How Laing O’Rourke streamlined its financial processes by replacing multiple legacy systems with a single corporate performance management solution
By Rupert Madath, Delivery Services Director, EOH UK
With locations in the UK, Australia, Hong Kong, Canada and the Middle East and 15,000+ employees, Laing O’Rourke is a client-centric organisation that designs and delivers complex engineering and construction solutions for customers across a broad spectrum of project types in the building, infrastructure and natural resources sectors.
Prestigious projects include London 2012 Olympic Park, Heathrow Terminal 5, Hinkley Point C, The Leadenhall Building (Cheesegrater), Australia Pacific LNG Facilities, Al Raha Beach in Dubai, Liverpool Street Crossrail station and Hong Kong Mass Transit Rail.
Time for change
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For years Laing O’Rourke (LOR) had been managing its group financial consolidation with PwC’s CLIME system but, in 2011,it was felt that thiswas aging and unstable and not keeping up with the demands for speed and scalability that the finance team needed. LOR was over-relying on Excel to complete critical business processes that required a lot of manual interaction. The system was also slow and cumbersome when responding to business changes and offered limited reporting and analytics capabilities. Last but not least, the old system worked in GBP only rather than multicurrency and did not include an inter-company reconciliation tool.
LOR decided that the company’s consolidation system needed an upgrade and embarked on a journey that would transform how the finance team analyse and report data.
What started as a simultaneous statutory and group management consolidation implementation developed into five distinct project phases over the course of a transformational six-year period.
In August 2011, LOR settled on the need for a single system to manage all its existing and anticipated financial consolidation and forecasting needs.
“The finance team wanted a consolidation system that would also be a strategic planning, advanced reporting and analytics tool that would facilitate faster access to data and make financial processes more efficient. We wanted both management and users to feel they could fully trust the data and processes,” said Graham Pattison, LOR’s FP&A Systems Manager.
LOR’s goal was to achieve refined financial processes as part of a phased implementation.
The solution – a technology-led financial transformation journey of five phases
Once requirements were agreed, the finance team began looking at solutions offered by corporate performance management suppliers and, following an exhaustive competitive tender with Tier 1 consolidation vendors, selected CCH Tagetik’s CPM system.
“CCH Tagetik’s key selling point was that its CPM solution is extremely user friendly and flexible enough to provide consolidation, budgeting, forecasting and bespoke solutions using out of the box functionality,” said Pattison. “We also wanted a system that could deal with complex solutions with simplicity and that finance could maintain and support without continuous reliance on IT and consultants.”
Once the vendor had been selected, LOR needed an implementation partner and EOH demonstrated the technology expertise, consulting and knowledge transfer skills LOR was looking for.
Phase 1 – Statutory and group management consolidation
LOR has two distinct consolidations: an annual, statutory consolidation of legal entities that produces consolidated group statutory accounts, and a group management consolidation that simultaneously looks at actuals and forecasting. As part of LOR’s statutory process, the two consolidations need to be reconciled at year-end.
“We kicked off the more complicated management accounting project in November 2011 and went live in May 2012. While we were about two thirds of the way through, we began incorporating the statutory accounting phase. That took 6 to 7 weeks to implement which allowed us to be ready for our March 2012 year-end.”
The LOR finance team configured the entire statutory accounting phase with EOH guiding and advising them.
The management accounting process needed more design input from the implementation partner to support LOR’s specific requirements. LOR had a number of ‘laingorourkeisms’ where things are reported in a way that requires bespoke design.LOR worked collaboratively with the vendor and implementation partner to find solutions.
Phase 2 – Streamlined tax calculation process
In March 2013, the journey continued with the financial tax pack implementation.
LOR wanted to streamline its existing tax calculation and submission process and for the tax numbers to automatically feed into group consolidation sitting in the CPM platform.
“EOH incorporated tax submissions into the statutory consolidation by integrating a bespoke Excel pack into the CPM statutory application.Prior to year-end, the tax team input bespoke tax data directly into CCH Tagetik. At year end, the pack combines the statutory consolidation and tax data, calculates the tax entries and posts the outputs directly back into the statutory consolidation,” continued Pattison. “The CPM solution process portal caters for submission and lockdown for accounting and tax separately. The CPM platform emails the tax team to inform them when an accountant has performed a late adjustment which ensures that accounting and tax are in sync and provides significant efficiencies”.
Phase 3 – Long-term contract forecasting
In January 2015 LOR completed working on yet another bespoke application, long-term contract forecasting.
“We are a long-term contracting business and have to forecast costs and calculate margin at any given point in the contract life.Until then,LOR had used an old SAP BW solution that we no longer had the in-house skills to manipulate properly. Our implementation partner helped us build a whole new contract forecasting system within the CPM solution. The long-term contract data application now feeds the management accounts application so that everything sits in one single solution.”
The long-term contract forecasting project not only replaced legacy systems; it also enabled LOR to automatically extract its financial data from CCH Tagetikand utilise it within the Data Warehouse and other external reporting solutions for non-CCH Tagetik users on a timely basis.
Phase 4 – Budgeting
LOR’s management accounts consist of a monthly 5-year forecast that is compared to the previous forecast every month. But the company also wanted to start collecting separate fixed budget versions that they could also use for comparison. In March 2017 the finance team decided to create an additional data entry process to collect the budgets on the same basis as the management accounts. “This project was incredibly straight forward because this functionality was out-of-the-box within the CPM solution. Something that could have taken six months was achieved in six weeks instead, with the majority of the effort being collaborative LOR and the implementation partner’s design work and testing.”
Phase 5 – Cash flow planning/liquidity forecasting
This is an ongoing phase which will allow the company to efficiently manage short term liquidity by forecasting and analysing direct cash flows. Pattison expects the project to be finalised by mid-2018, it’s just a matter of final testing, UAT and roll-out.
Since deploying CCH Tagetik with EOH, LOR financial processes are much more streamlined. “We previously needed accountants to do tasks that are now performed by the CPM solution. Currently the team can focus on more value-added activities like better analytics and decision-making – and everyone has increased confidence in reporting and analysis.”
LOR’s finance team are far less reliant on IT and consultants, which means they are much more reactive to business change. The team can analyse a piece of information in a heartbeat whereas before it could take days.
“Reflecting on the different projects, the financial and management accounts were really about replacing and improving existing systems but the new tax process and long-term contract forecasting are where the major added value is seen. The projects resulted in significant effort reduction and improved the decision-making process making a real difference to LOR’s business”.
The tax pack project changed complicated, risky, resource intensive procedures into a click of a button that allowed the team to focus on tax management rather than the process itself. It also guarantees that robustness LOR wanted and needed.
LOR’s finance team has a number of other operational projects to implement in the future, the collection of non-financial data being one of them. The team also wants to incorporate individual subsidiary statutory accounts into the CPM solution that can cater for any differences to the group consolidation. EOH consultants will be key partners in these future phases because they know LOR’s processes inside-out and are best placed to add real value to the ongoing development.
LOR’s finance team couldn’t do what they do now with their old systems. And having an implementation partner who understands exactly what you want from the start and who recognises the context in which you are trying to implement is key as it will keep the total cost of ownership low and enable self-sufficiency. This is crucial as it allows rather complicated solutions to be implemented straight-forwardly by finance people without the need to hire expensive IT consultants.
It’s been a long, transformative journey that has helped LOR become more visionary with the use of technology. And it’s left LOR wanting for more, keen to learn what else they can do with the CPM system.