Shifting regulatory environments, compliance obligations, and tax laws around the globe are increasing challenges for businesses using legacy systems. The Workday Enterprise Management Cloud offers a new approach geared toward the future.
The increasing complexity of doing business on a global scale presents new challenges for organisations and having an agile enterprise resource planning (ERP) system is more important than ever.
One of the largest challenges of legacy ERP systems—particularly for multinational enterprises operating in a variety of jurisdictions—lies in meeting country-specific regulations, currencies, and compliance obligations. (Briefly, ERP refers to the management of a suite of software applications necessary to operate a business and might include finance, human resources, supply chain management, customer relationship management, or inventory management in a single system.)
Global ERP strategies fall into one of two broad categories: dispersed or centralized.
Dispersed ERP: Separate Systems
As a result of its evolution, a large multinational organization typically operates with a large corporate general ledger, to which headquarters will expect subsidiaries to submit their financial results. Often, the central office will conduct global planning, account reconciliation, and business analytics from the general ledger, too.
Meanwhile, subsidiaries in other countries are effectively left to procure their own local finance systems, which can leave them operating independently of the parent company until it’s time to report results. Having a local finance system also requires spending time and effort on local compliance and reporting obligations in the jurisdictions where they operate.
The financial data, located in local ERP systems, is then summarised, and sent to the parent company. This approach might work on a basic level, but it also begins to limit the overall organization’s operational agility because making changes to their reporting dimensionality isn’t a simple question of tweaking a single ERP system. Rather, it involves coordinating those changes in each country’s specific ERP system. That can mean a company’s goals can’t easily be replicated at the individual country level.
It also means that a self-contained, country-specific finance function carries a high cost due to the need for manual reconciliation of data fed from underlying reporting general ledgers back to the centre.
Lastly, dispersed ERP systems can hinder the amount of insight a company is able to produce and can cause delays, due to the lack of a common dataset.
Centralized ERP: A Top-Down Approach
In the reverse scenario, a centralized ERP strategy is one in which enterprises have attempted to roll out a global ERP system. Again, taking the example of a multinational company that operates in various countries around the world, this approach involves a focus on group reporting and allows corporate headquarters to enforce its accounting policies.
As might be expected, the largest challenge is reversed.
What this means is that a corporate reporting model can’t meet local reporting requirements, leading companies to spend additional time trying to configure their global ERP systems to meet the various regulatory obligations in each country, which in turn can lead to a degradation of reporting capability.
Of course, there are some benefits. A centralized ERP system typically simplifies the reporting process at headquarters and allows for economies of scale. Arguably, the control environment is greater because transactions have to be routed to flow through the system, and there’s a greater level of insight into transactions. Organizations can create a core data model that allows for data such as projects, invoices, or suppliers to be captured similarly, but this approach also makes it challenging to meet local reporting needs.
Ultimately, each approach described above presents its own challenges.
How, then, to drive down the cost of finance and ramp up the insight and the efficiency with which global finance functions operate?
“Workday approaches the needs of global operations with the concept of configuration as opposed to customisation.”
The Enterprise Management Cloud: A New Approach
The more companies look to future competitiveness, the greater the need for adaptability from an ERP system—or the Workday Enterprise Management Cloud. Shifting regulatory environments, compliance obligations, and tax laws around the globe make it ever more critical that flexibility and scalability are built into how organizations operate. Legacy systems, which often require significant IT projects and resources to implement the correct structures into the workflow, simply will no longer cut it.
Additionally, the complexity of legacy ERP architectures have made managing global business more cumbersome. Transacting across borders typically means consolidating data across ledgers, which brings its own set of problems. Those can include the introduction of third-party reconciliation systems, which involves moving data out of the core system, and finance staff hours spent on non-strategic activity just to get the books closed on a monthly basis.
In an ideal situation, all of this occurs in order to extract information to guide the business, share insight with stakeholders at headquarters, and provide regional offices with data needed to make local decisions.
Workday’s Approach to Country-Specific Needs
Workday approaches the needs of global operations with the concept of configuration as opposed to customization. While all Workday customers receive the same version of our enterprise management cloud software, it is also heavily configurable to account for localized needs. At the same time, all customers are always on the latest version of Workday, with the most up-to-date innovations, enhancements, and security features.
The following are some details of Workday’s framework approach to an ERP system.
