With budgeting in the rearview and next year in the immediate horizon, CFOs may be looking for additional investment in staff, technology, and skills, but where can finance turn to improve this, as well as its budgeting, planning, and forecasting abilities in the future?
Bridging the Divide between Finance and Operations
CFOs and operating executives have a gap. While the CFO may be working on growing his or her team, operations executives may quietly sneer about overhead cost-creep, according to a recent APQC article on CFO Magazine:
“Do operating executives really have your back? Or do they quietly sneer about overhead cost-creep when the finance team needs to grow? In either case, CFOs will want to fight the good fight when it comes to investing in resources to boost the efficiency and the effectiveness of planning, budgeting, and forecasting (PBF).”
This is an unfortunate environment in which finance can’t get the tools it needs, and in turn can’t provide operations with the right insights to allow operations to thrive. APQC author Mary Driscoll notes that “the trick is to build a convincing argument that smarter planning and forecasting can help them shine more brightly.”
To accomplish this, of course, is its own challenge that requires an honest, candid discussion between two entities who rarely see eye to eye.
“Help Me Help You”
Driscoll recommends that finance leaders start by demonstrating that the PBF engine is not wasting company money. This starts with two things, a definition, and proof of concept.
Defining PBF (Planning, Budgeting, and Forecasting)
In APQC terminology, “Perform planning/budgeting/forecasting” involves developing periodic plans, budgets, and forecasts to enable the achievement of organizational performance goals.
The category includes setting assumptions for organizational revenue and cost levels, as well as cash flows. It also includes preemptive resources control and comparing (and dissecting with managers) actual versus targeted financial results.
Proving PBF Effectiveness
Once the problem (and potential solution) is defined, it’s time to begin showing how better processes, technologies, and integrations can be the key to reduced PBF costs. According to APQC’s Process Classification Framework (PCF), top performing organizations spend less than 0.02% of revenue on the PBF process, costing less than one-fifth of bottom performers and half of the median.
Lean, Smart, and Diligent: Selling PBF Improvements to Operations
With such an immense reduction to costs, it’s important to note the things that top performers do better than their counterparts. According to Driscoll, these top performers are those who can “pull all the right levers,” including but not limited to the following:
- Enforcing enterprise-wide standardization for the chart of accounts and data model.
- Keeping the number of budget iterations to a minimum.
- Training budget owners in the basics of cost analysis.
- Influencing the culture to think in terms of dynamic resource allocation, not “use-it-or-lose it.”
- Ensuring that planning and reporting are sufficiently enabled by technology.
Culture, technology, process standardization, and training—a framework to financial transformation.
A Checklist for Financial Transformation
A recent Brittenford blog dove into this framework, highlighting a six-step checklist for bringing the next wave of finance into your organization:
- First, you want to identify processes for improvement. This could be anything. An example is a monthly close. You can look at how you collect data or how you disseminate data. You want to look at how you determine the future of your chart of accounts.
- Second, determine where you want to be in the future. Put a stake in the ground for that point future and socialize the activities and tasks that would actually drive toward it.
- Third, regarding technology, there really aren’t a lot of technological considerations immediately especially if you are willing to embrace cloud applications (which by the way you should for many reasons which can be found in other blogs.) You may want to consider what browsers you use or what versions of browser. You may also want to look internally at what your mobile applications workforce policies are.
- Fourth, considering integrations: you want to identify all of your data sources and supporting systems. An example might be, “Are you getting your HR data from ADP or are you getting some revenue data or sales data from Salesforce?” You’ll also want to determine reporting requirements for all of your connected organizations, not just reports that you may develop internally for your Finance organization or for financial management but for any of the organization’s you might support.
- Fifth, you want to assess the current cleanliness of your segment data. What we find is that organizations often don’t have their data as clean as they would like it did before they start their transformation. That can certainly muddy the water for the organization as they try to move through quick implementations of new tools.
- Sixth, regarding people, you want to identify your stakeholders for integrations, technologies, and processes. You want to make sure that if your Board of Directors need to be pulled into the loop that they are. Your Sales VP is definitely going to have some say in how certain financial numbers are produced. And of course your CIO, along with every other leader of the organization, is going to want to weigh in on where you are headed.
Taking it Further: Finance’s EPM Playbook
As 2017 rapidly approaches, the time to act is now if you want to take control of an organization, becoming the strategic leader, disruptor, and business partner that your company needs and deserves. Learn more about how you can transform your business by downloading the Wipfli/Brittenford Whitepaper, Finance’s EPM Playbook: Leveraging World Class Enterprise Performance Management to learn about the demands and next steps.