The Cost of Finance
The Cost of Finance:
CFOs, owners, and boards will have different expectations of finance going forward. Similar to the changes that happened in IT several years ago, finance will move from a position of prioritizing control and discipline to being asked to prioritize cost efficiency and speed. Control and discipline will not go away entirely, but an increasing scrutiny on overhead and the need to have faster planning and reporting cycles mean that organizations will need to prioritize nimbleness and flexibility differently.
How will finance functions accomplish this? First, you need to understand how you compare. What is a reasonable percentage of revenue to strive for and put it in the context of what your finance department is required to accomplish. If you run a largely operational finance function, the lower end of the benchmarks will be your goal and, in some cases with good automation and strong systems, you will be able to beat it. Benchmarking is an art and it’s best to have an independent expert assess your function and apply benchmarking recommendations rather than assume you should target the headline number.
What it means
- Finance costs won’t come down if you don’t change your business processes. The only way to bring finance costs down substantially is to focus on business process efficiency and to rationalize your technology spend. Investing in process improvement is core to re-imagining finance.
- Achieving faster process speed means that it’s critical to do less manual work. There are several inter-related components to eliminating manual work including systems integration, streamlining workflows, and automation tools including robotics.
- Operating models need to change. Accomplishing efficiency and depth requires great specialization which means operating models need to be streamlined as processes are standardized.
Missed the previous post? Click here to read part 4: Finance Technology.
Want to learn more about finance transformation?
Re-Building Finance for a Post-COVID World: In this visual guide,â€¯Strategy and Business Transformationâ€¯Practice Leader Steve Ronan, shares how the finance function has changed as a result of the pandemic, how to define finance excellence, what finance executives are (or should be) prioritizing now, the importance of compatible finance technologies, and how you can start improving the finance function for your business. Click here to learn more.
Missed our July webinar on Building a Finance Function for a Post-COVID World? Click here to watch the recording.
Finance Transformation Roadmap: Download our complimentary whitepaper to learn how you can use process engineering and digital technology to close your books faster. Click here to learn more.
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