Our recent Office of Finance benchmark research demonstrates the importance of using automation to execute finance department functions.
Our research shows that in finance
Spreadsheets are a valuable tool for many finance department tasks, but they are out of place when used for repetitive, collaborative enterprise-wide processes. Indeed, they are both a symptom and a cause of dysfunctional processes, systems and data. A symptom because they frequently become the default option to put a bandage over, for example, issues that arise because systems are not properly integrated or a process is not supported by the appropriate technology such as a dedicated application. But spreadsheets remain the tool of choice for a variety of finance department tasks. Almost all midsize and larger companies (those with 100 or more employees) use them for management
The close is a useful process to benchmark because almost every company does it and there’s a measurable outcome: the number of days after the period’s end in which the company completes the process. To be sure, this metric does not represent the full amount of time companies spend on executing the close. Corporations that close their books the day after the period ends usually have already started parts of the process before the end of the period, and some of these processes are performed weekly or even daily in order to balance workloads over the month. Yet to focus on the total hours spent is to miss the point: Managing to a faster close is not just about efficiency, it’s also about getting the numbers to executives and managers so they can react quickly to issues and opportunities. The research demonstrates a close correlation between when the close is completed and the timeliness of communicating that information to the rest of the company.
Time is the critical ingredient that determines the overall performance of finance and accounting departments. Poorly performing organizations usually are mired in an endless cycle of fighting fires – for example, dealing with the impact of processes that are poorly designed or not properly executed. These departments are constantly contending with the impact of information sources that are unreliable, difficult to access or both. Poorly designed systems add to the problem, generating hours of work in the form of manual reconciliations done in spreadsheets. Think of a finance department that does not apply automation and that has poorly designed or executed processes and systems as a caged hamster running on a wheel. It expends a great deal of effort on repetitive manual processes that are only marginally productive.
Software automation by itself will not address all of the challenges of a finance and accounting organization. To optimize performance companies almost always must deal with an interrelated combination of people, process, technology and data issues in a holistic fashion. Yet confronted with the day-to-day struggle of meeting deadlines, many finance executives put off addressing their productivity and effectiveness issues. They shouldn’t, because a continuous improvement process involving a steady set of small advances can yield impressive results over time. Identifying the biggest time sinks that can be readily eliminated and then eliminating them can free up the resources needed to address the next set of significant problems. Even something as straightforward as uncovering unnecessary work or replacing the worst spreadsheets with better technology (for instance, implementing automated or self-service reporting) will be beneficial. For this to happen, though, senior finance and accounting executives must make automation a priority.
Regards,
Robert Kugel – SVP Research