By Gilles Bonelli, Associate Principal at The Hackett Group
Finance must rise to the challenge of today’s volatile global markets and become a more effective strategic partner to senior management, according to new research from The Hackett Group. The research found that finance is using digital transformation to help it excel in three key areas: running an efficient operation, delivering effective services and improving its customers’ experience.
Without a doubt, broader adoption of digital technologies is helping finance organisations achieve all three objectives. The report found that digital leaders’ finance cost are 43% lower and they employ 45% fewer FTEs. Their error rates are 37% lower and they spend 15% less time collecting and compiling data. These measures of efficiency and effectiveness lead to a better experience for customers, who are more than twice as likely than those of more typical companies, to consider finance as a valued and responsive business partner.
World-Class finance organisations achieve top performance in efficiency, effectiveness and customer experience. These organisations also continue to operate at a much lower cost than peers. While their cost of operations recently has been flat, that disguises greater investment in people, the adoption of new technologies and process improvements. In fact, these organisations have consistently managed to keep cost low by employing significantly fewer FTEs, rationalising expensive legacy systems (their technology spend is 54% lower), and investing wisely in their people, while shifting finance activities into global business services organisations (GBS), centres of excellence (COEs), outsourcing and offshoring.
World-class finance organisations become more effective by investing in their people, adopting best practices and leveraging technology. The research reveals that world-class finance organisations doubled their investment in training over the past year. They also spend over 60% more time on internal and external training than peers.
To guarantee their activities produce more effective results, world-class finance organisations have a clear view of processes from end to end. Process owners at companies that score high on this metric do better than ones who don’t. For example, they employ 50% fewer staff per $1 billion in revenue and spend 1.4X less on overall finance. Further, their cost to process invoices is 47% less (as measured from low to highly technology-enabled process ownership).
In addition, world-class finance organisations improve process effectiveness by standardising and consolidating their data management platforms so they can draw information from the same repository, guarantee data integrity, and produce better and more informative reports. They are 57% more likely than the peer group to pull information from data warehouses for performance reports.
How to Become a World-Class Finance Organisation
Finance’s mandate from senior management and top business leaders is clear: Support strategic decision-making by delivering better information; assist with the enterprise digital transformation strategy; and collaborate with business leaders.
Digital transformation can play a major role in helping peer-group organisations catch up to their world-class competitors. However the reality is that the definition of World-Class will continue to evolve as leading finance functions deploy smart technologies to transform themselves. Thus, the quest for achieving world-class status never ends. Its future will require continuous improvement of cost structure, effectiveness and stakeholders’ perceptions of how finance adds value to the performance of the enterprise.
A public version of the research discussed here is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/wcfin1806sm.