies, has contributed to a significant reduction in head count, and today the vast majority of the millions of invoices received annually are processed electronically. The outsourcing arrangement has also provided a robust governance framework and improved our control environment to tightly manage, quality and overall risk."