Former CFO, FAO metrics guru, and FAO advisor has answers to your FAO quesitons.

by Chris Gattenio

Q: We have made significant progress in reducing our costs, yet our company is still struggling to manage our business and finance issues. Other than brute force, what can I do to keep up?

A: The problem is that you are working hardernot smarter. Over the past 15 years, CFOs have had a sharp focus on driving down the cost of finance and have successfully accomplished cutting costs by more than 50 percent. Congratulations. But that is not enough to be competitive today.

Saving money does not necessarily address the complexity of businesses today, which is finances real Achilles heel. Finance organizations are still challenged to raise efficiency and add value. The demands placed on finance continue to escalateincreasing global competition, greater regulatory compliance, continued mergers and acquisitions, pressures to drive margin improvement, increasing pace of change, the list goes on. The pivotal point for any CFO is how they choose to meet these business requirementsand there is more choice than most are aware.

These choices significantly impact finances ability to execute well and at an acceptable cost level. While transformation agendas target greater standardization of process, organization, and technology, few CFOs actually achieve these goals. Instead, they are addressing how to rapidly drive down the:
Process complexity re-engineering initiatives failed to achieve
Application complexity new ERPs failed to deliver
Organizational complexity shared services failed to support
Effort to capture actionable information that decision-support tools failed to enable

A November 2004 study by the Economist Intelligence Unit and IBM highlights some of these disturbing realities (see chart). Companies miss the real opportunities to reduce costs and drive profitable growth because the challenge of running day-to-day operations is so great that little time is left to look outside. Companies still do not realize that it is no longer the ownership of assets (including employees) that matters, but rather the ability to execute and make the most of critical capabilities. The external pressures of market turmoil, such as globalization, combined with rapid technology innovation, change the basis of competition so swiftly that finance organizations are caught in the complexity squeeze. This squeeze forces attention on the latest demandssuch as Sarbanes- Oxley complianceand sacrifices the transformation focus that is needed to grow the business. CFOs are evaluating their organizations poor track record of driving major change and relentless pursuit of incremental improvement, and turning outside for answers.

Today, business transformation outsourcing (BTO) offers a rapid path to best practice solutions that mitigate complexity and positively impact performance, all at a lower cost. With BTO, you have the power and the choice to move multiple shared-service centers into a mature, global three-tier model that leverages labor arbitrage. You have the choice to link multiple ERPs with wrap around technology that brings immediate visibility and control. You have the choice to launch newly designed best-practices consistently across your company in less than six months. You have the choice to have Sarbanes-Oxley requirements integrated into the BTO terms and maintained to sustain compliance each year.

CFOs need to ask themselves, What are we missing by focusing two-thirds of our resources on the transaction processing requirements of finance? Organizations that leverage BTO find that the improvement of skills and capabilities allows them to focus on better decision making, monitoring, and assessment of risks.

The role of finance is no longer whether to choose to de-burden your tasks by outsourcing a capability or activity. Rather, it is a companys skill in quickly remolding its sourcing arrangements to respond to market conditions. What are you going to choose? 

Finance Transformation through Shared Services and BTO
*49% of companies dont have global standard polices.
*75% of companies dont have global common processes.
*70% of companies dont have globally standard platforms.
*Only 29% of companies have implemented functional best practices globally.
*Only 29% of companies have global ERP systems; 17% have no plans to adopt one on any level.
*Only 19% of finance professionals believe they are exploiting the full functionality of their ERP system.
*Only 22% of companies have adopted shared services at a global level.
*55% of finance professionals rate themselves very poor, poor, or only satisfactory at their ability to gather, interpret, and convey information to senior management in a way that helps drive profits.
*42% of organizations lack integrated planning across strategic, management, and operational units.
*41% of finance professionals believe their organizations have inadequate forecasting abilities.
Source: IBM and Economist Intelligence Unit