Your ERP System is Leaking

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Your ERP System is Leaking

How to Use a Time and Labour Data Collection System to Plug Holes Caused by Errors, Fraud and Waste


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Hidden Leaks

Your payroll system is leaking, losing data and money by the minute, and you probably don’t even know it. Maybe it’s a slow drip of mistakes, or a weekly trickle of employee fraud. It could even be a broken main-line, the result of poorly designed interfaces, a flawed implementation, or an over- extended ERP system.

If payroll were hermetically sealed within your ERP system, there would be no risk of leaking expenses. But your payroll system is only as good as the data that goes into it. Time and labour data collection1 is a common weak point in any corporate infrastructure, one that usually escapes detection and can leak hundreds of thousands, even millions, of pounds each year.

Even if one overlooks fraud and waste, considering that 30 to 50 percent of a company’s costs are people costs, time and labour data collection is a great place to look for quick payback. By attacking your time and labour data pipeline, you can streamline business processes and cut costs.

Labour costs represent one of the largest expenses for any company, yet collecting information about that expense — hours worked, shift differentials, work rules — is one of the areas least exploited with regard to a company’s ability to automate business processes.

ERP overview and challengesCompanies implement ERP systems to address big-picture challenges related to back -office systems: redundant data and systems, costly maintenance and support, and simplified reporting. But ERP systems are not a panacea to all an organisation’s challenges. They can’t be everything to everyone.

As ERP systems move beyond the confines of corporate headquarters, the more rigid and less flexible they become. ERP systems reduce Total Cost of Ownership (TCO) through automation and by simplifying business processes; but as everyone knows, a business process that works in corporate headquarters may not translate effectively to the factory floor or warehouse.

It is when ERP systems are called upon to perform tasks outside of their “core competencies” that there is a higher risk of fraud and waste. One critical area where ERP systems frequently spring a leak is in time and labour data collection.

ERP systems work best when the workforce is homogeneous: a majority of hourly employees, consistent payroll policies, simple work rules, and few (if any) collective bargaining units. But most companies have a heterogeneous workforce: there are unions, local and departmental work rules, flexible working variations, and other factors that require a much more granular approach.

Your payroll system is

leaking, losing data and money by the minute, and you probably

don’t even know it.

Considering that 30 to 50 percent of a company’s

costs are people costs, time

and labour data collection

is a great place to look for

quick payback.


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For many companies, however, the need for flexibility to address complex work rules runs contrary to the philosophy behind an ERP system. And the point at which the need for flexibility meets the rigidity of automation and ‘one size fits all’ business processes is where most ERP systems begin to seep money. In the area of time and labour data collection, you could be losing up to 2 percent of total labour costs to fraud and waste each year and not even know it.

How to know if your ERP system is leakingIf you don’t have the Kronos Workforce Central® solution, that slow leak may already be a rushing torrent (see quiz below).

You could be losing up to 2 percent of total labour costs to fraud and waste each year and not even know it.

Quiz: is Your ErP sYstEm LEaking?

Common Weak Points in time and Labour Data Collection

Does your organisation suffer from any of the following symptoms?

o Employees manually filling out paper timesheets

o Data entry clerks re-entering time and labour data, either from a manual system or from a time and labour data collection system that does not directly interface with your ERP system

o Frequent requests to finance or IT for detailed labour reports that are time-consuming to compile

o Project plans to replace or upgrade your ERP system (Note: Bonus points if the go-live date has been pushed back or scaled back more than once)

o Inefficient time and labour data collection that results in a delay of two or more days between data collection and posting, or between data collection and payroll

o Managers who spend hours poring over data and spreadsheets to find errors, discrepancies, and attendance issues

o Repetitive review and approval cycles between payroll and other departments

o Occasional discrepancies between payroll and attendance (indicating that employees may be punching a time clock for other employees, sometimes known as “buddy punching”)

o Overtime costs that are incurred days and sometimes weeks before your financial organisation learns of them (too late, of course, to implement changes that would have prevented them)

o Complaints from employees about discrepancies in their paychecks (Note: If payroll is shorting employees, there is a good chance you are not hearing from employees who are getting paid too much.)

if you’ve checked two or more of these points, don’t look now, but your ErP system is probably leaking.


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After more than 30 years building tools for time and labour data collection, Kronos has identified several time and labour data trends that most companies overlook.

• unreliable data collection. Consider a company that has expended millions of pounds for an ERP system, and yet somewhere on a factory floor or in a retail outlet, an employee is filling out a timesheet with the stub of an HB pencil. If he or she makes a mistake, the only protection is the manager who signs the timesheet (while reviewing a dozen or more) or the data entry clerk who types the information into the ERP system. In most cases, the mistakes are honest ones — inaccurate memories or “guesstimating” practices (always round up, for example). But in some companies, there can be isolated pockets of unscrupulous employees who promote a culture of corruption, an accepted peer mandate to cheat the system. (“After all, everyone does it.”) With a manual time and labour data collection system, there is little protection from either honest mistakes or intentional fraud. On average, companies overpay employees by 1.2 percent because of payroll errors.1

• Failed interfaces with other systems, and data trapped between them. The best ERP system in the world doesn’t amount to much if you struggle to get reliable, consistent, and timely data in or out of it. Every time and labour solution provider will tell you that its data can go into your ERP system. The problem, however, is not likely to be the data going in, but the lack of data coming out. A company can’t report against it, or it is so rife with errors that the payroll or reports coming out are useless.

