Periodic Reassessment, Continuous Improvement of Finance Operations

7/31/2019 Periodic Reassessment, Continuous Improvement of Finance Operations

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Periodic Reassessment, Continuous

Improvement o Finance OperationsA well-considered and executed transormation roadmap can help

fnance keep pace with emerging technologies and service deliverymodels, as well as advance key business objectives.

Executive Summary

The ever-changing needs o the business and

its operating environment make it imperative

or organizations to continuously reassess their

core processes, including those that pertain to

fnance. Doing so will ensure that processes can

meet any new business requirement and support

the organization through needed change. This

has led to a growing trend in recent years orfnance groups to conduct rigorous assessments

and develop multiyear transormation roadmaps.

A well-constructed and well-executed transor-

mation roadmap will address the wide swath o

process, people and technology issues. This will

put companies on a path to become best in class

and stay ahead o their peer group.

This white paper discusses the actors that

mandate a transormation plan update and pro-

vides a ramework or a comprehensive assess-

ment and roadmap.

Creating, Extending a Transormation

Roadmap

Finance transormation roadmaps are strategic in

nature and built or a multiyear timerame. They

set the transormation agenda and direction or

the organization. The critical inormation require-

ment or developing a transormation roadmap

is a detailed operating landscape map, including

an in-depth understanding o the “as-is” process,

available talent, organizational structure,

technology landscape and levels o automation.

Once an in-depth understanding o the current

landscape has been developed, analysis can be

perormed and alternative uture-state scenarios

developed to begin building the enterprise trans-ormation roadmap.

A transormation roadmap needs to be dynamic

and continuously updated. Current operations

need to be reassessed in light o changes to the

company and its environment, including:

• Availability o new sotware tools and solutions.

• Maturing o outsourcing options.

• Finance operations perormance.

• The advance o globalization.

• Evolving best practices.

• The changing role o fnance.

By continuously evaluating and updating the

transormation roadmap, companies will be able

to take advantage o the latest developments in

technology solutions or fnance. New sotware

• Cognizant 20-20 Insights

cognizant 20-20 insights | october 2012



cognizant 20-20 insights 2

tools can be leveraged to increase levels o

automation, eliminate non-value-added activities

and help create an organization o the uture with

best-in-class processes.

Technology Enablement

Sotware applications are available that lend a

degree o automation to all fnance processes.

These sotware technology enablers almost ullyautomate the process, as in the case o accounts

payable invoice processing, or improve the eec-

tiveness o the unction, such as fnancial plan-

ning and analysis (FP&A). Examples o fnance

processes or which mature technology oerings

are available include the ollowing:

• Invoicing: Eliminate invoice processing with

Web-based solutions that connect buyer and

supplier.

• Order management: Optimize order manage-

ment, billing and collection unctions with

Web-based solutions.

• Cash application: Automate credit card and

cash applications by leveraging auto-matching

o bank eeds with ERP.

• Recurring entries: Automate booking o re-

curring expenses and allocations by leveraging

existing ERP unctionality.

• Travel expenses: Optimize travel expense pro-

cessing by integrating expense reporting with

corporate travel cards.

• Reconciliations: Optimize reconciliations by

auto-matching multiple eeds.

• Consolidations: Optimize ledger consolida-

tions.

• Reporting: Standardize fnancial planning and

reporting by creating system-generated auto-

mated reports that are available centrally.

• FP&A: Build custom views o data and provide

analytics.

FAO Options

Transormation roadmaps also help companies

objectively evaluate whether to retain processes

or take advantage o the lower labor cost and

shared investments o working with a service

provider. This can be achieved by comparing

oerings and providers with existing cost

structures and service levels.

The oerings o fnance and accounting outsourc-

ing (FAO) providers are changing and maturing

rapidly, moving rom the provision o rules-based

transaction processing to complex judgment-based work. In the early days, the FAO scope

was limited primarily to accounts payables work.

Successul delivery o cost savings and quality

improvement rom accounts payable outsourcing

quickly led to the outsourcing o other transac-

tion processing work, such as accounts receivable,

fxed assets accounting, cost accounting and

routine reporting. Over time, as FAO became a

more accepted and proven business practice,

companies expanded their outsourced work to

include complex reconciliations, ad hoc reporting,

Sarbanes-Oxley compliance work and selected

treasury activities (see Figure 1).

