When investing in IT tools, this study’s best-practice organizations focus on people, processes, and technology—in that order. IT tools must seamlessly fit into employees’ routines. IT implementation was, in many cases, augmented with change management strategies to ensure buy-in from finance. Technology must integrate well with existing finance tools.
Invest in Technology and Automation
Best-practice organizations report that IT investments have allowed them to reach process improvement goals, including high rates of paperless transactions.
Technology and automation liberates finance’s time to provide more value-added analysis to the enterprise.
INVEST IN BACK-OFFICE TECHNOLOGY AND IT SOLUTIONS Best-practice organizations from this study credit investments in back-office technology with driving success in reporting and process improvement. Investments in technology centralize data collection, decrease risk, and reduce cycle times. Best-practice organizations often make a smaller initial investment in an IT solution before evaluating the system over time. Only when the results are favorable do best-practice organizations invest in additional modules.
Many best-practice organizations value a single enterprise resource planning (ERP) platform or performance management tool globally.
The finance function at Cintas has been able to reduce cycle times for key processes using IT solutions. The solutions integrate accounting processes in the flow of work and eliminate most manual reconciliation processes. The finance function at Cintas created a data warehouse that gives easy access to operational and financial data.
Accountants use these reporting tools to quickly report trends, benchmarks, and key performance indicators to the field. Accountants now spend less time finding and consolidating data from a variety of disparate systems and data files to obtain financial data.
Building a Best-in-Class Finance Function
A data warehouse provides data governance capabilities that are helpful in ensuring the integrity of the accounting function.
In 2012, the finance function at ManpowerGroup developed a global chart of accounts and standard back-office processes, including time collection, customer invoicing, collection support, AR, AP, and general accounting. The finance function at ManpowerGroup has a standardized global back-office system that each regional office is obligated to adopt when it needs new back-office technology. Unless there is a highly compelling reason that dictates otherwise, countries must use this standard system for back-office processing.
The implementation of this back-office technology is done by an established governing body. Although the independent governing body at ManpowerGroup reviews special situations in which an exception to implementing the global technology makes more sense (e.g. local regulations dictate the use of other technology), local business units must use a standard system.
Previously, the OCC used a customized mainframe application that was cumbersome and decentralized to process expense reports. The finance function chose to focus on increasing customer satisfaction through claims and reimbursement improvement. Representatives from all stakeholder groups who were impacted—policy, legal, records, customers, and management—were involved in designing a solution. Using this change management technique of stakeholder involvement from the beginning made the final solution easier to implement. The finance function enhanced the existing functionality of the core financial system by adding the needed features and functions. The system included built-in calculations and many other built-in controls, resulting in a reduction of the error rate from 50 to 60 percent to below 15 percent.
WORK TOWARDS ACHIEVING PAPERLESS TRANSACTIONS The best-practice organizations in this study are striving to increase their percentages of paperless transactions. Paperless processing reduces cycle times and the number of full-time equivalent employees (FTEs) needed to perform the process. One best-practice organization estimates saving more than 24,000 hours
Building a Best-in-Class Finance Function
transaction to the general ledger. Once there, the vendor can be paid. Between 50 percent and 60 percent of Company A’s invoices pass through the automated invoicing process without incident. If there is an issue with an invoice, the automated workflow will send a message to an AP employee. Finance is able to see when an invoice has reached the general ledger through automated notification, very helpful information for the accrual process.
Company B has embraced process automation with enthusiasm. For example, 75 percent of invoices are processed in a touch-less fashion. As described earlier, Company B uses an approach called evaluated receipt settlement. NCG also uses procurement cards to make payments, an approach that adds further process efficiency (disbursements are not bogged down by paper checks).
Use Quality and Process Improvement
Methodologies to Measure and Track Performance
Many best-practice organizations highlighted in this study use Lean, Six Sigma, and Kaizen to evaluate financial processes. Finance employees are often encouraged to enroll in Six Sigma courses. Two best-practice organizations have permanent governance structures that evaluate process improvement initiatives using Six Sigma and Kaizen action teams.
Company A’s AP function uses Six Sigma principles to identify root causes of failed matches. As a result, Company A’s AP function works with suppliers to eliminate the root causes of document error and to increase first-time matches. The AP department trains its employees in Six Sigma and utilizes the internal enterprise-wide Six Sigma team.
Using Lean management tools, Intel eliminates many extraneous aspects of the FP&A process, producing better forecasts. For example, instead of preparing all aspects of the financial forecast for review, the FP&A function realized it was more efficient to prepare only the material needed for each upcoming review (since there was never enough time to cover all details of the forecast in any given review).
Detailing what was needed at specific times and removing superfluous information from the messages presented to the CEO resulted in increased clarity and drove better decisions.
The OCC has three Lean Six Sigma programs: Business Process Improvement, Quick Wins, and Personal Productivity Improvement. Together, these three programs aim for $600,000 in annual savings.
The OCC reinvests its cost savings to cover the cost of
Lean Six Sigma training.
Building a Best-in-Class Finance Function
As a result of reinvesting its cost savings into Lean Six Sigma training, the finance function at the OCC has 15 employees with varying levels of Six Sigma certification.
The OCC manages projects through a centralized intranet site that is accessible to all finance employees. Employees are responsible for identifying and submitting ideas for process improvement in areas such as financial reporting, AP, and acquisitions.
Conclusion
There are a number of tools and techniques an organization can use to become a strong partner to the business. The organizations highlighted this study use a variety of techniques and tools to achieve excellence; most notably, investment in back-office technology and IT solutions, paperless transactions, and Lean and Six Sigma methodologies in order to measure and track performance. A common theme among best-practice organizations is a continuous focus on evaluating business processes and, when new tools and techniques are proposed, fitting them into existing systems and processes.