Why Payhawk? How to make decisions to implement new finance systems and improve efficiency.

Payhawk is an all-in-one corporate spending solution that helps you manage and control global spending. You can read more information about the solution on the website, BUT I want to discuss how we decided to implement Payhawk.

When making decisions about purchasing a new solution, we should always be very specific and clearly understand the current and future state of the workflows with a new solution. We need to know the value upfront. This sounds simple, but in reality, the decision-making process for many companies is challenging. Sometimes, the decisions about purchasing new software are made based on ‘like’ or ‘do not like,’ so it is a more high-level estimate of how much value it could bring. That can be made based on software cost, implementation fee, FTE, etc. When done like that, the company can lose a great opportunity to benefit from new software and new technologies if they see the high software cost/implementation cost and decide to decline. Another case is when an expensive solution is implemented, but the expected value doesn’t come.

I will share how we analyze the processes to understand their efficiency and see a clear picture from implementing a new potential solution.

Step 1: Know your destination.

When we travel, we usually know what we will do in a destination location, whether we can book a hotel, rent a taxi, rent a car, go to Disneyland, etc., so we know upfront what actions/activities we can do there.

The new software looks the same; we need to know exactly what we can do with that software, and a short demo/website can give us a high-level overview. When it comes to Payhawk, we knew that we could do the following:

• Manage per-diem requests;
• Manage mileage requests;
• Manage corporate cards, both virtual and physical;
• Manage reimbursements of personal expenses;

Today, you can also get Purchase Order management, budgeting, AP processing, and more. When we began evaluating Payhawk, its features were still expanding, but our needs focused on four key workflows.

Source: https://payhawk.com

Source: https://payhawk.com

Step 2: Know your current state.

We have a list of workflows that Payhawk can cover for us, so we must understand how the company manages those processes today to determine our current efficiency level. If we want to change something, we must know where we are today. If we want to travel to a destination location, we also need to know our departure location.

We described the four workflows that we see as potential from Payhawk with a simple approach of using five phases of the process and five flows that connect them. For example, manage per-diem requests can look like this:

We have the start of the process and the end. Also, we have a sequence, where 1 is a phase and 1-2 is the flow that connects to phases ‘1’ and ‘2’. This process can be represented as a cycle, where you have five phases and five flows. You can read about this approach here.

Summary: We have defined four processes and their flow in a straightforward, transparent way for everyone. If we use BPMN here and use best practices in describing business processes, then such a diagram or scheme would be overcomplicated. We can always use five phases / five flows to describe any method for simplicity in making a decision.

Step 3: Define the attributes to measure yourself

Now that we have a list of processes and their steps, we must design the attributes that will help us understand their efficiency. The idea is to have a list of attributes we can relate to each phase/flow of the process and assign a value to each.

We have designed the following attributes:

• Role. This indicates the role of the person who performs the step or flow;
• System. The system where the action is taken.
• Object name. This is the outcome of the action; it can be, for example, ‘reimbursement request,’ ‘expense report,’ ‘bill,’ ‘approval,’ etc. It represents the result of the action, which is always tangible.
• Object volume. We want to know how many objects are created, and this attribute allows us to track the quantity of the created object.
• Time per one object. This attribute allows us to determine the time needed to create a result (object). For example, it can tell us how much time we need to create a ‘reimbursement request.’
• Payroll cost. Represents the average salary per minute for different roles involved in the process.
• Software cost. Represents the software cost per object.
• Processing cost. Represent both costs (payroll & software) to process one object.
• Data accuracy. Represent the percentage of the accuracy of data entered by the employees.

Summary: Attributes allow us to understand a few key components, including time and money, which are critical in measuring the efficiency of any process. Apart from time and money, those attributes are very indicative and can be used for a deeper analysis.

Step 4: Assign the attributes and define the values

Now, we need each phase/flow (where possible) to assign attributes and define the values. This can take time, but this would give a clear and accurate picture of the current process efficiency, which is essential to making decisions about transformations.

