World-class finance organizations continue to outperform their
peers by delivering high-value services at about half the cost of
typical companies, according to new research from The Hackett
Group, Inc. (NASDAQ: HCKT).
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. The Hackett Group's research estimates that a typical
large company (with $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.
World-class finance organizations (those that, according to The
Hackett Group's benchmarking methodology, are among the top
quartile of companies across an array of efficiency and
effectiveness metrics) 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 “World-class finance organizations
also continue to look for ways to reinvent their service delivery
model and improve the overall value proposition of finance.”
Realigning Talent
The Hackett Group’s research has 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. They develop a
strategic workforce plan that defines the short and long-term
talent demands of the organization and highlights critical gaps in
the supply of talent in the organization. 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.
Rearchitecting Service Delivery
World-class finance organizations have rearchitected service
delivery by aggressively driving end-to-end process standards
across the organization and consolidating work from the businesses
into Global Business Services (GBS) organizations, next-generation
shared services that integrate and consolidate multiple business
functions, expand the process footprint and enhance overall service
management. This complexity reduction results in significant
improvements in cost and efficiency and creates capacity in the
organization for delivery of higher-value services.
World-class finance has driven much greater levels of
standardization across all key finance processes, particularly in
the transactional areas. For example, almost 90 percent of
world-class organizations have deployed a single set of standard
processes in general accounting and external reporting versus only
48 percent of typical companies. In cash disbursements, over 90
percent of world-class organizations have deployed a single set of
standard processes versus only 67 percent of peers. This has
enabled world-class finance organizations to realize transaction
costs that are 50 to 60 percent lower than typical companies.
They have also been more aggressive in consolidating work into
Global Business Services. World-class organizations deliver over 80
percent of basic transaction processing activities such as accounts
payable and cash application from these organizations, while also
expanding their portfolio to include more knowledge-based services
such as business performance reporting and analysis.
Retooling Finance
Companies are 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 typical companies.
A complimentary version of The Hackett Group's research insight,
"The World-Class Performance Advantage: How Leading Finance
Organizations Outperform Their Peers" is available with
registration at this link:
http://www.thehackettgroup.com/research/2014/pr/wcpa-fn/.
About The Hackett Group
The Hackett Group (NASDAQ: HCKT), a global strategic business
advisory and operations improvement consulting firm, is a leader in
best practice advisory, business benchmarking, and transformation
consulting services including strategy and operations, working
capital management, and globalization advice.
Utilizing best practices and implementation insights from more
than 10,000 benchmarking studies, executives use The Hackett
Group's empirically-based approach to quickly define and implement
initiatives that enable world-class performance. Through its REL
group, The Hackett Group offers working capital solutions focused
on delivering significant cash flow improvements. Through its
Archstone Consulting group, The Hackett Group offers Strategy &
Operations consulting services in the Consumer and Industrial
Products, Pharmaceutical, Manufacturing, and Financial Services
industry sectors. Through its Hackett ERP Solutions group, The
Hackett Group offers business application consulting services that
help maximize returns on IT investments. The Hackett Group has
completed benchmark studies with over 3,500 major corporations and
government agencies, including 93% of the Dow Jones Industrials,
83% of the Fortune 100, 87% of the DAX 30 and 48% of the FTSE
100.
More information on The Hackett Group is available: by phone at
(770) 225-7300; by e-mail at info@thehackettgroup.com.
The Hackett GroupGary Baker, 917-796-2391Global Communications
Directorgbaker@thehackettgroup.com
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