Agenda Structuring the high-impact Finance function

Transcription

1 Issue 13 CFO Agenda Structuring the high-impact function

2 CFO Agenda Chief financial officers (CFOs) and teams continue to face enormous pressure to provide strategic and timely insights that will enable management to make better business decisions. Investments in enterprise resource planning (ERP), enterprise performance management (EPM) tools and analytics are important to better equip your teams but aren t enough to respond to the task. Most teams have the capability to become the strategic business partner they aspire to, but their attempts often falter, leaving struggling to earn its place at the table. As a result still isn t making the impact it needs to influence and shape the performance agenda. But why not? teams aren t sufficiently focused on business partnering activities. Business partnering activities include: financial planning, budgeting and forecasting business analysis and performance measurement management reporting mergers and acquisitions and divestiture support support for strategic planning and analysis enterprise risk management tax planning capital structure planning Putting the right talent and tools in place is important, but where most functions fail is at establishing the right structure enabling true business partnership to happen. When business partnering is buried in more traditional activities, exposes itself to letting operational matters take over business support. What s happening to performance analysis and forecasting when you spend three weeks out of four closing the books, preparing financial statements and performing internal controls? Clearly, change is needed to better respond to the needs of the business. The power to become a true business partner is in the hands of the CFOs. Figure 1: The business partnership value proposition One source of the truth, through integrated data and reporting Dedicated commercial finance organization, embedded in the business Greater knowledge of business drivers, market and competition Tells the story behind data using financial and non-financial information Creates an environment for discussion and challenging performance, which is metrics driven Forwardlooking insight through strong forecasting Investing in people; developing talent and critical skills Provides business leaders with timely, relevant and actionable information to drive business performance Confidence in the numbers and understanding of the levers that can be pulled Ability to predict issues that lie ahead and take proactive action Ability to intervene to manage margin and investment return 2 CFO Agenda

3 How to structure the highimpact function To overcome these challenges and deliver the proactive, relevant insights the business needs, CFOs need to rethink the very structure of the function. They need to embrace an approach that enables to excel in providing valuable insights and in managing the day-to-day financial matters that keep the business running smoothly. This structure is key to building a high-impact function that can handle today s demands. To start, organize in two distinct fields The high-impact function needs to split itself into two separate fields: Operational and Commercial. Operational s focus is to execute traditional processes with maximum efficiency and effectiveness (i.e. payables, billing, receivables, general accounting and financial reporting), along with maintaining a robust control environment. Leading functions organize their Operational arm around shared services centres (for routine and highvolume activities) and centres of excellence (for highly specialized activities that can be concentrated and performed remotely), managed centrally and reporting directly to the CFO. Typically, establishing shared services centres allows organizations to achieve the required critical mass to deliver economies of scale. This is key in making your function as lean as possible and able to deploy other resources at the right place. Despite the adoption of shared services and technologies, there s often room for improvement by redesigning business processes to reach the level of worldclass. Adoption of new cloud technologies for is an opportunity CFOs should consider. New cloud solutions push organizations to embrace process standardization and streamlining. During the ERP implementation era, many organizations were reluctant to abandon older processes. This resulted in overly customized applications and limited ability to evolve in a cost-effective way towards leading practices over time. Figure 2: Adoption of new cloud technologies Main advantages Standardized and streamlined processes Strong internal controls and risk management; increased accountability over stewardship of financial resources and safeguarding of assets Stronger expertise Larger span of control Shared Services Centre (SSC) Lower operating cost Main levers Process standardization Automation Integrated application architecture: financial system, ERP and EPM solutions Electronic workflows and business process management Cloud technologies Issue 13 3

4 Commercial is home to the business partners the business analysts charged with understanding how economic, competitive and customer trends intersect and interact with business unit strategy. Their main objective is to provide executives with timely, relevant and actionable financial and non-financial information to drive business performance. With their Operational counterparts focused on day-to-day finance and accounting tasks, the business partners can be dedicated to and focused on serving the business. Being accessible and available is paramount to build strong relationships within the business units. Your business partners can engage in daily dialogue with business unit leaders and staff, constantly deepening their knowledge and understanding of issues and opportunities and delivering useful insights. Establishing a strong and dedicated Commercial arm has important benefits, apart from allowing better focus from business partners. This structure puts in place mechanisms to share more easily best practices and experiences among business partners, and also to use centralized expertise, tools and standard reports to make their work more efficient and effective. Figure 3: Target operating model Operational Commercial Corporate activities Centres of Excellence Tax Treasury Financial reporting Financial data and reporting mgmt. Head of Operational Make sure integration between Operational and Commercial is seamless Despite the separation of Operational and Commercial, structuring and maintaining company financial data must be performed under a common and integrated framework. must standardize data definitions, formats and reporting to make sure the entire organization is working from a single, consistent data source, should it be budget, actuals or forecast data. Also, in creating this new, two-pronged structure, CFOs should make sure that all staff are brought into it including the shadow staff who may have been recruited by business unit leaders to deliver what the group itself was not. By working together under an integrated data and reporting framework, Operational and Commercial will end debates over whose financial figures are true and raise the quality, accuracy and overall reliability of the data used for decision making. Improving the quality of the company s financial data will also inspire greater confidence in the information reported to external stakeholders and regulators. Corporate Head of Commercial Shared Services Centres Accounts payable Billing Accounts receivable Accounting Other corporate activities Business Units Business Unit A Operational team Operational team Commercial team Business Unit B Commercial team 4 CFO Agenda

