World-class finance organisations spend 42% less than typical companies and use 44% fewer staff, at the same time driving higher levels of effectiveness, agility, and insight, according to the 2016 analysis of finance benchmarks from The Hackett Group.
Research from the business management consultancy quantifies the performance advantage of world class compared with typical finance organisations. For a typical company with US$10bn in revenue, attaining world-class performance represents potential annual savings of up to US$40m.
The research finds that digital business transformation is one of five initiatives key to achieving world-class performance. Digital technology is creating new opportunities to transform finance service delivery, and world-class finance organizations focus greater resources in this area and employ analytics-based decision making to generate insights that improve enterprise agility.
The group classifies world-class finance organisations are those that achieve top-quartile performance in both efficiency and effectiveness across an array of weighted metrics.
The research identifies five strategies used by these best-in-class organisations use to achieve superior results: embrace digital transformation; enable analytics-based decision making; reallocate resources from transactional focus to value added; adopt customer-centric service design and delivery; and reskill the finance function:
Embrace digital transformation:
Cloud-based infrastructure and applications, virtual business and technology networks, robotic process automation, and business analytics are coming together with rapidly transitioning employee and consumer bases that are increasingly adept with new mobile technologies and business models.
This convergence is creating tremendous new opportunities for finance organisations to apply digital technologies to transform service delivery. The research shows that more than 70% of all finance organisations are planning major transformation, but most have made only minimal investments to date in cloud technologies, and even less in robotic process automation, mobile, and other digital technologies.
Overall, world-class companies have done more to automate basic transactions and finance processes across the board, which can drive benefits such as lower cost for customer invoices, fewer errors, shorter time to bill, and better cash flow. Automating customer invoicing, for example, reduces cost by 76%, leads to nearly 40% fewer errors, and results in 44% shorter time to bill.
“It’s critical for finance organisations to explore digital transformation opportunities to drive a more agile platform, greater cost reduction, and improved customer experience,” says The Hackett Group finance transformation principal Richard Cardillo.
“To succeed, finance leaders must embrace new technologies such as improved analytics enabled by big data, mobility, the cloud, and advanced process automation tools. They must investigate and deploy pilot programmes so they can better understand how to scale solutions and realise the long-term benefits promised by these technologies.
“Robotic process automation is a particularly interesting area that is rapidly evolving with a variety of players developing tools – some of which are competitive and others which are complementary. Operationalising robotics it is not about adopting a single solution, or evolving from structured to cognitive processing. Rather it’s about applying the appropriate toolset to drive the maximum value depending on the issue at hand.
“Some leading-edge companies have begun to explore the potential for robotic systems that can respond to basic inquiries in areas like payables and receivables. Others are starting to look at robotics for call centre interactions such as insurance quotes and credit card inquiries. These solutions have companies asking whether off-shoring transaction processing tasks to gain the labour arbitrage benefit is really necessary.”
Enable analytics-based decision making:
The report notes that advanced information management is key to enterprise agility. What’s required is a “sensory” system that monitors external conditions and analytical capabilities that comprehend this data within the business context.
World-class finance organisations have a sophisticated information/data architecture that makes effective data analysis possible; planning and analysis capability that is dynamic and information driven; and performance measurement that is aligned with the business. As an example, their operations managers are more than four times more likely to use an online budgeting system (14% vs. 60%), enabling everyone to work from one set of data and facilitating a shift from building budgets to analysis and judgement based on the data. But there is dramatic room for improvement.
Fifty-six percent of all companies still use spreadsheets and customised applications for planning and forecasting, and analysts spend more than half of their time compiling data, leaving less time for analysis and business advice.
Reallocate resources from transactional focus to value adding:
By leveraging a formal service delivery model, generally including a global business services or shared services facility or centre of excellence, world-class finance organisations are able to shift their focus from transactional work to higher-value activities, such as analytics, measurement, and supporting business strategy in ways that drive business results.
Despite their much smaller staffs, they dedicate a much larger percentage of their overall staff (36% vs. 26%) to planning and performance management than typical companies and a smaller percentage (49% vs. 60%) to transactional work.
Adopt customer-centric service design and delivery:
Understanding and managing the customer experience requires a holistic, structured approach, starting with a clear understanding of customers’ needs and then improving relevant elements of the finance service delivery model.
A key part of that focus should include educating those customers about the trade-offs inherent in different service levels and non-standard offerings. World-class organisations are service oriented and customer focused in their approaches to finance delivery.
Re-skill the finance function:
Among the biggest challenges facing finance organistions is aligning the competencies and skills of finance talent with the needs of the business. Top management looks to finance to help the business execute strategies more successfully and to implement the organisational changes needed to become more agile and innovative. This means moving beyond technical accounting and data skills to establish broad leadership and business acumen capabilities throughout the finance organization.
World-class finance organisations demonstrate this by having nearly 50% more staff per manager than typical companies, offering greater autonomy for individual decision-making and fewer layers in the organisation.
“Getting to world-class is a real challenge for even the most agile finance organizations. But the benefits are tangible,” said Jim O’Connor, The Hackett Group’s global practice leader of global business services and finance advisory programmes.
“To jump start their journey, finance leaders can take steps like measuring baseline efficiency and effectiveness levels to gauge performance and test their service delivery model. They can document and evaluate the customer value they create, and find ways to reduce complexity. They can explore digital opportunities for more agile platforms and cost reduction. And finally they can adopt a service delivery model that enhances finance’s alignment with business objectives.”
Sentiment in the financial services sector deteriorated in the three months to September, as firms digested the challenges of lower interest rates and the uncertainty caused by the vote to leave the European Union (EU), according to the latest CBI/PwC Financial Services Survey.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
The proposals of both US presidential candidates could shake up operating conditions in several sectors, reports the credit ratings agency.
The Danish shipping and oil conglomerate confirmed that it will separate its businesses into stand-alone transport and energy divisions.