It is better to take the data for one year regarding the number of objects created; the rest of the attributes are less static within that period. First, you must add the values for each phase/flow (where possible) and then aggregate them at a high level.

Examples: Level I - assign attributes to phases/flows

Here, we have a phase called ‘Expense Submission,’ where we add our attributes and enter the values.

Example: Level II - aggregate attribute values on a high level

When information for all the phases and flows is completed, we can aggregate data to see the totals and the complete picture of the process.

Summary: We now know how much time and cash we spend executing the process and can answer questions such as: Who spends most of the time? Which tools are we using, and which take most of the time? What steps of the process are most expensive? etc.

All this comes down to one key metric: the processing cost of the object. In that example, the cost of processing one per diem in the company is 20 EUR.

Why is it important? You can use that metric to compare with a new potential solution, or you can use it to see how much the processing of the per-diems would cost your company when you scale, or if you need to hire any new person to cover the scope, etc.

Step 5. Cost & Time

We know our current cost/time for processing four main workflows. For example, they can look like this:

• Processing one per diem - 15 EUR (example)
• Processing one mileage request - 15 EUR (example)
• Processing one corporate card usage - 10 EUR (example)
• Processing one personal expense - 10 EUR (example)

We also know the quantities for each process over the year. For example, this can be:

• Per-diem requests within one year - 250 (example)
• Mileage request within one year - 50 (example)
• Corporate card expense within one year - 5000 (example)
• Personal expenses within one year - 500 (example)

Processing those workflows costs the company - 59k EUR with current systems/processes. This amount includes the software cost and payroll cost.

It is time to get the values for those processes with Payhawk.

Step 6. Get the Cost & Time for Payhawk

To make the right decision, we need to know the future cost of processing all the processes. So, how do we get that data? You can have demo calls with the Payhawk team and ask for a referral call with one of their customers (we have made such calls). What is unusual is to get a trial period so you can test the system and validate all the values.

The goal is to get the values for the attributes we would have in the future with Payhawk. This would allow us to see the difference between the current and the future states.

You can visit the Payhawk site to get the information about the product and request a demo:

Source: https://payhawk.com

You can also ask to speak to existing Payhawk customers, where you can ask questions and obtain processing time or the average time employees spend processing the documents. Please ask the Payhawk team to organize such a meeting.

Summary: We need to get the values for the attributes so we can build the future state of the processes.

Step 7. Compare and make a decision

We can compare and decide what to do next when we have data for both states—an example of how you can compare the data for one of the processes.

You can see that even without additional explanation, the processing cost with Payhawk is much lower. Apart from the monetary and time impact of using Payhawk, we have another side of this efficiency; all the time we have reduced with Payhawk is giving back to the employees so that they can focus on doing business and not on back office activities. That is why we can have direct and indirect impacts from transformation when we analyze a new solution.

Direct impact:

• Time reduction for employees.
• Processing cost reduction.
• Period-end close time reduction.
• Improvement of the UI/UX.
• etc;

Indirect impact:

• Employees are getting more time to perform other tasks, which leads to gains in other areas of the business.
• The data accuracy at the end of the day is the same. Still, there is a big difference when the data accuracy becomes 100% along the process because, with Payhawk, the data accuracy was from the beginning (when employees enter the data) compared to what the company had before. This leads to less work for accountants during the review and the reconciliation, as a result, during the period-end close.
• etc;

Summary:

It is not always the benefit of change or transformation on the surface, and sometimes, we look only at the surface to make a strategic decision, which is occasionally OK. Still, regarding business processes and efficiency, we need to spend more time first to understand ourselves and secondly to know where we can be in the future; then, it is a technical question of how to get from point A to point B.

Gartner research finds that 85% of finance teams today are in the midst of a finance transformation initiative. Success isn’t assured. This is no easy feat, as 70% of finance transformations fail — they don’t deliver on their forecast outcomes or cost objectives.

With Payhawk, you can increase success rate to 99,9%.