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Finance function challenges and way forward
Achieving finance excellence
EY approach and value
FAAS contacts
Page 4 Designing a finance function to meet tomorrow’s challenges
Finance functions across the globe areaiming to add value
In delivering an effective support function to the organization, finance must balance its three key priorities: costreduction, compliance requirements and efficient operations.Be effective in driving forward the business► Deliver an effective finance support service to business units► Provide timely and accurate reporting and business information► Strengthen business decision making throughout the organization► Provide challenge to the business► Be seen as a valued partner to the business
Promote strong governance and control in the organization► Design an appropriate financial control framework► Facilitate improvements in control in the business► Promote management of financial risk to the organization► Meet increasingly onerous statutory and regulatory requirements
Be efficient in the operation of the finance function► Reduce the costs of the finance function► Realize benefits of investments in finance► Integrate finance teams of acquired businesses► Streamline commodity processes including reporting
Back-office focus
Effectiveness
Potential balance
EfficiencyControl
Striking a balance for the organization
The key challenge for finance is to improve in all three dimensions while retaining the appropriate balance for the organization.
Page 5 Designing a finance function to meet tomorrow’s challenges
Finance function key challenges in achievingits objectives
Responsivenessto business needs
► Limited time to focus on higher value-added activities (e.g., strategic planning and decision supportsystem)
► Inadequate focus on complex business performance management► Need for a closer integration between finance and other areas such as risk and technology► Silo approach leading to business inefficiencies
Technology
► Lack of preparedness and foresight to adapt to increasing and more complex reporting and businessneeds
► Inefficiencies in reporting − balance between speed, cost and output► Greater need for a single source of truth for financial information► Focus on data analytics, technology controls, cyber security and business continuity
Governance, riskand compliance
► Greater accountability on CFO and senior executives► Need to document and prove financial controls in an ever-changing business and regulatory environment► Need to balance cost and control, and embed control in business processes► Increasing regulatory, legislative, supervisory and contractual compliance pressures
Efficiency andcost pressures
► Rise of outsource usage and increase of finance activities available for outsourcing► Inadequate focus on leveraging low-cost geographies for finance and shared service centers (SSCs)► Need to leverage investments in technology to reduce cost► Need for standardization and simplification of finance processes
Business issues Finance function challenges
Page 6 Designing a finance function to meet tomorrow’s challenges
The way forwardFinance function: current focus and future considerations
► With the enhanced scale of operations, increasing complexities andconcentration of all critical and non-critical finance activities, there is animmediate need to have clear role definition for finance,segregation of duties between corporate finance and BU financeand a robust organization structure will assist the right peoplefocusing on the right business issues.
► Future considerations include robust planning, budgeting andforecasting, finance function improvement initiatives at a macrolevel and process level, with a solid governance and controlframework embedded.
Page 7 Designing a finance function to meet tomorrow’s challenges
The way forward
Technologyand data
People and organization
Future phasesCurrent scope
►Define role of finance,scope of activities,optimal organizationmodel and governancestructure
►Consistency of keyaccountingpolicies
►Further standardizationand streamlining of coretransaction processes (e.g.,within shared servicesenvironment)
►Governance frameworkand changemanagement
►Standardization of managementreporting and financial budgeting;global processes
►Assess ERP system;alignment of code blockbased on moreconsistent managementmodels
►Deploy single globalplatform for reporting
►Centers of excellence forspecialist functions
► Integrate solutions withenterprise data warehouse
►Deploy single global platformfor financial planning
►Expand planning processtransformation: strategic plan;operational planning processes6
to24
mon
ths
2to
4ye
ars
Processand policy
►Transition to local GAAP►Fast close of books
►Establish commoncore structures forfinance operations
►Talent and performancemanagement processesfor finance
►Alignment offinancestrategyto overallbusinessobjectives
►SSC strategy and managedservices operating model
►Target operating model –design and delivery
►Processtransformation andreducing cost offinance
Strategic direction and decision support
Page 9 Designing a finance function to meet tomorrow’s challenges
Achieving the right balance
Strategic directionand decision support
People and organization Process and policy Technology and data
► Sharper cost focus► Elimination of operating silos► Continuous improvement of
support services► Appropriate operating model
► Appropriate or leanorganization structure, rolesand responsibilities
► Training, development andupskilling
► Defined career path
► Process simplification andstandardization
► Leverage technology andachieve automation
► Robust controls to mitigaterisks
► Harmonize accounting policiesand reduce GAAP differences
► IT strategy aligned with broaderbusiness objectives
► Act as a business supporter► Automation and integration
resulting in increased efficiencyand effectiveness
► Alignment of finance strategy tooverall business objectives
► SSC strategy and vision► Target operating model –
design and delivery (outsource,offshore, BOT, captive, etc.)
