Why do finance departments have to transform?
Mark Roberts, managing business process services business development leader, IBM UK
Finance transformation has to be framed around three fundamental challenges.
The first is the internal challenge that all businesses face in this globally
competitive market place to drive down the cost to serve. We have all seen many
different metrics that suggest what is world class and leading edge in terms of
the overall cost of a finance function. Many firms use a benchmark figure that
they are aiming for of below 1% of total revenue. So how do they achieve that in
this increasingly complex market?
The second challenge is to bring the basic standard processes to bear and to meet the complexity that exists across the business that they are supporting.
And thirdly how it actually brings more value to the enterprise to help it achieve its global vision.
A lot of the work that goes on in a finance function is not recognised by the wider business. They don’t see the impact on them, they just see the day to day activities. I think when transformation does become a step change, it involves things like a big systems transformation - a new ERP platform.
Anyone that thinks they have transformed and has nothing else to do is frankly missing the point because their wider business has to change, it has to grow, it has to develop it has to continue to evolve. Everyone has to go through further transformation.
What role can shared services centres play?
Peter Simons, technical specialist, CIMA
Leading edge companies are not only looking to just reduce cost but are also to increase the effectiveness of the finance function. So they are engaging their management accountants and supporting decision making across the business.
Our forum finds that the blueprint towards getting cost down is reasonably straightforward. It is about investing in technology, it’s about investing in structures like shared service centres - whether in-house or outsourced. The most challenging area is developing accountants to be finance partners who support the business.
The argument for shared service centres that is based on economies scale has been won. Most people will believe that if they have any kind of scale at all that is if they are a big company - they should have a shared service centre.
The debate then moves onto should it be in-house or be outsourced and if they are going to outsource will it be on-shore, off-shore or mid-shore. The answer seems to depend on the culture within the company.
If it’s any way customer facing, and that customer can be an internal customer, then there is a tendency to prefer to keep that in a similar culture rather than in a remote culture. What we also find is that shared service centres were originally thought of as a good place to put the routine boring stuff and get it done efficiently but actually you have highly qualified people in them, whether here in England or off-shore. We also find that the capabilities of the shared service centres are greater than envisaged.
Is transformation ever complete?
Andy Kitcher, partner, Alsbridge plc
It is a journey - a never ending journey. It depends on where you are and what is happening in your business. An organisation may think that it has invested in its systems. It has managed to up-skill its finance business analysts. Its senior finance people are more engaged in the strategy and the planning and the decisions supporting the business. And then suddenly the focus changes in the business and the finance function then needs to be able to respond to that.
You can’t afford to stand still and even those organisations that have transformed or significantly changed the role of finance in recent years can’t afford to be complacent.
I saw some Hackett research recently that said that since 2005, 300 US and European companies have implemented shared services. Yet I work with clients who are dissatisfied with this shared services function. The quality of the service or the benefits that were perceived haven’t been realised.
I don’t think there is a magic bullet, but I’m also a big fan of shared services and I’ve advised and worked with a number of organisations over the years in implementing shared services and making them successful.
They help the finance function become much more focused and enable them to achieve that holy grail of becoming a business partner. Many organisations implement shared services but they don’t follow through and up-skill or change the capabilities of the people that are left behind in a retained organisation or left behind as part of the business unit to provide that decision support. Those that do reap the benefits. It is very important for the finance function to get absolutely clear what its vision is and align those goals with the strategic goals and objectives of the business.
Chaired by Damian Wild
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