Is Your Finance Operation Due for a Transformation?
- Published: Tuesday, May 09, 2023 07:21
By Sean Hickey, Senior Consultant
A few weeks ago I was at a local business event, having a discussion with a couple of CFOs on ways to improve their company’s results. After discussing a variety of transformative business strategies that all relate to other functions within the business, they were surprised when I said, “What about your finance operations?” They had been so focused on ways to improve other company-wide horizontal processes – order to cash, procure to pay, etc., – that finance had taken a lower priority as a downstream process vs. being a horizontal process for the company as well.
The reality is, updating and upgrading the finance operation’s business process and IT application architecture can provide measurable improvements in both financial and operational results.
Here are four ways to tell that by sticking with the status quo you may be missing out on the opportunity to optimize costs while improving service levels.
#1: Your managers and executives are making decisions based on financial reporting that doesn’t tie to the general ledger and therefore does not reconcile to what is reported externally.
This frequently happens when management relies on highly-variable and unreliable Excel workbooks that various members of your financial reporting and analyst team individually create for each manager. These workbooks typically contain one worksheet for the raw data extract, another for data calculations and another for presentation. The inherent risk is that most of these workbooks are undocumented and lack both change control and security.
The solution is to replace these workbooks with a Business Process as a Service (BPaaS) that delivers financial reporting as an enterprise self-service capability. With this approach management makes decisions based on real time reports that tie to your general ledger versus using Excel workbooks that become outdated as soon as they are created.
The huge win here is elevating the contribution of your finance team, as they will now be able to spend more time on analysis: budgeting, forecasting and working with your business leaders to provide insights for improving business results. After all, if you have an overreliance on manual offline processes, such as creating and updating individually created Excel workbooks, this can quickly eat up most of your financial analysts’ time.
#2: You don’t know how your finance, accounting and related IT costs compare with that of other companies within your industry.
If you are not cost-competitive within your industry, you are definitely leaving money on the table. How can you tell? Compare your finance organization’s cost structure to the benchmarks provided by external benchmarking firms. Benchmarking can also reveal where the finance function is underinvested, particularly with regard to having world class IT capabilities.
External benchmarking also serves as a current state assessment; from there, a strategic target business process and business application architecture can be defined. A migration plan will identify immediate and mid-term opportunities to implement industry-leading finance capabilities and a competitive cost structure.
In addition, benchmarking can serve as a catalyst for eliminating a costly patchwork legacy systems environment. ROI lies in implementing employee self service capabilities and outsourcing transaction processing by implementing Business Processes as a Service vs. buying offshore headcount. Here a company outsources the entire stack, meaning the business process itself along with all of IT, including applications, application support and the underlying IT infrastructure.
#3: Errors are being recorded to the general ledger that are throwing your company out of SOX compliance.
SOX (Sarbanes-Oxley) compliance needs to be achieved on a daily basis – not just during annual compliance testing. Sustainable business controls and processes, supported by a reliable business application IT architecture which also minimizes manual controls, can help prevent errors from occurring in the first place.
Errors are often the result of over reliance on manual controls, which are usually supported by Excel workbooks. These can be subject to SOX IT General Controls (ITGC). This Excel workbook approach is especially common in patchwork legacy application environments, where automated controls often are not possible.
Of course, having incorrect numbers recorded in your general ledger also presents the risk that erroneous information may be reported through to your Board of Directors and regulatory agencies such as the Securities Exchange Commission (SEC), thereby requiring you to restate financial results for prior reporting periods.
#4: Your financial organization’s structure creates inherent risks.
Another common problem occurs when finance personnel report to the supported business leaders instead of reporting through the finance organization, on up to the CFO.
While the finance function must be integrated with all the different corporate functions (marketing, supply chain, sales, human resources, manufacturing, investor relations, etc.), finance should report to finance. This ensures the fiduciary responsibilities of the company are met and avoids the inconsistencies that can result when personnel get different finance leadership direction from different corporate functions. It also provides for effective separation of duties and adequate business controls … which ties back to the need to remain in SOX compliance on a day in, day out basis.
What a finance operation transformation can do
A finance operation transformation can address all of the above issues and more. The end result:
- Daily SOX compliance and/or immediate corrections to the business control environment
- Competitive finance, accounting and related IT cost structure
- Seamless integration with business operations
- Finance function driving high impact business decisions
Need help analyzing your finance operation to identify areas for improvement? Give us a call. We don’t just work with CIOs – we help CFOs, too!
About Sean Hickey
Sean Hickey is a business process improvement leader and business application implementation expert with 25+ years of industry and consulting experience developing and implementing transformative business strategies. Clients appreciate his ability to develop the “big picture” strategy and then drive it down to executable tactics for realizing both immediate and sustainable results.
About CIO Professional Services
Based in the San Francisco Bay area, CIO Professional Services LLC is a top-rated Information Technology (IT) consulting firm focused on integrating Business and Information Technology. Our consultants are all hands-on executives who are veteran CIOs and Partners of Big 4 consulting firms. Companies come to us seeking assistance with their information technology strategy as well as for interim or fractional CIO / CTOs, and negotiation and program management/project rescue assistance.