► Governance framework andchange management
► Analytics, reporting and insights
► Organization design► Improvement in structure, roles
and identification ofresponsibilities
► Training and knowledgetransfer
► Process reviews,documentation andstandardization
► Policies and procedures► Process risk and controls► Improvement in statutory
reporting► Legal entity rationalization► Local compliance and reporting
requirements► Internal and external reporting
► Review of IT strategy and itsimpact on finance organizationand SSC strategy
► Review of IT operations as acritical supporter to the financefunction
Focu
san
dob
ject
ive
EYca
nhe
lpyo
uw
ith:
Integrated by:► Robust project and change
management
► Business case development► Benefits realization► Migration strategy
► Readiness assessment► Acceptance criteria► Sign-off and approval
► Project planning► Transition planning
Page 10 Designing a finance function to meet tomorrow’s challenges
Strategic direction – overview and focus
Focus and rationaleThe strategic direction for shared or managed services is shaped and influenced by a number of change drivers:► Sharper cost focus: Many finance leaders are driving strategic change and cost management in the finance
function due to cost pressures and the overall need to align finance strategy to business objectives.► Elimination of operating silos: Some organizations sustained regional and functional silos during the past decade
of mergers, allowing systems and processes to proliferate. An SSC or managed service environment focusesattention on standards and end to end process excellence, eliminating silos and reducing costs.
► Continuous improvement of support services: Finance, IT, HR and other support services are under pressure tomake tangible contributions to earnings.
Work stream scope Points to consider Key supporters and options
Stra
tegi
cdi
rect
ion
asse
ssm
ent
► Business and financestrategy
► SSC strategy and vision► SSC governance► Voice of the customer► Service management
framework► Service level agreements► Charging strategy► Business continuity
► How many SSCs should there be?► What is the underlying SSC strategy (back office transaction
processing, Centers of Excellence, hybrid)?► What does the business want to achieve through shared services?► How does the SSC align with the business strategy and
objectives?► What do the customers and stakeholders need?► How should the SSC be funded?► How should the SSC be governed?► How do we build in future scalability?► Who will the SSC report to?► Will the SSC be a cost or profit center?
► Global SSC operating models► Emerging hybrid models► Three-tiered operating model► Expert centers► Centers of Excellence► Finance maturity profiles► Captive managed services
Page 11 Designing a finance function to meet tomorrow’s challenges
People and organizational change – overviewand focus
Focus and rationale► Focus on recruiting and training staff with the appropriate processing skills, finance knowledge and language
capability► Reward and recognition frameworks that incentivize high performance and continuous improvement► To facilitate migration up the shared service value chain, there is a need for greater levels of skills in:
► Business understanding – understanding the context, complexity, dynamics, key issues and drivers of their customer’s business► Business analytics – the ability to analyze and interpret financial and non-financial data to provide insight► Business decision-making and problem answering – understanding how information impacts the business and to use this understanding
to advise decision makers
Work stream scope Points to consider Key supporters and options
Peop
lean
dor
gani
zatio
nch
ange
asse
ssm
ent
► Organization design andsizing
► Organization readiness
► Staff management
► HR transition
► Knowledge transfer
► Competency framework
► Job profile and descriptions
► Talent management
► Cultural blueprint design
► Recruitment strategy
► How should the shared services operation be organized (process,customer, etc.)?
► What are the key roles?
► What does the shared service culture need to be?
► How will we train staff?
► Is the business and organization ready, are the roles andresponsibilities clear?
► How will we incentivize people?
► What will the requirement be for language skills?
► Competency frameworks forfinance
► Opportunities to improveorganization and governancestructures
► Talent management strategies
► Finance academy
Page 12 Designing a finance function to meet tomorrow’s challenges
Process – overview and focus
Focus and rationale► When designing the SSC there is a need to review current leading practices in process design to determine how
these link to the challenges that the business is facing.► Process design should leverage integrated business applications, automation and workflow while reducing the
manual intervention.► Process, policy and data structures need to be standardized.
