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CFOs & Next-Generation Finance


Next-Generation Finance BPO: Getting Ahead of the Numbers.



Laurent Leloup
Laurent Leloup
A business environment of permanent complexity and volatility is creating significant challenges for finance organizations. In this paper, Accenture argues that the evolution of business process outsourcing (BPO) makes it a potential solution for those CFOs who want to deliver more value to the enterprise and help speed the journey to achieve high performance.

Background
CFOs are seeking to become business partners within their organizations through strategic alignments between finance and operations that can create real value. Yet these executives must also navigate major disruptions from macroeconomic shifts, regulatory uncertainty, and other hard-to-predict events—at times on a daily basis.
The result is a dual challenge: CFOs have to operate smarter, and do so in an environment characterized by increasing complexity and volatility. Complicating this challenge is the sheer volume of information that finance organizations have access to. With more data than ever before, on both financial and enterprise performance, many finance departments struggle to synthesize it into actionable intelligence.

Analysis
Business process outsourcing offers a potential solution: finance and accounting expertise tailored to the specific needs of the company. This is in large measure due to the evolution of finance and accounting BPO, which has become much more complex and geared to delivering value—while continuing to deliver significant cost reduction.
This conclusion is borne out by the findings of the recent Accenture High Performance Finance survey.

Specifically, evolved finance and accounting BPO can help CFOs deal with three key challenges identified in the survey:
- Complexity and volatility. Analytics tools can give finance executives more immediate insights into how external events are likely to impact the performance of the finance function and the enterprise as a whole.
- Managing data. Data volumes are increasing dramatically, and BPO can help companies optimize back-office functions while providing a layer of analytics that can deliver insights from the data.
- Retention and development of talent within the finance organization. By helping finance organizations play a more strategic role and function at a higher level, BPO services can help create an environment that fosters individual growth and development.

Survey results also indicate that many CFOs doubt that their departments have the capability to address these challenges themselves.

FULL SURVEY:

The complexity of finance and accounting functions has increased substantially in recent years.

CFOs are seeking to become business partners within their organizations, through strategic alignments between finance and operations that can create real value. Yet these executives must also navigate major disruptions from macroeconomic shifts, regulatory uncertainty, and other hard-to-predict tail events—at times on a daily basis. The result is a dual challenge: CFOs have to operate smarter, and do so in an environment characterized by increasing complexity and volatility. Complicating this challenge is the sheer volume of information that finance organizations have access to. With more data than ever before, on both financial and enterprise performance, many finance departments struggle to synthesize it into actionable intelligence.

A recent Accenture High Performance Finance survey underscored these difficulties. The survey, which follows a similar project Accenture completed in 2008, drew responses from more than 800 “CXOs” and senior finance executives. While many of these respondents report advanced financial capabilities and a solid integration of finance with other areas of their companies—particularly notable given the recent financial upheavals—others report concerns about several key challenges. These include adopting a more growth-driven posture in the coming year as global economic demand begins to rise, cost-containment, riskmitigation, and even talent retention within the finance department.

A common theme of these challenges is that business process outsourcing (BPO) offers a potential solution: finance and accounting expertise tailored to the specific needs of the company. While BPO offerings of the past were limited to cost reduction—often by moving transaction reporting functions to lower-cost markets in order to take advantage of labor arbitrage—today’s BPO services are far more complex and more geared to delivering value. They still offer significant cost reductions, yet they build off that baseline with advanced analytics that can give finance executives real-time insights into how global events are impacting the company’s financials.

In short, the right outsourcing solution leverages data to enhance specific business outcomes. It can better integrate finance organizations with the operational elements of the company, and empower CFOs to become true partners with the rest of the C-suite.

Snapshot of a Complex World

Given the significant financial turmoil in recent years, Accenture’s 2011 High Performance Finance survey sought to assess how finance organizations have adapted and enhanced their capabilities. A central goal was to identify the main challenges finance executives face today and how well they are dealing with these challenges.

(We have executed this survey in the past, most recently in 2008; for a complete discussion of the 2011 findings, see “Delivering Value in a Complex World.”) The study comprised online surveys of 536 senior finance executives and 297 C-level finance customers (“CXOs”), as well as in-depth qualitative interviews with 11 CFOs and five COOs, all at predominantly large global companies.

The research revealed several key findings, which are reassuring in some cases. As a group, finance organizations have substantially improved their capabilities and performance over the past three years and remain generally aligned within the C-suite, an improvement over the 2008 survey. Nearly three-quarters of CXOs reported that their finance organization contributes to the company’s overall strategy and provides timely, responsive, and accurate services.