- Workday Financial Management has been translated into 11 languages, and its users are able to enter transactions in whichever language they prefer.
- Configurations are predelivered for certain countries, while customers have the ability to build out configurations further to more specific needs.
- As a multientity enterprise management cloud, Workday allows each legal entity under the parent organization to handle various currencies and keep financial information within the core system.
- Whether using generally accepted accounting principles (GAAP), international financial reporting standards (IFRS), or some combination of the two across the organization, Workday customers are able to specify different accounting treatments and adjustments within the workflow. Workday is also able to map a corporate account code structure to allow for compliance with reporting standards in other jurisdictions.
- The rules around document sequencing, historically a pain point for multinational organizations, are built into Workday’s predelivered configurations. Some countries require document numbering to be reset at specified intervals, whether quarterly or annually, while others do not. Workday’s banking and payment engine integrates with global financial institutions to provide a streamlined process.
- Workday’s robust tax engine allows users to capture indirect taxes, whether it’s value-added tax (VAT), goods and services tax (GST), sales tax, or withholding tax. Customers can easily input changes in tax rates and effective dates, while also capturing individual transactions and meeting various reporting requirements for specific tax authorities, including the increasingly common standard audit file for tax (SAF-T).
- Using the Pagero Network, Workday customers get instant access to millions of companies and end-to-end compliance with local e-invoice infrastructures such as the Pan-European Public Procurement Online (PEPPOL), FACe (Spain), Chorus (France), SDI (Italy), and ESPAP (Portugal), among others. Pagero also supports hundreds of e-invoice and electronic data interchange (EDI) standards, enabling an easy, scalable rollout around the world.
“We work with best-in-class technologies that allow our mutual customers to go 100% digital from day one.” – Alexander Jansson, Vice-President, Partner Development, Pagero
Support for E-Invoicing Integration
In addition to cross-border ERP capabilities, Workday customers are also able to add automated, compliant, and secure multinational electronic document functionality to the enterprise management cloud. Pagero, a Workday partner, provides customers the ability to digitize and automate their financial processes, achieving data accuracy, operational excellence, and real-time visibility across their entire purchase-to-pay (P2P) and order-to-cash (O2C) processes. Additionally, Pagero automatically enables Workday users to easily meet local regulations in all the markets where they operate.
Using the Pagero Network, Workday customers can integrate the exchange of business documents with all their suppliers and customers, regardless of their size, ERP system, IT maturity, or preferred format. Pagero combines a multitude of exchange channels so that Workday ERP customers can receive and send all invoice and order documents electronically, while ensuring compliance with local regulations.
Alexander Jansson, vice president, partner development, at Pagero, said in a recent webinar that e-invoicing is quickly becoming the norm—and, he explained, it involves more than simply converting invoicing documents into a PDF. E-invoicing regulatory obligations vary by jurisdiction, and automating those processes can ensure compliance.
For instance, the PEPPOL electronic standard is becoming more widely used in Europe and parts of Asia, and Pagero supports organizations in connecting to this common framework for fast and secure borderless trade. (PEPPOL, a common framework for e-document message standards and a communication network, enables businesses to communicate electronically with their counterparts in the procurement process, locally and worldwide, increasing efficiency and reducing costs.)
Pagero’s support includes the ability—ready for out-of-the-box use within Workday—to enable distribution and transformation to e-invoicing according to local requirements for each country, whether they need a digital signature or have specific content requirements.
“We work with best-in-class technologies that allow our mutual customers to go 100% digital from day one,” Jansson said.
“Using the Pagero Network, Workday customers get instant access to millions of companies and end-to-end compliance with local e-invoice infrastructures.”
Pagero has partnered with Workday to provide a Smart Business Network that connects buyers and sellers for automated, compliant, and secure exchange of orders, invoices, and other business documents. By combining the powerful and flexible technology foundation of Workday with the open, cloud based Pagero Network, customers can digitize their P2P and O2C processes to respond to rapid changes in business, markets, and regulations.
When looking for a provider, Jansson added, it’s important to have a partner that can help from a knowledge perspective, as well as one that can provide a product that can scale globally.
“When it comes to e-invoicing, it is truly something for which you need to have a central strategy and finding a suitable supplier that can help you both today and tomorrow is going to be extremely important,” he said.