World-class finance: better analysis, less cost, fewer people


World-class finance organisations are doing more with less – and they have the data to back it up.



They spend 42% less and have about half the staff of their lower-performing peers, according to new research from The Hackett Group. This ability to be effective and lean at the same time enables top finance functions to be far more responsive to business needs and provide more forward-looking analysis.



The Hackett Group defines world-class finance organisations as those in the top quartile of several effectiveness and efficiency metrics. The top-level finance teams, from research of hundreds of global companies, set themselves apart by costing 42% less as a percentage of revenue. And the world-class finance teams have fewer players – 48% fewer full-time employees per billion in revenue – than their peer group.



Their costs for specific tasks are much lower when compared with peers. For example, the cost of customer billing is 85% less at world-class finance organisations, travel and expense tasks cost 70% less, and the accounts payable function costs 68% less. These savings allow world-class finance organisations to devote more time and spending to business analysis.



Effective finance organisations excel at harnessing data, gaining insight from the data, and then making intelligent forecasts using leading indicators, according to Bob Paladino, CPA, CGMA, a consultant and author and the founder of Bob Paladino and Associates LLC.



“The problem with the traditional finance function is they’re relying on financial indicators, which by definition are lagging indicators,” he said. Finance professionals should be in tune with a company’s drivers of value so that they can predict value more accurately, Paladino said.



Steve Player, CPA, CGMA, the CEO of consulting firm The Player Group, said finance organisations that insist on relying on a static annual budget not only hold back their companies but also diminish their own reputations.



“Finance organisations in many cases are the last bastion to hold onto the budget,” Player said. “They’re stuck in a rut. They’re stuck in doing it the old way.” He said finance teams should focus less on basic transactional activities and more on analysis.



Cost-cutting remains a primary focus for most finance functions, although top-performing companies have less work to do on that front, according to The Hackett Group. For typical companies, there is room for improvement in cutting costs.



The Hackett Group lists three imperatives that can make finance more agile and more valuable:



Strengthen the foundations to enable agile service execution. One way organisations can get stronger is by revisiting change initiatives and technologies already in place. Perhaps all that is needed is better training for finance staff on technology that’s sitting idle.



Unleash enterprise-wide decision-making excellence. Choose key performance indicators that align with the business strategy and drive execution. The managers at higher performing companies are more confident in the analysis supplied by finance, especially the analysis tied to financial and operational decisions, than managers in the peer group. Finance’s ability to pare down the large amount of data into a few, critical pieces of information will help management’s confidence grow.



Build an adaptive finance organisation. Agile finance functions are characterised by being more customer-centric; having a clearer, more focused vision; understanding how service supports company goals; and, to a lesser extent, having well-defined and understood individual roles. For instance, finance project leaders at top performers are released from day-to-day job commitments, making them more accountable for project outcomes. While 71% of top performers incorporate business-case metrics and targets into ongoing scorecards – giving finance an understanding of how its work supports company goals – just 38% of lower-performing peers do the same.


By Neil Amato
August 18 2015

http://www.cgma.org/MAGAZINE/NEWS/PAGES/WORLD-CLASS-FINANCE-ANALYSIS-FEWER-PEOPLE-201512847.ASPX

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