That’s the good news. While these results show notable improvements in finance capabilities over the past few years, other findings highlight the growing challenges that finance organizations now face. First, respondents reported that several persistent issues are likely to have a significant impact on the finance function. For example, four of five reported that “complexity” is a major factor. Others identified regulation, permanent volatility, the management of talent within the finance organization, and the sheer volume of data as concerns.

A majority of executives reported that their finance organization does not currently employ leading practices such as identifying growth opportunities, delivering more data than in prior years, providing analytics to the company, or expanding their input into syrategy and high-level decision making. Significantly, finance executives report seeking to enhance their management capabilities to deal with these concerns through better forecasting of future performance, and gaining greater visibility into current results.

The Evolution of Finance and Accounting BPO

These are significant issues, however business process outsourcing (BPO) offers a potential solution. In its earliest iteration back in the late 1990s, finance and accounting BPO was focused primarily on reducing costs, through “lift and shift” strategies that moved transaction reporting and other recurring finance and accounting functions out of the company. This version can be thought of as firstgeneration BPO. The second generation involved the use of offshore markets, which offered greater cost savings through labor arbitrage.

Since then, the sophistication and potential value-add from BPO have evolved markedly, in line with the growing problems that businesses now face. Subsequent generations of BPO have moved beyond mere cost reductions to increase efficiencies within the operations of the finance department. They have added procurement and sourcing capabilities, and more comprehensively integrated those into the finance function to enable global strategies for the entire organization that could ensure best pricing and volume discounts.

Currently, finance and accounting BPO is on its fourth generation, which pushes the cost and efficiency improvements outside the borders of the finance organization and into the entire company. This suite of services gives CFOs and finance executives far greater visibility about current financial and enterprise performance. Primarily, visibility comes through finance and accounting analytics, which allow organizations to capture and leverage data far more effectively than in the past. Defined as the use of complex algorithms to synthesize data and improve business outcomes, analytics have traditionally been applied to corporate functions such as inventory management, marketing and promotions, and generating actionable consumer insights. However the tools are becoming equally powerful in finance and accounting.

The current suite of analytics technologies can look at a greater number of variables within the finance and accounting function and deliver insights more quickly than ever before. They not only give finance executives a greater capability to handle the volumes of data streaming through the finance organization, but also deliver a real-time indication of financial and enterprise performance, dramatically increasingly visibility. In short, the tools turn data from an information-processing burden into an asset. (For CFOs on the road, all this information will soon be delivered via secure mobile apps: Fifth-generation finance and accounting BPO, currently in development, will offer this same functionality on devices such as tablets and smart phones.)

These tools help create value by improving business outcomes. Empowered by this information, a CFO now has the opportunity to take specific steps to, for example, reduce days sales outstanding (DSO) or shorten the closing time for a given cycle. The right BPO offering, supported by analytics, lets finance executives get ahead of the numbers. They can stop reacting to events and become true partners with the organization.

Aligning Capabilities to Concerns

Given the strengths and potential value-add from an analytics-based BPO offering, it’s worth noting how well these capabilities address the principal challenges that finance executives identified in the High
Performance Finance survey. Recall that these challenges included dealing with permanent volatility and complexity, managing data, and the retention and development of talent within the finance organization. The right BPO arrangement—a partnership between provider and client, with a comprehensive suite of finance business services—can address all three.

Complexity and Volatility
Regarding volatility and complexity, the world is now increasingly interconnected, and distant events can trigger unforeseen ramifications on a company’s operations and financial performance. Witness the tsunami in Japan, or the volcano eruption in Iceland, or the recent debt crises in Europe. This kind of volatility and complexity is now a permanent part of the business landscape, and companies have little choice but to develop a strategy for managing it.

In the past, the full impact from events like these would take weeks or months to percolate through the numbers and manifest itself in a close. That left CFOs perpetually looking in the rear-view mirror. However analytics tools can give finance executives more immediate insights into how external events are likely to impact the performance of the finance organization and the overall enterprise. As a result, the finance organization can shift from a reactionary posture to one that is far more forward-thinking and proactive, with the ability to implement strategic measures that can mitigate the impact from such external events.

Data
A related challenge is the requirement to manage, retain, and interpret a tremendous amount of data. As with volatility, this issue is likely to get more difficult in the future. Without a clear capability for managing information, many companies are drowning in data, and missing key insights that would come from a better grasp of the numbers.

BPO solutions can give companies a much better means of handling data, in two ways. First, they help companies optimize core back-office functions with streamlined finance and accounting processes. This helps create an environment of integrity, compliance, transparency, and control. It puts many of the recurring and routine elements of financial management on “autopilot,” generating significant cost savings—a reduction in operating costs of 25 percent to 50 percent.

