FINANCE FUNCTION PROCESSES AND PERFORMANCE MEASURES

Transcription

1 FINANCE FUNCTION PROCESSES AND PERFORMANCE MEASURES NOTE: The following material is intended to provide a brief overview of some finance function processes. This can be used as a high-level reference when beginning to look at continuous improvement opportunities in this area. Key Processes: Payroll Travel and Entertainment Accounting Accounts Payable Billing Accounts Receivable Credit and Collections Close the Books/Financial Reporting Financial Budgeting Fixed Asset Accounting Internal Audit Tax Treasury Risk Management Key Activities: Payroll setup and maintain employee payroll files time reporting and approval, including distribution, preparation, posting, balancing, and approval of time sheets manual payroll processing process payroll time sheet distribute paychecks and registers process payroll accounting entries prepare, review, and file payroll tax returns resolve payroll inquiries Benefits administration activities (if handled by Payroll) Travel and Entertainment Accounting establish and update company T&E policies gather and compile employee T&E data review and analyze T&E information for compliance and validity maintain general ledger system for activities associated with posting T&E information manage and analyze T&E applicable trends to determine financial impact to company process T&E adjustments for errors or omissions create and produce T&E reports for management review

2 Accounts Payable gather and compile A/P documentation, including company purchase orders, vendor invoices, receiving information, etc. establish new vendor accounts obtain verification of receipt of goods/services and obtain vendor payment approval maintain A/P system post payments to General Ledger accounts generate and post manual or "special" check disbursements generate or transmit vendor payment evaluate and review A/P balances, including account analysis, review of cash disbursements resolve vendor billing discrepancies and related inquiries process A/P adjustments for errors or omissions create and produce A/P-related reports for management or other review Billing create new customer billing accounts (order entry is an input to this process, and therefore should not be included) collect and compile company invoices prior to transmitting/sending invoices to the customer review billing invoices for accuracy, completeness, and integrity transmit billing invoices to customers maintain billing system respond to customer billing inquiries and resolve billing discrepancies generate and issue customer credit memos process billing adjustments for errors or omissions create and produce collection-related reports for management or other review Accounts Receivable receive and post customer remittances to customer accounts investigate and research over/under payments implement actions to re-bill customer or forward account to collections process A/R adjustments for errors or omissions, including credits/debits to accounts maintain A/R system review receivables and specific account balances to ensure timely receipt of payment produce A/R reports for management review establish and update company credit and collections policies compile credit information pertaining to new and existing customer accounts evaluate and authorize credit limits maintain, evaluate, and analyze credit and collections accounts and trends review and monitor customer payment histories to identify delinquent or late-paying accounts research and contact delinquent customers transfer and monitor delinquent customer accounts sent to outside collection agencies process collections adjustments

3 Close the Books/Financial Reporting maintenance of general ledger chart of accounts administration of G/L database reporting/consolidation structure preparation, review, and recording of journal entries monitoring of the closing process at unit and corporate levels preparation, review and analysis of accounts and trial balances at the unit level preparation of consolidated corporate trial balance, including eliminating and consolidating journal entries generation and distribution of monthly financial reports reconciliation of balance sheet accounts consolidation of expense type information maintenance of allocation pools and related rates development, review, and distribution of accounting and internal control policies and procedures manuals record retention/archiving preparation, review, and submission of financial information (financial statements, footnotes, and other supplementary information) research of GAAP and international accounting issues and briefing of new FASB/ International Authorities pronouncements external and/ or parent audit coordination and related fees Financial Budgeting and Analysis gather and organize information necessary for designing and analyzing the budget, operating plan, and strategic plan analyze budget, operating plan, and strategic plan information prepare budget, operating plan, and strategic plan obtain budget, operating plan, and strategic plan approval maintain planning/forecasting system report and distribute budget, operating plan, and strategic plan information investigate and evaluate financial performance and variances between budget and actual figures prepare and distribute budget and actual variance reports periodically recast budget create and produce reports for internal management or external third party review

