A typical large company (with US$10 billion in revenue) could save up to $51 million by achieving world-class performance levels in finance, freeing resources to focus on higher-value activity and innovation.
New research from The Hackett Group, Inc. reveals that world-class finance organizations continue to outperform their peers by delivering high-value services at about half the cost of typical companies.
The research found that to achieve these results world-class companies realign their finance talent, rearchitect their service delivery model, and retool with more effective technology capabilities.
World-class finance organizations deliver their services at 46 percent lower cost as a percent of revenue than typical companies and with 52 percent fewer staff.
Significant cost gaps exist in all finance processes, but are most dramatic in transactional processes, reaching as high as 84 percent for customer billing and 73 percent for time and expense processing.
In addition, world-class organizations also allocate budgets and resources very differently from their peers, as part of their overall finance strategy.
Their total budget allocated to planning and strategy activities is 38 percent higher and the amount allocated to transaction processing activities is 25 percent lower than typical organizations. This has enabled them to invest more in the capabilities required to support their businesses in delivering on strategic goals and objectives.
World-class finance organizations also consistently deliver higher-quality services. Their error rate in customer billing is 48 percent lower than that of typical companies, which has positive impacts on customer satisfaction as well as the speed with which cash is collected.
From a business partnering perspective, they deliver forecasts 30 percent faster and with more accuracy (variances that are less than half that of typical companies). As a result, smarter and faster resource allocation decisions can be made, driven by a high degree of confidence in forecast quality.
"Finance organizations have been working on reducing costs for some time, something that is sure to continue. But there's clearly a renewed focus on finding innovative ways to redeploy savings to support enterprise growth," said Jim O'Connor, Global Finance and GBS Advisory Practice Leader
The Hackett Group's research has also shown that key finance and general business skills critical to finance's reinvention may become difficult to acquire over the coming years as a result of increasing demand and limited availability.
Areas such as business acumen, business relationship management, and process improvement represent skills of greatest concern. The problem is accentuated by the trend towards offshoring and finance outsourcing, which has largely eliminated the internal "farm system" through which finance departments have traditionally developed new talent.
In response to these challenges, world-class finance organizations partner with human resources to implement a number of important best practices to realign talent.
Additional talent management practices, such as competency models and competency-based job profiles, career path models, learning and development programs, and performance management processes are employed to close the gaps.
Companies are also continuing to invest heavily in core Enterprise Resource Planning (ERP) and Enterprise Performance Management (EPM) technology to automate transactions and improve their information delivery capabilities.
Most companies, however, are not realizing the full benefits expected from those investments.
World-class finance organizations rationalize their application portfolios and optimize their use of those applications to achieve cost reduction, enable standard processes and consolidation of work, as well as to provide easier access to relevant, high quality management information.
World-class finance organizations have achieved a higher degree of automation in areas such as accounts payable, where they receive 2.5 times more supplier invoices electronically than typical companies, and accounts receivable, where they have a 53 percent greater automated match rate on remittances.
From a reporting perspective, they generate over a third more of their business performance reports from a central data repository. Nearly 70 percent more of their management information users in the business have online, self-service access to that management information than at