FA BPS

• Types of business organisations:

  • Sole traders
  • Partnerships
  • Limited companies (Private and Public)
• Organisation is a group of persons who joined together to achieve collective goals with controlled performance
• Business Process Services (BPS) is contracting a specific business task to a third party provider
• BPS provides services for various business functions of an entity with agreed conditions for deliverables
• BPS combines process, technology, and people, covering tasks from payment processing to industry-specific processes
• Types of BPS areas handled:

  • Banking and Financial services
  • Insurance
  • Pharmaceutical
  • Manufacturing
  • Media and Information services
  • Retail and Consumer packaged goods
  • Telecom
  • Travel and Hospitality
  • Information Technology Enabled Services
• Merits of BPS:

  • Save costs
  • Specialised knowledge of BPS company
  • Professional services
  • Free from routine jobs
  • Concentrate on core business
  • Ready availability of workforce
  • Value added services
  • Save on infrastructure and technology
• DeMerits of BPS:

  • Service expectation mismatch
  • Lower than anticipated cost savings
  • Data theft
  • Intellectual property protection
  • Higher training costs
  • Monitoring costs
  • Compromising confidentiality
  • Loss of control
  • Information security
  • Customer dissatisfaction
• Horizontal BPO involves function centric outsourcing across different industry domains

  • Examples: procurement, payroll processing, HR, facilities management
  • Automatic Data Processing (ADP) is an example of a horizontal BPO vendor
• Vertical BPO focuses on providing functional services in limited industry domains like healthcare, financial services, manufacturing, and retail
• Current trend in F&A Outsourcing:

  • SAAS and cloud-based solutions gaining influence
  • Finance activities outsourced becoming more complex
  • Strategic audits, reports, and analysis now outsourced
  • Cloud computing, automation, social media strategy, and collaborative accounting are current trends
• TCS provides leading edge Finance and Accounting services using Value BPM framework

  • 'Touchless' procure-to-pay
  • 'Perfect order' in the order to cash cycle
  • 'Predictive close' in the record-to-report process
• General ledger is the chronological record of all transactions during a financial period, starting with the creation of Record (GL Code) until the publishing of REPORT (R2R)
• Ledgers are the primary books to book journal entries or transactions, while daily routine transactions are recorded in sub-ledgers
• Chart of accounts (CoA) is a list with a fixed structure in numeric or alphanumeric code to denote a particular general ledger account, organized within account types like Expenses, Incomes, Assets, and Liabilities
• Terminologies:

  • Cost Center: a unit accounted for expenses, like a department or product category with 4-character codes
  • Line of Business: describes products or services offered by a business, containing all Cost centers with 4-character codes
  • Profit Center: a unit generating income, treated as a separate business unit responsible for revenues and earnings
• Account Code is a six-digit field classifying financial activities and balances within the General Ledger, with the first digit indicating whether it's a balance sheet or income statement item
• Maintenance of CoA involves applying segment changes, deactivating unused accounts, restructuring cross-validation rules, crediting cost allocation rules, cleaning up cost allocation formulas, and organizing all country accounts
• Quality Check and Control for CoA creation includes authorization, review, approval, and confirmation processes to ensure accuracy and proper maintenance
• Benefits of CoA include expense classification, user-friendliness, support for various reports for management decisions, and correction in financial statements
• Creation of cost centers and profit centers within an organization helps allocate overheads and profits, used for budgets, variance studies, and estimation
• Intercompany Accounting involves transactions between entities within or outside a country, including purchases, sales, expenses, income, dividends, asset transactions, and fund borrowing
• Reconciliation is the activity where two sets of respective account ledger balances are compared to identify variances, ensuring financial statements disclose a "true and fair value" and provide evidence for statutory and regulatory compliance
• Best practices for accounting reconciliations include standardized balance sheets, tallying transactions and balances downloaded from ERP, storing supporting documents as backup, and having multiple reviewers for account transactions and balances
• Various reports in accounting include statutory reports like Director's report, Auditor's report, financial statements, and notes to financial statements
• Director's Report content includes the company's principal activity, business overview, key performance indicators, future developments, results, financial position, principal risks, directors' responsibilities, and auditor information
• Auditor's Report confirms if the accounts present a true and fair view of the company's affairs and comply with the Companies Act, signed by auditors
• Financial Statements include the Profit & Loss account, Balance sheet, and Notes to Financial Statements, detailing accounting policies, turnover, operating profit, tax details, dividend details, inventories, and borrowings
• General ledger is the chronological record of all transactions during a financial period, starting with the creation of Record (GL Code) till the publishing of REPORT (R2R)
• Ledgers are the primary books to book journal entries or transactions, while daily routine transactions are recorded in Sub-Ledgers
• Chart of accounts (CoA) is a list with a fixed structure in numeric or alphanumeric code to denote a particular general ledger account, organized within account types like Expenses, Incomes, Assets, and Liabilities
• Terminologies:

  • Cost Center: a unit accounted for expenses, like a department or product category with 4-character codes
  • Line of Business: describes the products or services offered by a business
  • Profit Center: a unit generating income, treated as a separate business unit responsible for revenues and earnings
• Terminologies:

  • Account Code: a group of accounts, a six-digit field classifying financial activities and balances within the General Ledger
  • Account Description: details of a particular account
  • Account Type: Revenue, Expenses, Assets, Liabilities
• Maintenance of CoA involves applying segment changes, deactivating unused accounts or cost centers, restructuring cross-validation rules, crediting cost allocation rules, cleaning up cost allocation formulas, and organizing all country accounts
• Quality Check and Control for COA creation includes authorization processes, review and approval by authorized individuals, and confirmation of COA creation to the initiator
• Benefits of COA:

  • Helps classify expenses at booking time
  • User-friendly
  • Supports gathering various reports for management decisions or corrections in financial statements
  • A well-constructed COA helps drill down expenses by Expense Type
• Creation of cost centers and profit centers within an organization helps allocate overheads and profits efficiently for budgets, variance studies, and estimations
• Cost Allocation involves allocating common expenses like Housekeeping, Rent, and Electricity to the Line of Business based on factors like headcount or floor space
• Quality Check & Controls for COA Process include different processes for control, ensuring correct account coding, maintaining separate accounts for different currencies, documenting knowledge, and reviewing trial balances for unusual variances
• Intercompany Accounting involves transactions between entities within the same company group, including purchases, sales, expenses, income, dividends, asset transactions, and fund borrowing