Work stream scope Points to consider Key supporters andoptions
Proc
ess
asse
ssm
ent
► Process transformation► Controls framework► Tax models► User Acceptance Testing (UAT)► KPIs and performance metrics► Document management► Data cleanse► Legal and statutory assessment► Operational review and status► Leading practices► Policies and procedures► Business calendar► Help desk
► What processes and activities should be included in the SSC andwhat is the criteria for inclusion?
► How do we make the transaction processing more streamlined?► How do we make management information more accurate and
usable?► When do I reengineer business processes?► What level of efficiency is expected from the SSC?► How do we meet the legal and statutory requirements of each
country in scope?► What tax efficient models could we adopt?► What standards do we need to adopt?► How is non compliance addressed?► Is risk management and control an integrated part of business
activity?
► Leading practices► Industry comparisons► Process diagnostic
Page 13 Designing a finance function to meet tomorrow’s challenges
Technology – overview and focus
Focus and rationale► Advances in web-based technologies and workflow-supporting technologies have been fundamental building blocks
for SSC implementations.► Web-based interaction with third parties enables efficiency savings through both greater automation and self-service.► Data and data management tools are increasingly important – particularly as organizations seek to improve returns
on their investments.► Smarter application of technological knowledge revolutionize working practices which can be achieved through
intelligent analysis of to-be stage and generating efficiency savings through the automation of current processes.
Work stream scope Points to consider Key supporters andoptions
Tech
nolo
gyas
sess
men
t
► Vendor management► Applications► System integration► Information management► Technical Infrastructure
► What technology do I need?► How can I leverage the existing IT infrastructure?► How do we link shared services to our IT strategy?► Will a vanilla software configuration be mandated?► Will we have a single instance, single configuration, common data
structures?► Should we adopt process improvement tools to be used to
automate routine transactions?► What does technology make possible?► What functionality can really transform the way we work?
► ERP (localized)► Imaging and document
archiving and retrievaltechnology
► Electronic data interface► Electronic funds transfer► Middleware► Employee self service► Data warehouse► Modelling tools► Spread sheets and end
user tools
Page 14 Designing a finance function to meet tomorrow’s challenges
Shared services or managed services?Operating model considerations
Decision criteria► Service can be shared► High degree of automation► Process can be web
enabled► Customers have access to
tools► Customer are able to make
cultural shift in serviceprovision
► High degree of expertise► Service required frequently► Proximity to customers and
decision makers essential► People providing service
are an integral part of themanagement of theenterprise
► Service can be shared► Process and systems
commonality► Critical mass exists to
enable economies of scale► Manually intensive work► Service can be remote from
customer
► Service can be shared► Process only used
periodically or occasionally► High levels of expertise
required► No critical mass of staff► Knowledge can be easily
transferred
► Service cannot be shared► Service required regularly► Local knowledge required► Systems and processes
unique to location► Not economic to
consolidate to SSC
Support function activities are allocated to different service delivery models with the aim of improving cost efficiency andraising quality or service levels.
Local and HQservice provision
Businesspartnering
Centers orCommunities of
Excellence
Self-service orvirtual shared
services
Physical sharedservices
Benefits► Very low cost► Flexible and scalable► Customers control service
levels
► Highly responsive► Focused on value creation► Experts used as experts not
administrators
► Low cost► Flexible and scalable► Accountable► Service levels and quality
can be controlled► Allow consistency of
service► Continuous improvement
► Pools scarce expertise► Improves cost efficiency► Service available to all
regardless of size► Environment designed to
create and shareknowledge
► Experts used as experts notadministrators
► Service level controlleddirectly by customer
► Highly responsive
Page 16 Designing a finance function to meet tomorrow’s challenges
EY finance excellence methodology
Validate requirementsand performengagement specificplanning
► Understand thecurrent state
► Evaluate the currentstate
► Generate andprioritizerecommendationsand next steps
► Agree approach andrefine requirements
► Develop detaileddesign
► Finalize design andgain approval
► Developimplementation anddeployment plans
► Build and validateimprovements
► Execute deploymentplan
► Confirm operationaleffectiveness
► Support continuousimprovement
► Expand benefitsacross the extendedenterprise
► Define scope andopportunity
► Collect data
► Define vision andstrategy
► Analyze and developoptions
► Develop businesscase
► Developspecifications
► Develop detaileddesign
► Confirm approachand benefits
► Build
► Validateimplementation
► Implementation
► Stabilize
► Operate
► Improve
► Extend
1–2 weeks 7–8 weeks 16–20 weeks 12+ months 4 weeks – 6+months
* The above approach reflects very indicative timings. Actual timings could be different and would depend upon client context, project scope , complexity etc.
