Vino Pte Ltd: Finance Function Consolidation and Process Review

This report analyzes the Accounts Payable (AP) process and finance function consolidation for Vino Pte Ltd, a wine distributor experiencing rapid growth in the Asia Pacific region. The report begins with a review of the existing AP process, including invoice handling, approvals, and payment procedures, identifying areas for improvement. The core of the report focuses on the consolidation of the finance function, considering the establishment of a Shared Service Center (SSC) in either China or Malaysia. A detailed business case is presented, evaluating both quantitative and qualitative factors such as setup costs, running expenses, government incentives, and staffing requirements. The analysis includes a comparison of costs and benefits associated with each location, leading to a final recommendation for setting up the SSC in Malaysia to reduce overall costs and improve efficiency. The report concludes with a summary of the findings and their implications for Vino Pte Ltd's financial operations.

Vino Pte Ltd.
PROCESS REVIEW AND CONSOLIDATION OF FINANCE FUNCTION

TASK 1:Process Design for AP
Process
 Invoice
 Approval
 requestor 1.Receive and check
invoice. Prepare
voucher and sign
invoice and send for
approval
2.Review and approve
invoices .Approv
e?
4. Submit to
AP Team
3.Follow up
with the
supplier to
rectify the
error
A

TASK 1: Process Design for AP
Process
 AP Staff
 Payment Officer
A Booking iparking
entriesnvoices,,che
cking and posting of
invoices
Passing invoices
AP Manage for
signng vouchers
Passing invoices to
payment officer for
final paymenr

TASK 1: Process Design for AP
Process
 Payment Officer
Receing invoices from AP
Manager,generate payment
proposal in SAP,Checking
the amount correction of
invoices
Amount payable
through cheque is
written and sent to
finance director and
second approval for the
signature in check
For electronic payment the file
uploaded to the HSBC web Bank and
Two approver by logging into the
same web approve the payment

TASK 2:Consolidation of Finance
function
 Our understanding
 Vino Pte Limited is engaged as a distributor of wide collection of wine in the Asia
Pacific region with the rapid expansion noticed primarily in the countries like
China, Korea, Singapore, Malaysia and Australia having its headquarter based in
Singapore. It was established in the year 1990 and has seen double digit growth
for past five years (Abdullah and Said).
 But its CFO Kerry Tan has noticed that with its rapid growth the size of its finance
team too has increased to a considerable size and the present strength has
reached to more than 150 resulting into the rising finance function.
 Hence in order to control the same it is in the process of thinking about to set up
a shared service centre so as to centralise their finance process for which they
are considering two options either China or Malaysia (Boghossian).

Functions to perform in the SSC
 The major functions to be performed in the SSC are explained hereunder:
a. Giving a check to the invoices received by the department. Then preparing the
voucher for the payment and getting it approved from the superior authority.
b. The AP staff shall affix a stamp of the date on which it is supposed to be
received. preparation of the excel sheet for al the invoices received (Kaufmann).
c. Checking of all the invoices so as to ensure that the same has been approved and
if it not approved by the appropriate authority then send it back to the
appropriate personnel seeking such approval (Johan).
d. Maintenance of the vendor record so as to conform the ,ode of acceptance of
payment by the respective supplier as there are two modes of payment, the first
being the cheque and the second being the electronic transfer.

Functions to perform in the SSC
 d. Booking of invoices on the SAP, parking of entries, posting of invoices.
 e. Passing the invoice to the AP manager so as to check the accuracy of the
invoices and vouchers so that correct document may be forwarded to the
payment officer by getting it approved from the AP manager (Borit and Olsen).
 f. Payment officer shall check the accuracy of the amount of the invoices based
on which the payment proposal shall be generated in the SAP.
 Finally the necessary signature in case of payment by cheque is to be obtained
and the same sort of approval to be obtained when the payment is to released
through the online mode (Truong, Partington and Peat).

Business case
 Evaluation of the option
( Quantitaiveanalysis)
a. From the table given it is clear that the setting up and running cost of the Malaysia and
China are USD$ 70k and USD $78k respectively.
b. Similarly in terms of incentives the Malaysian government is providing
the rental waiver of USD $ 300000 in a year , whereas the Chinese government is providing
the rental waiver of one year and six months of USD $540000 along with the staff
training grant of USD $1000 per staff too shall be additionally provided.
Further average cost of per staff per year in China is USD $21000, whereas it is
USD $22000 in case of Malaysia.
c. But the number of staff required by China Office is much higher in comparison to the Malaysia.
SSC Setup and Running Cost (Malaysia)
Estimated Cost ('000 USD)
Office Rental US D 25k per month
Renovation C ost US D 300k one off
Utilities US D 5k per month
Other expenses US D 10k per month
I ncentives off ered by Malaysian Government
1. Rental waiver for 1st year
SSC Setup and Running Cost (China)
Estimated Cost ('000 USD)
Office Rental US D 30k per month
Renovation C ost US D 400k one off
Utilities US D 3k per month
Other expenses US D 5k per month
I ncentives off ered by China Government
1. Rental waiver for 1st 6 months
2. Government will provide training grant of USD1k per staff hired

Business case
 If we consider the data presented for a single year then we can see that
for three years total running and setting up cost of SSC in China and
Malaysia shall be USD $ 210000 and USD $234000 respectively.
 Similarly the cost to be incurred per staff in Malaysia shall for the period
of three years in Malaysia shall USD $ 462000 and that of china shall be
USD$1071000 respectively (Sikka).

Qualitative Analysis
 If we see the quality wise features that is associated with both of the
options then following things may be noticed.
 A. The number of staff required in china is much higher in comparison
to the Malaysia.
 B. though the Chinese government is contributing the training cost per
staff hired as an incentive too in this case, but such incentive is not
sufficient enough so in terms of qualitative characteristics malaysia
seems to be the best.

Proposed Solution
The overall recommendation in the given case is presented hereunder:
a. In terms of quantitative factor there is no doubt that the Malaysian SSC
hall be most cost efficient.
b. Even the analysis of the qualitative factors too suggest the same thing.
c. As in the given case the major objective is to reduce the overall cost,
hence it is being suggested to set up the SSC in Malaysia only

Conclusion
 From the above analysis of the data provided in relation to the vino Pte
Limited it is quite clear that establishing the SSC is an efficient tool to
contro the cost incurred by the finance department f the organization
which can cause significant impact on its overall profitability.