5 Define clear roles and responsibilities and find the talent Rolling out this kind of structure for the function means that companies need to think hard about the roles and responsibilities of the members of both Operational and Commercial. In both cases, the skill sets needed to excel may be quite different from those currently available within the company. A strong Commercial arm calls for having the right people properly embedded into business units people who truly understand the business drivers and challenges faced each day on the front lines. They need to be adept at problem solving and analysis, with good skills and a high degree of comfort with numbers. They need to be effective, persuasive communicators who can challenge and influence their peers in the business as well as work together as part of a team. Organizations that fail to put the right profiles into business partner roles often assign individuals who have spent their careers in the group rather than the business unit they re assigned to. This limits their ability to develop a deep understanding of the business unit s nuances. Their training, often in accounting, doesn t always provide them with a solid foundation for making sense of financial and non-financial data, planning or forecasting in a way that helps management teams understand the decisions that need to be made or the implications of those decisions. In addition, staff often find their attention drawn back to more traditional areas like transactions processing and financial reporting, meaning they spend more time looking backward than forward. CFOs should pay close attention to training and development especially on communication and management skills and on career paths to make sure they can help develop people with the right profile. As an example, some organizations build cross-training programs to send business analysts in other departments Operations, Sales, Production, among others to help develop a strong business acumen before moving them back in business partnering roles. While Operational may assume responsibility for traditional, transactional finance and accounting work, that doesn t mean traditional talent is what companies need. Centralization, automation and process streamlining remove the need for processors as used to think of them. The staff of an Operational shared services centre will instead require a higher degree of analytically savvy resources, people who can bring an understanding of business processes, troubleshoot rejects in the system and resolve special cases. Supervisors and managers of such teams should have a constant focus on measuring performance of business processes (under the SSC) as well as on driving continuous improvement. The span of control is also significantly greater, and thiswhich requires an ability to coordinate resources and manage teams,. But thisa skill that might not be an attribute of current staff. CFOs may have to invest in training or consider retooling their existing teams to meet these higher demands. Here again, proper training and development areis essential to make Operational run smoothly,; otherwise attention from executives won twill not be able to shift from day- to -day transactional activities to making Commercial effective. Issue 13 5

6 Are you ready? Of course, establishing a new structure for along the lines we ve described above is no small undertaking. It s much deeper than improving a process, upgrading your financial system or implementing a shared services centre through a lift-and-shift strategy. This new structure aligns back to actual stakeholders requirements and results in a business transformation that will reshape the relationship between the function and the business overall. Are you ready to embark on the journey? Do you have buy-in? This is essential. CFOs should share the idea with business unit leaders, department heads and other executives to gauge their appetite for such a reinvention of. Would it address their concerns and meet their needs? Do they understand how this new model will change the way they operate and interact with? Engaging the business around the future structure of is an essential first step. Is your company large and diverse? Companies that span geographies or those that have grown by acquisitions over the years often end up with a complex web of different processes, systems and procedures in and elsewhere. This could become a strong case for change and open the door to bring structural changes that will shape the future of. As the CFO, how could you apply this model to your function? This transformation can greatly improve s ability to meet today s demands, making structural changes and bringing more value but how will you make it happen? That s the challenge are you up to it? 6 CFO Agenda

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8 Contacts Toronto Samir Bishara Partner, National Effectiveness Leader Our CFO Agenda articles provide our perspectives on the issues that keep Canada s senior finance executives awake at night as their roles within the enterprise evolve with changing market dynamics. Montreal Sebastien Doyon Partner, Effectiveness sebastien.doyon@ca.pwc.com Ottawa Lori Watson Partner, Effectiveness lori.c.watson@ca.pwc.com Western Canada Arun Gupta Partner, Effectiveness gupta.arun@ca.pwc.com 2016 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights reserved. PwC refers to the Canadian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details