Digital transformation is affecting every company and its support functions. Finance in particular must rise to the challenge of today’s volatile global markets and become a more effective strategic partner to senior management.
According to new research from The Hackett Group finance is embracing digital transformation to help it excel in three key areas: running an efficient operation, delivering effective services and improving the customer experience it delivers.
Results from the report show that broader adoption of digital technologies is helping finance organisations achieve all three objectives. The report found that digital leaders’ or finance functions that ranked ‘high’ on a scorecard of technology metrics, operate at 44% lower cost than their peers and employ 45% fewer staff.
Through standardisation, automation and process redesign, these world class finance organisations experience 37% lower error rates than their peers and have significantly reduced the time employees spend on low-value work. For example, financial analysts at these organisations spend 19% less time collecting and compiling data, and that much more time analysing it.
By investing in their people, adopting best practices and leveraging technology, world-class finance organisations are becoming more effective than their peers. The research reveals that world-class finance organisations doubled their investment in training over the past year and on average, spend over 60% more time on internal and external training than peers.
To guarantee their activities produce more effective results, world-class finance organisations have a clear view of processes from end to end. Process owners at companies that score high on this metric do better than ones who don’t. For example, they employ 50% fewer staff per $1 billion in revenue and spend 1.4X less on overall finance. Further, their cost to process invoices is 47% less (as measured from low to highly technology-enabled process ownership).
In addition, world-class finance organisations improve process effectiveness by standardising and consolidating their data management platforms so they can draw information from the same repository, guarantee data integrity, and produce better and more informative reports. They are 57% more likely than the peer group to pull information from data warehouses for performance reports.
Improved measures of efficiency and effectiveness leads to a better experience for customers. World-class finance organisations see much higher levels of customer satisfaction and are over 3x more likely to be perceived by stakeholders as anticipating and responding to their business needs. This makes them at least twice as likely than those of more typical companies, to consider finance as a valued and responsive business partner.
World-class organisations make 6x fewer mistakes than peers in accounts payable and 3x fewer errors in customer billing. An important driver of higher customer satisfaction at world-class finance is the quality of the analyses finance provides to management.
These organisations not only spend more time on analysis but also are also more likely to include what-if scenario analyses when creating strategic plans, leading to greater accuracy and higher chances of meeting organisational strategic objectives.
Leading the way as a world-class finance organisation
World-class finance organisations achieve top performance in efficiency, effectiveness and customer experience. These organisations also continue to operate at a much lower cost than their peers. While their cost of operations recently has been flat, that disguises greater investment in people, the adoption of new technologies and process improvements.
In fact, these organisations have consistently managed to keep cost low by employing significantly fewer FTEs, rationalising expensive legacy systems (their technology spend is 54% lower), and investing wisely in their people, while shifting finance activities into global business services organisations (GBS), centres of excellence (COEs), outsourcing and offshoring.
The mandate from senior management and top business leaders to finance is clear: support strategic decision-making by delivering better information; assist with the enterprise digital transformation strategy; and collaborate with business leaders.
Digital transformation can play a major role in helping peer-group organisations catch up to their world-class competitors. However, the reality is that the definition of World-Class will continue to evolve as leading finance functions deploy smart technologies to transform themselves.
Thus, the quest for achieving world-class status never ends. Its future will require continuous improvement of cost structure, effectiveness and stakeholders’ perceptions of how finance adds value to the performance of the enterprise.