Source: Everest Research Institute (2011)

Figure 1

Degree o Outsourcing o F&A Processes Over Time

Emerging Mature

Accountspayable

Generalledger

Accounts receivable

FP&A

Regulatoryreporting &

complianceInternalaudit

Payroll

Tax

Low High

Low

High Pioneer

Frequency of Inclusion

(Percentage of transactions)

Transaction-intensive processes

2009-2010

2007-2008

Judgment-intensive processes

2009-2010

2007-2008

Depth of Outsourcing Scope

(Degree of process

ownership transferred

to FAO service provider)

During the past few years,

FP&A scope evolution was

driven more by the increasing

depth of scope than the

frequency of inclusion of FP&A

processes in FAO contracts.

Sample size: 580 multiprocess FAO contracts signed as of 2010

Note: For more information, please refer to “Moving Beyond Transactional FAO:The Rise of FP&A Outsourcing,” Everest Group, December 2010.




Service Level Expectations

In-house levels o service perormance also

change over time, or better or worse, as do per-

ormance requirements. Several actors can drive

the need or a change in service levels, including

new expectations, accounting standards and

technology, as well as changes in the operating

or regulatory environment. I current process

perormance levels are not meeting the new

demands, this calls or a process reassessment in

order to achieve compliance.

Consider the ollowing scenario: The end-to-end

cycle time or Company XYZ, rom request receipt

to order ulfllment, is 12 working days. The best-

in-class cycle time is our days. The company,

thereore, must reassess the process with a

target o getting close to best-in-class to stay

competitive.

Globalization also impacts the fnance transor-

mation roadmap. As companies expand globallyto access new markets, or get closer to the

existing markets they serve, the demands on

fnance change. In the traditional model, organi-

zations tended to create inrastructure and back-

ofce support in new markets, including fnance.

With the maturity o today’s FAO oerings, it is no

longer a requirement to build all o the necessary

support. Organizations are now able to operate in

multiple new markets with minimum investment

by partnering with established providers that

oer global F&A services. Companies that have

successully adopted this model are able to

quickly ramp up in new markets, get closer to the

markets they serve and ocus on core business.

As the World Turns

Best practices are changing rapidly. In response

to changing technologies, maturing o outsourc-

ing and changing regulations, approaches and

activities that were best practice just a year

ago may no longer hold that status. Organiza-

tions are leveraging the power o inormation

and developing a greater understanding o the

fnance back-ofce unction and converting it into

value or the organization. This has led to a newtrend, in which back-ofce unctions are trans-

orming into revenue-generating unctions:

• Order management: This unction is now used

by companies to cross-sell and upsell prod-

ucts and services. This has a direct impact on

revenue. The processes and skill sets o the

people managing this unction are changing

to accommodate the expanded agenda. Order

management is transorming itsel rom being

a back-ofce unction to a ront-ofce sales

channel.

• Accounts payable: Improving discount capture

and recovering debit balances are now increas-

ingly being built into the standard accounts

payable process and are key deliverables or

most accounts payable managers.

• Sourcing: With changing expectations,

sourcing teams are now being measured on

actual savings delivered. They are expected

to leverage spend analytics

and new technologies to

take advantage o scale and

negotiate better rates and

terms o credit.

The goals and aspirations o

fnance are also changing over

time. As fnance organizations

are transormed, goals are evolving rom predict-

ability, efciency and accuracy to business impact,

predictive analytics and business partnering.

These evolving goals also orce revisions to

fnance’s transormation roadmap. Increasingly,

corporations want fnance to not only record trans-

actions and report accurately but also be a true

business partner supporting overall enterprise

strategy and growth.

A fnal actor is the progress toward the existing

transormation roadmap itsel. Progress may be

lagging or exceeding the

original plan; i it is lagging,

what are the actors that

are slowing progress? Was

the original plan realistic? I

the answers are no, then the

plan needs to be revisited

and updated to ensure that

the objectives are met.

FAO providers are also not

immune to the need to

reassess operations and

revise transormation plans.

A service provider that only

implements the transorma-

tive changes identifed at the start o the rela-

tionship is ailing its client. For all o the aore-

mentioned reasons — technology, regulation,

perormance, etc. — FAO service providers must

also step back and periodically reassess.

With changingexpectations, sourcteams are now beinmeasured on actuasavings delivered.

As fnanceorganizations aretransormed, goalsare evolving rompredictability,efciency andaccuracy to businessimpact, predictiveanalytics and

business partnering.




Figure 2

Creating a Transormation Roadmap

The required periodic reassessment o fnance

is not a cursory, surace-level activity; it must be

both objective and comprehensive. At a minimum,

a reassessment must include:

• Benchmarking internal costs against the

market price o external service providers.

• Benchmarking perormance (productivity,

accuracy, timeliness, cycle time, stakeholder

satisaction, etc.) against the perormance o

external service providers.

• Assessing fnance operations against leading

best practices.