• Expensive and/or complicated customisations. Some companies attempt to automate time and labour data collection by extending their multimillion pound ERP systems via customisation - which may be acceptable until you attempt to upgrade or modify your ERP system. You then have to embark on another expensive and manual process to customise your time and labour data collection all over again.

• Lack of visibility. With manual time and labour data collection systems and some automated systems, there is no mechanism to catch an error in timekeeping data until it is sent to payroll and pay slips are produced. Worse, long-term trends such as excessive overtime evade notice and scrutiny until the data is aggregated by the finance department, and even then, can escape detection if there is inadequate reporting against it.

1 Research Report H103, Nucleus Research (January 2008). Sponsored by Kronos.

On average, companies overpay employees by 1.2 percent because of

payroll errors.


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Plug Leaks with a single solution

To plug these holes, Kronos Workforce Central extends time and labour data collection into your ERP system by automating it, while at the same time improving reliability of the data and reducing costs. Kronos, when combined with your ERP solution, can reduce risks often incurred from complex work rules, payroll errors, and compliance issues. With the Kronos solution in place, you can:

• reduce labour costs by automating time and labour data collection processes, resulting in savings from employees on the front line and from those who process payroll

• increase productivity by giving front-line managers real-time employee information and labour data to better manage workforce deployment

• Expand visibility into labour and critical workplace activities to drive better decision making from the shop floor up to the boardroom

In a study by Nucleus Research, companies achieved a greater return on investment from using Kronos for time and labour management because they were able to deploy the solution faster, reduce their payroll error rate, and decrease application costs.

the kronos method

The Kronos solution automates time and labour data collection using a two-pronged approach:

1. Kronos InTouch® data collection terminals enable employees to easily and efficiently track their hours. The logon process is as simple as swiping a barcode or proximity car, and/or using the biometric finger-scan option. Using biometric verification or identifications options assists in preventing fraudulent clocking.

2. Data is aggregated in Kronos Workforce Central, which manages complex work rules and feeds data through approved interfaces to your ERP system. It requires little or no customisation, and the system can be configured by non technical staff. The system can also generate its own time and labour data reports or feed the data into an ERP business intelligence (BI) system, if desired.

real-time visibility. Workforce Analytics provides key performance indicators (KPIs) that are directly affected by implementing a Kronos workforce management solution. This web-based dashboard displays KPIs for five best-practice workforce performance categories: over time, absenteeism, productivity, scheduling, and timeliness. These categories represent areas in which many companies’ work-forces frequently “leak” money.


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the combination of these two complementary products — the kronos intouch terminals and Workforce Central — enables companies to boost productivity and increase compliance while at the same time reducing costs.

kronos: Easy to implement and support

A new ERP implementation is often a lengthy and time-consuming experience. The backbone of a company is a successful implementation — and with so much riding on it, it has to be done right.

The challenge for most companies is that the current time and labour data collection system continues to leak from fraud, waste, and mistakes, and if you wait for your ERP system to go online, you may still have another year or more before you get around to implementing business processes or a technical solution to address it.

Companies can implement the Kronos solution quickly and begin reaping its benefits before a new ERP system is up and running. One reason for this relatively quick ROI is that customers can take advantage of the vast experience and engrained time and labour knowledge of its service and support professionals. Kronos has a 30-year track record of on-time and on-budget implementations, effective training approaches, and award-winning support.

The repeatable and structured implementation approach of Kronos is supported by strong project management and flexible education offerings that drive projects toward completion and accelerated ROI. What differentiates Kronos is our ability to:

• Understand your complex business needs

• Provide experienced implementation teams

• Use a proven methodology to reduce risk

• Drive employee acceptance and build self- sufficiency

• Foster close collaboration for deep, two-way understanding

• Add value with industry and labour management experts

Given the Kronos solution’s ability to execute projects successfully, many customers have found that the payback from the Kronos system occurs before the ERP system goes live. Some have even been able to apply the savings generated from plugging the leaks in time and labour data collection toward the ERP implementation.

Post-implementation support is another differentiator for Kronos. The Kronos Support organisation provides 24/7 global support to tens of thousands of customers and in 2014 won its fourteenth consecutive Omega Management Group “NorthFace Award” for superior customer satisfaction - one of only two organisations to receive the award every year since the programme’s inception in 2000.

Kronos has a 30-year

track record of on-time and on-budget implementations, effective training

approaches, and award-winning support.


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kronos: Ease and reliability

Kronos solutions are specifically designed for on-the-go labour forces and the people who manage them. Managers can configure Kronos to handle even the most complex work rules. And users will find the data terminals intuitive and easy to use, requiring little training.