4 Fixed Asset Accounting establish and/or change fixed asset accounting policies, including depreciation capitalization gather information to evaluate fixed assets classify fixed assets based on asset description maintain fixed asset accounting system analyze the company's fixed asset performance (e.g., return on investment calculation, tax implications, etc.) prepare fixed asset adjustments for errors, misclassifications, or omissions prepare fixed asset reports for management, including fixed asset register, tax depreciation reports, etc. Internal Audit evaluate the effectiveness of internal controls (both physical and financial) assist in improving business processes (continuous improvement) monitor activities of non-compliance with company policy, laws and regulations assist external auditors in conducting the annual financial audit assist in systems development evaluate the soundness of the company's accounting records report on findings of non-compliance, fraud, major defects in controls to management, board of directors, and outsiders Tax compile and gather relevant tax information monitor the adherence to company and regulatory tax guidelines design tax plans and programs prepare supporting schedules and tax forms, including all tax-based accounting manage tax regulatory relationships maintain tax general ledger system create and produce tax reports for management and other review Treasury/Risk Management Manage incoming and outgoing cash flows (including lock box, transfer consolidations) Manage and leverage intercompany cash flows and use of foreign currencies. Manage collections and payment disbursement processes. Coordinate and build relations with banking partners. Perform cash forecasting to determine the optimal liquidity needed for company growth. Manage investment activities (including securities and pension plans). Identify and measure financial risk exposures. Implement technology to effectively assess financial risks. Manage relations with insurers/underwriters of investment transactions. Offset financial risks through hedging or like transactions. Control and develop dealing/trading operations.

5 Performance Measures Overall finance department Total finance department cost as a % of revenue Total finance headcount as a % of total business unit headcount Total finance span of control Average length of employee service Finance management education levels as a % of finance managers Finance staff education levels as a % of finance staff Finance department cost as a % of revenue by process Span of control by process (staff to management ratio) Payroll Total payroll department cost as a % of revenue Total payroll department cost per paycheck Annual payroll department cost per employee Annual number of paychecks processed per FTE Payroll/human resources system integration % of personnel using direct deposit % of paychecks with errors Travel & entertainment accounting Total T&E department cost as a % of revenue Total T&E department cost per T&E report Average T&E payment amount Annual number of T&E reports processed per FTE Frequency of expense report submission Method of employee reimbursement Accounts payable Total A/P department cost as a % of revenue Total A/P department cost per invoice processed Average A/P payment amount Annual number of invoices processed per FTE % of vouchers with errors Number of active vendors Billing Total billing department cost as a % of revenue Total billing department cost per customer invoice % of invoices with inquiries % of billing adjustments processed Average elapsed time between shipment/service and billing % of EDI/Internet utilization (bills sent via electronic invoice)

6 Accounts receivable Total A/R department cost as a % of revenue C&C cost per account requiring credit activity C&C cost per account requiring collections activity % of remittances with errors % of remittances that are a first-time match Annual number of remittances per FTE Days sales outstanding Close the books/financial reporting Total close the books/financial reporting department cost as a % of revenue Hard closes per year in excess of regulatory/required closes Number of error correction entries as a % of total entries Cycle time to complete reports Number of accounts in business unit's chart of accounts Financial budgeting & analysis Total financial budgeting and analysis department cost as a % of revenue Annual number of financial budgets developed Cycle time to prepare budgets Variance of budgeted to actual as a % of budgeted Type of budgeting Financial budgeting structure Fixed assets accounting Total fixed assets department cost as a % of revenue Total cost per fixed assets transaction Total cost per fixed asset tracked Annual volume of fixed assets tracked per FTE % of fixed assets that are misallocated or misclassified Minimum capitalization value Internal audit Total internal audit department cost as a % of revenue Internal/external staff turnover rate Customer satisfaction survey frequency Customer satisfaction survey results Total days from end of fieldwork to issuance of reports % of time spent on operational audits/process reviews

7 Tax Total tax department cost as a % of revenue Cash income taxes paid as a % of pretax income Penalties, fines, & interest as a % of cash income taxes paid Average cost per filing Effective tax rate Tax time allocation % of annual income tax filings ready to file by due date % of tax preparation time (compliance) to derive net income per books from financial records Treasury/Risk Management Treasury Department Cost as a Percentage of Revenue Treasury Department Cost per Treasury Full-Time Equivalent Employee (FTE) Treasury Personnel Certifications Degree of Centralization Number of Banking Partners per $1 Billion Revenue Number of Bank Accounts per $1 Billion Revenue Number of Bank Accounts per Treasury FTE Number of Credit Lending Banking Partners Average Interest Paid on Loan Frequency of Bank Account Reviews Length of Cash Conversion Cycle Ratio of Wire Transfers to ACH Payments Initiated Ratio of Wire Transfer versus ACH Processing Errors Made Use of Hedging for Different Risk Types Use of Derivative Instruments Risk Models Used to Measure Risks Treasury Systems Cash Management Functionality Treasury Systems Risk Management Functionality Treasury Systems Foreign Exchange Functionality Treasury Systems Debt/Investment Functionality