I recently noticed a post on one of the accounts payable forums that was searching for a procedure to handle a post-acquisition integration of the accounts payable (AP) function into a shared service center environment. Mergers and acquisitions have become so commonplace that they hardly raise an eyebrow in the general business community. They do, however, still have the ability to wreak havoc in the lives of the unfortunate AP staff members charged with integrating the financial processes of the acquired firms into those they currently manage or oversee.
The accounts payable function is particularly vulnerable to encountering a high degree of complexity and numerous obstacles while attempting such an integration. Virtually all of the inputs to the AP process are dependent on other systems over which AP exerts no control. The purchasing, receiving, general ledger, approval hierarchy, etc. systems of their own company and the billing/AR, credit, returned material, etc. systems of their suppliers must all operate smoothly to ensure functionality. The lack of quality vendor master data in the acquired company’s records (and perhaps also on the part of the acquirer) can be particularly problematic. In an acquisition scenario, all of these must be correctly transitioned on a coordinated basis to achieve success. If there is no central project planning then each function defaults to its own timeline requirements and the result can be chaos for AP.
I have managed over twenty such AP acquisition integrations in the shared service center for which I had responsibility for 12 years, and AP managers going through this continue to ask me if I know some algebraic-like formula that would help accomplish the task. The short answer was always: “It doesn’t exist”. There is an almost endless list of variables inherent in any AP integration process that makes the search for a consistent formula or neatly-wrapped approach nearly impossible. The myriad potential systems combinations and configurations along with all of the specialized procedures and work-arounds that inevitably develop in each AP department, as well as the skill sets and personalities involved in the process simply do not allow for such an easy switch approach.
Each AP consolidation I encountered had at least some unique characteristics. The only real consistency was that I found it absolutely essential to have a very robust discovery phase in which I and our team would be on site at an early point, making sure to connect directly with as many of those in corresponding positions as possible and gathering all the information we could about the existing process. The integration plan then had to be developed in accordance with the results.
Then there is the human side. Those same individuals that are so critical in this connection and information-gathering phase are the same ones that have a high level of concern about their future employment prospects or may even have already been told that their jobs will be eliminated. There is no way to make this a non-issue and, for me, the effect on those in the acquired organization was always the most distasteful piece of the experience. As you might expect, there were wide variations in the reaction and level of cooperation that followed. I was pleasantly surprised by the fact that the majority of those affected were very willing to assist once they had the person-to-person connection with those of us charged with the integration as they understood that we had not initiated the change and had a tough job to do. It was apparent that the human connection was critical in taking away the image of faceless, Gordon Gekko types on the other end of the deal. There were exceptions though, and it is clearly a time of high risk for fraud, error and non-performance so that a high level of vigilance is warranted.
Next week, I’ll continue this conversation with some suggestions about easing this integration process. If you have any comments or want to share some or your own experiences, please send us a note!