For many mid-market finance operations, finding an efficiencysolution may involve outsourcing. That's evident in Ames, Iowa,home to the North American Financial Shared Service Center ofSauer-Danfoss, a $1.2 billion company that designs, manufacturesand sells engineered hydraulic and electronic components for mobileequipment manufacturers.

Corporate treasury may be multinational, but making supplierpayments in North America is a classic middle-market operation.Sauer-Danfoss has put in place classic middle-market solutions byoutsourcing non-core competencies.

Sauer-Danfoss's shared service center plugged into twostate-of-the-art automated solutions by outsourcing supplierpayments and travel and entertainment expense processing andreimbursement to Wells Fargo Bank, explains Kim Sampson, manager ofthe center.

“When our North American facilities were transitioning to SAP in2005, we took a close look at our business processes and how wemight improve them in the future considering the move to SAP,”Sampson says. “Disbursing funds for supplier payments is not a corecompetency for us. Rather than setting up an internal solutionwithin our new SAP system to disburse supplier payments, we foundan efficient and cost-effective provider.”

The SAP payment program with a vendor master data inSAPdetermines who gets paid, how much, and when, she explains. “Wethen export the payment file to Wells Fargo, which disburses thepayments to our suppliers via check, ACH, and foreign wire.

“We essentially replaced a 16-step check printing process, whichtied up resources from accounts payable, IT and our mail room, plussupplies, with a one-step process,” Sampson notes. “Our SAP paymentprogram is completely automated and set up to run on a weeklyschedule. We use an SAP iDoc to package the payment informationinto something the bank can receive. The bank confirms receipt andverifies the number of checks, ACH, and wires and the dollaramounts associated with them. Then they take the file, divide itaccording to payment types, and send the payments along with theremittance information to our suppliers. There are no touch pointsfor us.”

The company's business case for this project calculated thatoutsourcing supplier payments would break even with the cost of itscurrent process if 80% of payments were converted from paper checkto electronic payment. “We're at 94% electronic payments now,” saysSampson, “so we've saved time and money by outsourcing.

“The shared service center typically generates 1,800 supplierpayments a month, covering approximately 15,000 invoices,” shesays.

Wells Fargo prints and mails check payments includingremittances to suppliers. Sauer-Danfoss will sometimes have thebank print checks and mail them back to the shared service centerin Ames. There's a reason, of course.

“Some suppliers require a coupon or remittance document with ourpayment,” Sampson explains. “We see this with government and taxpayments, and also with donations. Our HR team likes to send aletter along with the check for donations.”

The other efficiency gain came from outsourcing theadministration of the North American travel and entertainmentexpense process. Today, the company uses the Wells Fargo commercialcredit card program for 700 travelers and key purchasing employees,who charge T&E expenses and purchases to their company-issuedcredit cards.

“Prior to the commercial card, employees paid for their travelexpenses and used a spreadsheet template and extensive routing ofpaper to eventually be reimbursed,” Sampson reports. “Now employeeslog onto a Wells Fargo portal when it's convenient. Instead ofkeying information and numbers into a spreadsheet and totalingcolumns of numbers, they verify charges recorded on their statementand add a business description.

“Once they complete the approval of their monthly statement, theWells Fargo system sends their leader an e-mail recognizing thecompleted statement,” she adds. “Leaders then log into the WellsFargo portal to review and approve or reject their employee'smonthly statement of charges. It's a much more streamlined processthan before.”

To read more about innovative solutions employed bymiddle-market companies, see CashingIn on Technology.