SustainIdentify Diagnose Design Deliver
Diagnosing the current state Designing and implementing the transformation Initiatives
EY can provide support as the company fulfills the following steps:
Page 17 Designing a finance function to meet tomorrow’s challenges
EY value
► Our depth of global experience, including extensiveresearch and analysis, provides strong subject matterresources and insights to our clients.
► Our team integrates advisory capabilities across ourmultidisciplinary service lines to deliver the full range ofrecommendations to address your needs.
Industry andsubject matterknowledge andteam
► We harness leading edge project management techniquesand tracked benefits delivery, supported by a clear changemanagement principles.
► Our integrated service delivery approach includes benefitsmanagement starting with an individual project and endingwith financial statement impact.
Methodicalexecution anddelivery
► We are able to help identify and deploy rapid savingsinitiatives that may fund the assessment, rationalization,review and realization phases of the improvement program.
► We work closely with client leadership to agree on acommon vision of success and shape a program that iscommercially compelling and realizable.
Rapid andefficientapproach
► We understand the psychology of cost – sustainability is thekey focus from the outset, considering cost effectiveness inrecommendations.
► We frame cost improvement opportunities in terms of adesirable end-state encouraging clear motivation to “takethe pain of change” out of the process.
Drivesustainability
► Clear action plan► Measurable benefits► Fast and efficient delivery► Proven approach► Industry knowledge► Leading practices► Risk management► Sustainable execution
Delivering results withindependence andobjectivity
Page 18 Designing a finance function to meet tomorrow’s challenges
* The above approach reflects very indicative timings. Actual timings could be different and would depend upon client context, project scope, complexity etc.
Service: Finance excellenceIndustry: Diversified industrial products
Case studyFinance excellence
Business drivers► Standardize and streamline the client’s finance
processes across various regions► Strong emphasis on reducing the overall costs and
reshaping the finance function► Improving finance operations to meet company’s overall
plan and business strategy► Strong focus on streamlining and simplifying finance
function to reduce manual intervention► Leveraging technology to reduce manual intervention
and to enhance control over the processes.
► Assisted in the development of a transformation road map► Provided project management, change management and process improvement services► Developed a customized tool – Financial Statement Automation Tool (FSAT), to assist in the
production of statutory financial statements in accordance with local GAAP► Centralized the project by developing a multifunctional platform – ePlaybook, a live version
of the EY step plan, with access to the client and its auditors► Established teams across various regions to leverage the localized GAAP knowledge for
preparation of the statutory reports► Helped enable a round the clock work culture, thereby reduced the turnaround time by
having a global footprint of the team► Supported corporate secretarial services – assisting in timely preparation and submission of
regulatory filings
Value delivered to client► Helped in making the finance process cost efficient through increased automation► Helped streamline controls by leveraging technology and reducing manual intervention► Helped change finance focus from back-office “bookkeeper” to “trusted business advisor” to the business► Helped to develop the approach, architecture, roadmap and business case to support the transformation► Brought leading practices and lessons learned to help this client quickly and efficiently meet their objectives
Certain of our services for an audit client and its affiliates may be more limited in order to comply with applicable independence standards. Please reach out toyour EY contact for further information.
Page 20 Designing a finance function to meet tomorrow’s challenges
Financial Accounting Advisory ServicesContacts
Pankaj ChadhaFinance excellence
[email protected]+91 124 671 4150
Myles CorsonFinance excellence
[email protected]+1 212 773 3232
Vish DhingraFinance excellence
[email protected]+91 124 443 5020
Ken AkaishiJapan FAAS
[email protected]+81 3 3503 1100
EY | Assurance | Tax | Transactions | Advisory
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