• Assessing the deployment and eective utiliza-

tion o technology.

Getting Started

A disciplined, successul implementation o the

fnance transormation roadmap will enable

organizations to build fnancial organizations

o the uture with best-in-class processes at

an optimized cost. Based on our experience

with large global companies, a well-drated and

executed transormation roadmap can reduce

program costs by 30% to 50% over a three- to

fve-year timerame, as was achieved by one large

hospitality industry client (see Figure 2).

Any business that has not reassessed its fnance

organization and revised its transormation

roadmap within the past 24 months needs to get

started. To truly achieve an objective and rigorousreview, and a roadmap that is actionable and

pragmatic, outside assistance is recommended.

When seeking help with assessing and transorm-

ing fnance, we suggest choosing a partner that

not only provides consulting but also operates

large-scale fnancial operations or others. A

provider o fnance and accounting outsourced

services will be best positioned to know the real

timerames, costs, benefts and risks associated

with alternative transormation initiatives.

Client: Large U.S.-based hospitality chain

Challenges:

• Large-scale operations with complex ran-

chising and reranchising relationships.

• Fragmented fnancial processes and systems.

• Poor knowledge management; highly

resource centric.

• No ormal business metrics program.

• High process variation rom one business

unit to another.

Our Approach:

• Current-state assessment (people, process,

technology).

• Analysis o multiple uture-state scenarios.

• Development o transormation roadmapand business dcase.

Client Benefts:

• Five-year transormation roadmap, with

identifed quality and business impact

benefts.

• Identifcation o 35% savings on current

total cost.

• Identifcation o 5% year-over-year ongoing

productivity improvements.



About Cognizant

Cognizant (NASDAQ: CTSH) is a leading provider o inormation technology, consulting, and business process out-

sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in

Teaneck, New Jersey (U.S.), Cognizant combines a passion or client satisaction, technology innovation, deep industry

and business process expertise, and a global, collaborative workorce that embodies the uture o work. With over 50delivery centers worldwide and approximately 145,200 employees as o June 30, 2012, Cognizant is a member o the

NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top perorming

and astest growing companies in the world. Visit us online at www.cognizant.com or ollow us on Twitter: Cognizant.

World Headquarters500 Frank W. Burr Blvd.Teaneck, NJ 07666 USAPhone: +1 201 801 0233Fax: +1 201 801 0243Toll Free: +1 888 937 3277Email: [email protected]

European Headquarters1 Kingdom StreetPaddington CentralLondon W2 6BDPhone: +44 (0) 20 7297 7600Fax: +44 (0) 20 7121 0102Email: [email protected]

India Operations Headquarters#5/535, Old Mahabalipuram RoadOkkiyam Pettai, ThoraipakkamChennai, 600 096 IndiaPhone: +91 (0) 44 4209 6000Fax: +91 (0) 44 4209 6060Email: [email protected]

© Copyright 2012, Cognizant. All rights reserved. No part o this document may be reproduced, stored in a retrieval system, transmitted in any orm or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission rom Cognizant. The inormation contained herein is

subject to change without notice. All other trademarks mentioned herein are the property o their respective owners.

About the Authors

Paul Nowacki, CFA, is Leader o Finance and Accounting Transormation Services, within Cognizant’s

Business Process Services Business Unit. In this role, Paul oversees all F&A consulting activities. He

also serves as a thought leader in F&A and helps identiy market trends and shape new Cognizant

oerings. He is a requent conerence and webinar speaker and author o numerous articles and white

papers on various fnance and accounting topics. By combining his industry experience in IT and fnance

leadership roles with a background in transormational consulting, Paul looks holistically at fnance

and accounting organizations and blends process and systems with an organizational design perspec-

tive. He has a B.S. in quantitative business analysis and an M.B.A., with a concentration in operations

research. Paul also holds the Chartered Financial Analyst proessional designation. He can be reached at

[email protected] .

Mathew George, CPA, is a Solutions Leader within the Finance and Accounting Practice o Cognizant’s

Business Process Services Business Unit. In this role, Mathew works closely with clients on strategic

fnance and accounting deals. He also leads strategic assessments and develops optimal solutions that

ocus on the redesign and reengineering o critical processes. Moreover, Mathew has led the global con-

solidation and standardization o F&A processes across multiple countries and languages, into oshore

and near-shore delivery centers. He is a Chartered Accountant, a Certifed Public Accountant and a

Certifed Internal Auditor and holds a certifed Six Sigma Green Belt rom GE. Mathew can be reached at

[email protected] .

http://www.cognizant.com/

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Periodic Reassessment, Continuous Improvement of Finance Operations