Easy for managers. One reason companies avoid automating time and labour data collection is that it requires technical assistance to implement changes to complex work rules. With Kronos, updating or revising complex work rules can be executed by non-technical staff. A member of the payroll team, for example, could easily update work rules that change as the result of a new collective bargaining agreement, or a manager can modify complex work rules relating to changing shift differentials.

Also, Kronos doesn’t require constant vigilance, but instead manages your time and labour data using exception-based management. Kronos tracks variances and issues alerts to managers only when problems that require attention arise.

Easy for users. At the same time, users find Kronos solutions convenient for logging on and recording time and labour tasks on devices designed for the workplace. These devices are easier to use and require less training than PC-based solutions that are adapted from the office environment.

Reliable for everyone. Kronos accurately tracks sick and leave timedays, preventing fraud by employees or mistakes by managers who award leave time incorrectly because of work rule complexity.

Kronos securityWhile manual systems are vulnerable to costly employee fraud such as ‘buddy punching’, Kronos data collection terminals offer security features that make such fraud difficult — and in the case of the biometric Kronos InTouch terminal, nearly impossible. The terminal employs state-of-the-art biometric technology to distinguish one employee from another.

imagE - the kronos intouch terminal brings the time clock into the 21st century.


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security and Efficiency: the kronos intouch terminal

The Kronos InTouch terminal brings the time clock into the 21st century. With its straightforward user interface, it provides a fast, self-service view into any employee’s work-related information. Optional biometric identification allows employees to clock in by placing a finger on a scanner that reads the fingertip.

Once the Kronos InTouch verifies the employee’s identity, it records the employee’s time and labour data and reports it to the Workforce Central solution (from which it is exported to the ERP system).

The Kronos InTouch terminal includes the following features:

• Large 7” touchscreen with wVga full colour LCD. A simple, intuitive, and unrivaled user experience that delivers an unprecedented level of functionality for faster adoption and improved productivity.

• optional biometric identification for increased accuracy. Looking to stop fraudulent clocking? InTouch incorporates biometric technology to identify and validate an employee’s true identity.

• supports all major badge formats, including a new smart card reader. InTouch allows employees to clock in based on the system that works best for them and your organisation.

• slim profile, plus battery pack option for power outage protection. While the touchscreen may be big, the terminal itself is anything but. Just like the powerful technologies we carry around in our pockets, it’s durable and reliable, and yet attractively designed.

• selectable languages support your employees’ preferences. InTouch was designed from the ground up to be multilingual, and multiple languages can be supported simultaneously.

• Built for the Cloud. InTouch was designed for today’s cloud-centric computing environments, with flexible features that allow you to securely work over the open internet and through firewalls, while providing plug-and-play capabilities.

• intouch app platform. Who knows what your company needs better than yourself? Only Kronos gives you the choice of how to develop your own customised applications. Just tell us what you need.


© 2014, Kronos Incorporated. Kronos and the Kronos logo are registered trademarks of Kronos Incorporated or a related company. All other product and company names are used for identification purposes only and may be the trademarks of their respective owners. All specifications are subject to change. All rights reserved. CV0188-IN

Kronos Systems India Private Ltd. Tridib Level 2, Unit 1 Bagmane Tech Park C V Raman Nagar Bangalore 560 093 +91 80 43340500 www.kronos.in

immediate Benefits of kronos

The Kronos Workforce Central solution delivers accurate — and timely — labour data directly to your ERP system. There is no time-consuming reconciliation of data required, because time and labour data is collected directly and approved quickly, and it conforms to the complex rules that govern your specific workforce.

A recent study by Nucleus Research found that, on average, companies overpay employees by 1.2 percent due to payroll errors. What many companies fail to realise is that payroll errors tend to be evenly distributed between overpayments and underpayments (see figure 1). While underpayments are easily detected (by employees) and significant overpayments quickly make themselves evident, smaller overpayments often escape detection.

A major factor behind payroll errors is a company’s inability to manage complex work rules, specifically:

• Work hours by task• Wage rates• Pay rules• Leave time such as sick days and vacation• Shift premium differentials• Collective bargaining agreement stipulations• Government and EU laws and regulations

Many companies turn a blind eye to charges related to specific work rules because their time and labour data collection systems lack the sophistication to address them. Sometimes it is easier to throw money at the problem. But when these companies fail to build the necessary processes and systems, they risk excessive overtime charges, union violations, and even legislative or legal action.

kronos seals Leaks from time and Labour Data Collection

Companies that have implemented Kronos have seen direct savings on payroll and HR staff expenses — an average of five hours per HR employee per week. Equally important, the Kronos solution prevents bottlenecks in payroll processing workflows, because the data filters directly into Kronos and/or your ERP payroll solution.

By employing the Kronos solution to plug leaks in time and labour data collection, many companies have realised ROI within two years — and many within a single year. With the ease of implementation and peace of mind that result from a reliable and complete solution that enhances security, Kronos enables you to get the most out of your ERP system without requiring ERP to extend beyond its core competencies.

Companies that have

implemented Kronos have

seen direct savings on payroll and Hr staff expenses — an average of

five hours per HR employee

per week.

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Your ERP System is Leaking