CROs (Contract Research Organizations) experience near constant change through mergers and acquisitions. This kind of inorganic growth is good for agile CROs looking to quickly grow; however, that kind of growth also needs to be supported from within the back end, including your HR, payroll, accounting, and time and expense systems.
How to Handle CRO Mergers & Acquisitions on the back end
Time and expense is a particularly crucial aspect of a CRO merger or acquisition. Timesheets and expense reports are both inward- and outward-facing. They affect everyone in the company, from the employees logging their time and expenses to the accounting team making sure everyone to gets paid to the CFO who needs to make data-based decisions related to employee labor and company expenses.
Here are a few of the major challenges that CROs face when it comes to mergers and acquisitions:
- Handling the WBS (work breakdown structure) of multiple companies
- Integrating different accounting systems from your new acquisition or merger
- Supporting global requirements
- Working with multiple travel policies
- Managing employee leave/PTO for separate companies
Each of these challenges has to do with managing both the short-term and long-term needs of your CRO. In the short-term, the goal is to handle the challenges above for both organizations. The long-term solution is to consolidate both companies into one system. However, both companies still need to function efficiently in the meantime, which can be a stumbling block without the right back end systems.
Supporting Multiple Companies At Once
Firstly, supporting multiple companies at once is a major challenge for CROs experiencing mergers and acquisitions. Handling two separate data elements, projects, WBS, and organizational structure are just a few specific hurdles to overcome.
For example, Company A is acquiring Company B. Both companies have separate WBS. Company A might organized by department where Company B is organized by project type. Making these two different structures come together can be a challenge. A time and expense back end solution that can manage both types can be crucial for keeping both companies moving forward without interruption.
Another challenge is how to complete billing. For instance, both companies might have separate requirements for what they want to capture and at what level. Company A might need to capture project details all the way down to the sub-task; however, Company B tracks to the project level only. Adaptability for both kinds of tracking can be crucial in the short-term.
A multi-company time and expense solution can handle both Company A and Company B. A single time and expense solution that can handle both types of WBS and both types of data capture can lead to short-term success. With both companies on one solution, data is consolidated and the companies can continue to do work immediately without losing data. Then, putting both companies on a single solution makes the transition toward a long-term solution smoother.
Accommodating multiple Accounting Systems
This is a challenge that occurs when you acquire a company with a different accounting system from your own. As an example, let’s say that your solution uses Accounting A; however, your company acquired a company that uses Accounting B. What happens when the two accounting solutions need to be merged together?
An additional challenge when you have two accounting systems is that they have their own GL structures, their own cost center/department data, and their own project structure. Now that you've acquired your new company, you're still responsible for getting everyone paid on time and for managing the accounting for both. In the short-term, both solutions need to work together. In the long-term, the acquired company needs to move to your accounting system.
Another challenge might occur when your solution only tracks expenses on one system, but your acquired company tracks only timesheets. These two systems might seem disparate, but they can have a lot in common. For instance, projects and travel policies can overlap when it comes to time and expense. You can match timesheets against expenses incurred for specific projects to ensure what the employee has submitted makes sense. For example, let's say your employee charged $100 worth of travel expenses for Project A, but hasn't logged time for Project A. Consolidating common data between both time and expense systems can bring context for data that was once separate.
Supporting Global Requirements
Global requirements can be especially challenging when it comes to CRO mergers and acquisitions. Global challenges might include needing to accommodate multiple languages, but can also extend to managing complexities like per diems, multiple currencies, and cash advancement among others.
For example, if a global CRO acquires a company in a country like Sweden, certain requirements regarding per diems have to be met. That’s because part of the per diem is taxable, which is different from other countries in which per diems are not taxable. What this means for your time and expense vendor, however, is that the taxes on per diems in Sweden need to be tracked.
In another example, a company with multiple currencies also faces complications. After all, supporting multiple currencies means more than using the basic exchange rate. A calculator could do that. Support for multiple currencies means that rates need to be exchanged and then accommodated based on project allocation and billing. For instance, if you have one project in the U.K. and one in the U.S., the employee should get paid in the currency of the project (although other options are also possible).
Related Article: How One CRO Used Time & Expense To Make Employees And Finance Happy
Handling Different Travel Policies For Each Organization
Speaking of global requirements, employees in different countries and in different companies will probably have different travel policies. It’s one thing to have a single policy and provide it to employees in their language, but it’s another thing to have policies for different companies that need to be enforced. After all, when one company acquires another, the purchasing company can’t impose immediate changes to existing employee rules.
This challenge goes beyond being fair to both sets of employees for your two different companies. You also have to manage two disparate kinds of travel policies in one system. Sure, a manager can manually go over every expense report or timesheet to make sure it follows the rules of each company, but that takes up a lot of valuable managerial time. That's time that could be spent on higher value tasks.
Managing employee leave/PTO for separate companies
Related to the challenge of travel policy management is employee leave policy management. Leave management is another challenge for CROs undergoing mergers and acquisitions wherein one company needs to manage two kinds of employee leave. Two separate companies will mostly likely have two policies when it comes to leave types and the amount of leave allowed for employees.
Leave management can be a sticky problem for CROs acquisitions because leave not only has to do with employee benefits and employee morale, but there are also laws and requirements around different kinds of employee time off. For example, let's say you acquire another company in a new state or even a new country. If you're based in the U.S.A., for example, and you acquire a company in Canada, both countries have different laws around family leave. This example goes to show that this challenge goes beyond consolidating two policies in a way that will keep employees happy. Managing employee leave for two companies can have legal implications to consider.
Managing leave fairly and lawfully is a challenge that needs to be handled carefully to ensure compliance while you merge two companies together. How you make the compromise will also contribute to your company's overall culture and method of recruiting and retaining exemplary employees. Managing different leave policies will come down to compromising long term. However, a short-term solution is to use a time and expense solution that can manage the leave policies of two companies (and manage compliance with the law) while you consolidate in the long term.
CROs want to increase productivity, increase the quality of their work, and cut costs. Acquisitions can often be a major part of the strategy for meeting those goals. However, your back end systems can be slowing you down when it comes to solving CRO acquisition & merger challenges like managing multiple companies and separate accounting systems, supporting global requirements, and managing compliance with travel and leave policies .
Specifically, an automated time and expense solution can be one method of answering these challenges. That's because timesheets and expense reports have a larger user base that affects nearly everyone in the company. Plus, time and expense requires training and is associated with several parts of any company, including HR, payroll, and even travel policies leave policies. This makes it critical to have a system that can deal with these kind of challenges and why it’s worth the time to make sure that your time and expense solution will support your goals, not slow you down.
After all, the major goal of any acquisition is to grow the company. The caveat is that growth can be stunted when your time and expense solution can’t keep up with your acquisitions. A time and expense solution that provides for short-term and long-term success without interruption to your core work of pharma innovation is the answer.
Learn more about how we can help you solve your biggest time and expense challenges using the expert solutions that have worked for other CROs. Get details on the solutions DATABASICS innovated to meet Wuxi Apptec's needs in our free PDF case study.
DATABASICS provides cloud-based, next generation Expense Reporting, P-Card Management, Timesheet & Leave Management, and Invoice Processing automation. Specializing in meeting the most rigorous requirements, DATABASICS offers the highest level of service to its customers around the world.
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