Former CFO, FAO metrics guru, and FAO provider Chris Gattenio has given sage advice to more than 1,000 CFOs. This month, she talks about F&A transformational outsourcing, the new No. 1 fitness program for finance executives.

by Chris Gattenio

Q: So why is it that the headcount we trimmed at the turn of the century seems to be creeping back?

A: If you’re looking for the skinny on how finance executives are trimming the fat and creating leaner organizations, I’ve got news for you. The “f” in finance isn’t just about finance; it’s about the real fitness of an organization and its ability to fend off the competition. We are quickly learning that it’s not enough to just cut headcount. Companies must make changes to how they execute the business, or the fat will keep coming back. New alternatives offered by F&A outsourcing enhance the shape of internal execution by taking the best solution each has to offer, creating a fit-for-life plan, and sticking to it. In fact, outsourcing providers even put money on the table tied to sustaining improvement!

Finance executives who seek speed to implementation and best-in-class performance for superior financial strength build a process, organization, and technology strategy that leverages outsourcing benefits to be included as part of the company’s game plan. It is not an all-or-nothing proposition but one that simply works on strengthening weaknesses and building muscle. The muscle attained is by way of value-added benefit by being in shape both strategically—with enhanced business flexibility and agility, increased visibility and control, increased competitive advantage/marketshare, and improved customer satisfaction—and mentally by improved business focus/redirected resources, enabled rapid access to world-class capabilities, ensured regulatory compliance/sustained controls, improved service delivery execution capabilities, and shared risks/aligned outcomes.

When implemented, the facts cannot be ignored anymore. Outsourcing finance, could trim a hefty 30 to 50 percent from existing operating costs while making you stronger at the same time.

As chief fitness officers, finance executives must realize that fat accumulates in the first place because staying fit and eliminating bad habits is hard work. Many finance executives are treating systematic root causes instead of responding to budgetary needs. Over the past 10 years, companies that have invested in focused improvement programs but failed to address the true drivers of cost are finding costs creeping back into their finance organizations as the economy strengthens and these improvement teams have been redeployed. In many instances, the real cost drivers around structural complexities were not worked out; hence the costs were not permanently eliminated.

The reason is simple: the gym was installed, but the equipment is not being used properly—lots of new technology and shared-service deployment implemented with old organic process designs. Research is proving the best way to trim organizational excess permanently is to address simplifying process execution, eliminate redundancy, challenge old policy limits, address skills weaknesses, and automate and standardize where possible.

The fact is that savings from process simplification prove more durable, sustainable, and valuable than savings driven by pure headcount reduction. To start, employing best-practice design principals across core transaction processing areas—accounts payable, accounts receivable, general ledger, and fixed-asset accounting—sets the stage for a strong foundation to build efficient information access. While these transaction processing areas provide a company with
little strategic value, done inefficiently, they can drive up operating and compliance costs, and delay the ability to easily access needed information to effectively manage the business. Extending your reach to an outsourcing partner that will work with you to drive simplification despite the increasing complexities resulting from globalization and competition is an option considered by more and more companies to achieve financial fitness.

If you’re spending more than 1 percent of revenues on your finance function, it’s time to take a serious look at outsourcing finance. Plenty of other out-of-shape enterprises are doing so. AMR Research estimates that the number of finance BPO adopters has doubled since 2001 and now stands at 25 percent of all those surveyed. This kind of adoption interest is driving BPO, not just in finance but also across all back-office functions. AMR Research says that the BPO marketplace will grow 33 percent by 2007, creating more fat-burning muscle than we’ve ever seen in companies.