Insider Business Club: transforming finance

Peter Simons, Mark Roberts and Andy Kitcher

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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