How much time are you spending on ‘Process’ vs Analytics?
Countless studies show that finance functions are, on average, spending around 3/4 of their time aggregating, checking, cleansing and presenting data, with (at best) 1/4 of their time spent analysing, understanding, and interpreting the information in front of them.
Finance teams have in many instances become proud ‘super-users’ of Excel and are sometimes happy just to have survived their month-end processes with a ‘clean’ data set. Setting aside the missed opportunities to actually add value to the month-end close process, what about opportunities to spend time interacting and partnering with their operational teams?
So, how can you turn your finance function around, minimising time spent on processes and routine reporting in order to focus on value-adding activity that supports the decision makers of your business?
The activities of a FTSE250 company’s central finance team were analysed over the course of 3 consecutive and fairly typical month-end cycles. During that time it became evident that finance teams both in the central finance function and in the underlying regional teams were operating in a mechanical fashion, following historic precedent and with low enthusiasm for the work being undertaken.
Bucketing the activities above into 'value buckets' highlights the amount of time spend on Process vs Analysis vs Business Insight.
Despite already having an industry-standard Enterprise Performance Management (EPM) reporting and planning application environment available to them, years without any formalised training or central stewardship had resulted in sub-optimal use of these systems in addition to the following key issues:
- The reporting process was primarily an “upward push of information”, with little interest in how the information was subsequently used, why it was needed, or whether or not requirements had changed.
- Lack of top-down feedback or stewardship, resulting in an “it’s how we’ve always done it” approach.
- Variance analysis was mechanical, with no effort made to identify key issues or underlying drivers.
- Hundreds of highly modified and non-standard Excel and system-generated reports.
- Little interaction between the Finance and EPM Systems (IT) teams.
- An uneven patchwork of staff competencies across the business and inconsistent team output.
- No formalised staff training (systems functionality, report building, trouble-shooting).
Following a period of review and consultation with the underlying finance teams, upstream users of the reporting output and customers in operational functions, a remediation program was initiated between the central finance team and the regional finance teams in partnership with the systems (IT) team to achieve the following:
- Agreeing month-end reporting output required by Executive team before the start of the month-end.
- General operational output rationalised: Customer requirements reconfirmed to eradicate legacy / redundant reporting.
- Running consolidations overnight, not at the start of the next day: Re-focus staff time on analytics instead of watching systems processes.
- Staff training program established: Centralised training strategy, supported by local centres of excellence and a formalised Group-wide “super user community”.
- Significant reduction in ad-hoc Excel usage, replaced instead by purpose-built system-automated reports that provide users with enhanced analytics.
- Standardised system-generated reports adopted for all Regional and Group-level reporting.
- Finance teams and the Systems team given joint ownership of all system-generated reporting.
- Automation of ‘business rules‘ within the EPM applications for underlying data management: Reduced manual intervention; increased control and data accuracy.
The time/value proposition of the finance function and overall reporting process was significantly increased, delivering greater insight into the performance of the underlying business in less time.
- An accelerated month-end reporting timetable.
- Regional finance staff freed up from month-end processes to directly assist front-office teams and provide analytical commentary to support month-end analysis.
- A material reduction in overall monthly output, focussed on value-adding activity.
- Significantly improved staff engagement and job satisfaction.
Overall, every organisation will have its own unique challenges and desired balance between ‘process’ and ‘value’, however the underlying principle remains:
- Challenge the status quo. Just because something worked before doesn’t mean that it is still of value today.
- Identify and resolve the weaknesses and time-sapping activities within your existing reporting processes before looking to new software or adding new processes and controls.
- Wherever possible, leverage in-house skills and involve your existing staff.
In many cases the underlying issues will be identified and solved by the users themselves when given the space, time and support to do so. This fast tracks the adoption of change and ensuring increased staff buy-in during the remediation process.
Given today’s economic climate and the ever-present need to derive maximum value from invested resources, isn’t a health check on the finance team’s effectiveness something that every business should regularly undertake?