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The Top Characteristics of Best-in-Class Finance Functions

Top finance functions are embarking on substantive changes to their processes and their organizational role. APQC conducted a case study research project throughout 2018 seeking best practices from organizations transforming their finance and accounting functions, and found some common themes shared among the organizations that we studied. Organizations on the journey to building a best-in-class finance function exhibited the following characteristics:

1) Align finance with business and organizational strategy.

To better serve the business, finance functions are transforming traditional cost structures, economic models, and reporting processes, as well as stepping into a central enterprise role in driving value and strategic investments. This requires finance to align its agenda with business and organizational strategy. Finance will continue to steward financial integrity and shareholder value, while also moving more toward driving business outcomes rather than simply reporting them. And as routine tasks become automated and new analytical tools become standard, finance can leverage its visibility into business performance to take a leading advisory role.

2) Centralize finance transaction processing to gain bandwidth for business partnering.

APQC has found that top-performing finance functions centralize transaction processing, often through shared services, to automate transactional activities and build expertise. This centralization frees up bandwidth for the finance function to focus on decision support and other responsibilities in partnering with the business.

3) Create one standard for end-to-end finance processes.

Most organizations appreciate the savings, simplification, and opportunity for best-practice adoption that comes with standardizing processes. Top-performing finance functions emphasized standardizing end-to-end finance processes regarding activities, accountability, tools, data and reporting, formatting, and measurement.

4) Instill strong process governance.

Process governance encompasses all the structural elements that help finance to function. Top-performance finance functions look at all aspects of process management, including roles, responsibility, accountability, oversight, sponsorship, and management structures. Solid policies, workflows, and role allocations reduce stress and fragmentation as the role of finance transforms. Appropriate governance ensures that the right changes are made and that the policies surrounding process management align with organizational strategy.

5) Apply organizational improvement techniques to finance.

Finance functions need a toolkit of organizational improvement techniques to be prepared for widening opportunities stemming from automation and analytical tools, as well as increasing enterprise expectations. These demands require a systematic approach to organizational improvement and benchmarking. Top-performing finance functions are leveraging process management techniques such as Lean and Agile to systematically expand their capabilities and improve processes.

6) Ensure finance professionals have the necessary new skills to thrive.

Given the expanding expectations of the finance function, finance roles are also transforming. New opportunities are enabling finance to shift from transactional and reporting competencies to more advisory and analytical ones. As a result, finance needs data-savvy, technologically literate analysts, strategists, statisticians, programmers, machine learning experts, and data miners. And even traditional finance staff need higher-level reasoning and people skills to act as business partners, problem solvers, and organizational visionaries. APQC has found that top-performing finance functions are rising to the occasion with development programs, structured rotations and targeted assignments, coaching, and career pathing.

7) Build a strong bench of finance leaders.

As the stakes build for the function, finance leaders need to ensure a strong bench of high-potential finance professionals. Engagement and retention are powerful factors in the state of a function’s talent pipeline. Top-performing functions invest time and effort upfront to ensure their future leaders are prepared and trained for the transformation challenges ahead.

8) Offer self-service tools for the business.

Increasingly available digital tools such as advanced analytics and machine learning, AI, robotics process automation, blockchain, cloud computing, and cognitive computing are enabling finance functions to automate large parts of their reporting processes, reduce time spent on transactional processes, and provide more mature analytical capabilities. In short, digital tools are providing extra bandwidth to focus on high-value tasks. Top-performing finance functions are using this opportunity to provide the business with self-service reporting and analytics capabilities, which simultaneously unburdens finance professionals from lower-value tasks and expands the function’s ability to support informed decision making in the business.

9) Leverage digital tools to automate manual tasks and facilitate analytics.

Digital tools help finance functions reduce errors, hasten and optimize processes, improve compliance, and integrate data sources for better reporting, planning, forecasting, and analytics. A more streamlined finance function can then focus on the quality of its insights, bolstered by automation for mundane tasks and analytical power for more demanding responsibilities. And finance professionals can shift from reporting and oversight to value creation by better understanding what is truly driving performance. Using tools such as robotics process automation (RPA) and machine learning, the finance function becomes a broker of information and an engine for analytics that feeds decisions across the enterprise. The better-utilized resources enable finance to generate value, open up capital, and improve organizational efficiency.

10) Monitor and benchmark performance.

In researching top performers, APQC has found it critical for finance functions to monitor and measure a balanced set of KPIs such as cost, productivity, cycle time, and efficiency against internal, industry, and best-practice benchmarks. The difference between top performers and others pulled from APQC’s Open Standards Benchmarking Portal, provide extremely motivating goals for improved performance.

APQC members wishing to learn more and view company examples should visit our new white paper Ten Characteristics Shared Among Best-in-Class Finance Functions: Lessons from a Transforming Field.

 

Each month, APQC contributes to a Metric of the Month on CFO.com as part of our mission to find and disseminate best practices information. Members and Non-members may reference our article Cost to Run the Finance Function for APQC’s perspectives on total finance function cost and how to improve this metric.