However, that represents the first step. Greater benefits come when companies layer such an optimized back-office with a strong analytics function that can deliver insights from the data. In this way, they can substantially increase visibility into financial and enterprise performance. For example, CFOs can establish a set of dashboards to get a quick visual summary of consolidated financial data by function, region, or other category, along with alerts of significant trends that require attention or action.

Retention and development of talent within the finance organization
A more qualitative aspect of BPO services is that they allow finance organizations to differentiate themselves by playing a more strategic role within the company. Armed with advanced processes and technology, the finance organization workforce can function at a higher level, and become more integrated with the operations of the enterprise. This helps facilitate greater development and retention of individuals at all levels of finance organization. A world-class, analytics-based BPO partnership can show finance workforces the “best of what’s out there” — the most sophisticated systems and tools to enhance performance—and give these individuals more substantive challenges. Finance organizations no longer see the company’s numbers as a fixed entity to simply record and report, but as a dynamic set of metrics that they hold the power to improve.

In fact, the effects of an analytics-based BPO partnership can be so pervasive that they often transcend the boundaries that a CFO owns and controls. Our experience has been that while finance organizations usually grasp the benefit of a BPO solution, they also recognize that they will need buy-in from other elements of the company, given that the advantages and value-generation potential cross over from finance into the overall strategy and operations of the enterprise.

Conclusion

A more challenging business environment requires correspondingly greater capabilities in the finance organization. As the survey results indicate, CFOs at large corporations have some specific concerns about whether their departments have these needed capabilities in place. Specifically, these concerns include the ability to deal with increasing complexity, handle the abundance of data, and understand the current performance not only of the finance organization but of the enterprise as a whole.

While some companies will be able to address these challenges by upgrading internal resources, others may opt for a BPO partnership to address needed gaps in capabilities. Ideally, this solution includes analytics, which can help a finance organization make sense of enterprise data, delivering key insights to drive better performance. Given the pace at which the business world grows more interconnected and dynamic, the goal for CFOs should not merely be to catch up, but to leverage information in order to get ahead of the numbers.

Case Study: Microsoft

Historically, Microsoft has operated with a broad network of subsidiaries that are given wide latitude in determining local operational strategies. That decentralized management approach has been a key element in the company’s success, but it also led to significant complications in the company’s finance, accounting, and procurement functions. As recently as the mid-2000s, most of Microsoft’s 90 subsidiaries managed these functions independently, often by working with local vendors. That resulted in duplicated processes, inconsistent results, and uneven compliance with corporate and federal guidelines. The finance and accounting department was saddled with high costs, low efficiency, and little visibility into current enterprise performance. These challenges left it scant time or resources for the kind of strategic alignment that could lead to value generation.

In 2007, the company signed Accenture to a multi-year services agreement in order to address these issues. Microsoft wanted to consolidate the finance, auditing, and procurement functions of its subsidiaries into a single optimized system, which it called “OneFinance.” The goal was to standardize processes, reduce costs, improve visibility and compliance, and—most fundamentally— free up senior finance executives to focus on more strategic practices that could truly add value. Because this was a significant transformation—involving 95 countries and 450 positions—it involved substantial groundwork. Accenture’s challenge was to assess and benchmark current performance; identify challenges; and redesign a more integrated finance, accounting, and procurement function. Moreover, Microsoft wanted minimal disruption on the day-to-day operation of the company.

The overall transformation took 18 months, using a mix of Accenture and Microsoft IT resources. Each transition was broken into five major milestones and focused not only on reducing costs but on improving business outcomes and overall visibility. For example, Accenture created a Controller Workspace, a dashboard with clear, real-time data on regulatory compliance, current status of the monthly close, and execution performance at each subsidiary. This increased the efficiency of the finance staff, giving executives greater visibility into day-to-day financial performance and freeing them up to focus on more strategic, value-added activities.

The services agreement was built around key performance indicators, ensuring that Accenture delivered measurable gains that were aligned around Microsoft’s business needs. Within three years, Microsoft achieved a 35 percent reduction in operating costs, along with improvements to procurement compliance and supplier discounts. In addition, Microsoft has streamlined its administrative burden and improved compliance with regulations such as Sarbanes-Oxley and with corporate procurement guidelines.

However those are just the initial gains. The Microsoft/Accenture partnership was built around continuous improvement, and as Accenture’s BPO offerings have continued to evolve, Microsoft has continued to take advantage of its enhanced capabilities. In addition to reduced costs and greater efficiencies driven by the initial transformation, Microsoft is currently improving business outcomes such as faster monthly and quarterly closes, more accurate reports, and improved business outcomes. Fundamentally, the finance organization now has integrated, world-class capabilities in recurring functions, enabling the CFO and senior finance executives to play a more direct role in positioning and driving company-wide strategy to enhance financial performance.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with more than 244,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com

Laurent Leloup

Jeudi 30 Août 2012
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