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How Leaders Use Benchmarks and Best Practices to Transform Finance
 

How Leaders Use Benchmarks and Best Practices to Transform Finance

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Video/Presentation: http://www.proformative.com/events/how-leaders-use-benchmarks-best-practices-transform-finance ...

Video/Presentation: http://www.proformative.com/events/how-leaders-use-benchmarks-best-practices-transform-finance

Statutory financial reporting and filing has experienced profound change of late. Unrelenting regulatory pressure, shortened deadlines, digital mandates, and accounting complexity make the Record-to-Report (R2R) process extremely expensive, inefficient, and fraught with risk for the Office of the CFO. This educational session will focus on highlighting the current state of the record-to-report process and understanding the expense impact of R2R on the bottom line. It will also show attendees how to identify critical R2R efficiency opportunities while minimizing risk across the financial close, compliance and disclosure management efforts. Lastly, attendees will learn best practices and things to avoid in the R2R process.

Speakers:
Mike Duderich, Finance Director, Americas R2R Operations, Unilever
Ken Fritz, Executive Vice President, Trintech

Presentation delivered at CFO Dimensions 2013 - http://www.cfodimensions.com
Track: Governance, Risk, Compliance | Session: 1

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  • APQC's Process Classification FrameworkSM (PCF) provides a framework and set of common definitions for business processes so that benchmarking can truly take place on a common playing field.
  • See points made in BF 8.12 article re: it’s the 10 – 15% of the match failures that really drive your costs. A lot of the time it’s not AP’s fault. So, here’s where best practice cos do more than throw automation at the picture. They work collaboratively with operations/procurement/sales, fulfillment, etc. to resolve root cause of errors on invoices.
  • Median is the midpoint in a range of data… Top quartile – better than 75% or rangeBottom quartile – worse that 75% of rangeBucket 4 is the top quartile that has 85-99% invoice line items matched first time
  • First, consider the cost of producing and filing SEC Form 10-Q. The fastest companies—those that prepare and file their quarterly statements in 10 or fewer days—reside in the top quartile and spend relatively less money to perform financial reporting per $1,000 in revenue (Figure 4). Obviously, the slowest organizations—those that take more than 25 days to complete the quartertly cycle and comprise the bottom quartile—are at a disadvantage.A 10-Q is a comprehensive report of a company's performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission. Its annual counterpart is SEC Form 10-K.The top quartile is the performance level above which 25% of all responses occur. The bottom quartile is the performance level above which 75% of all responses occur. The median is the middle value in a set of values that are arranged in ascending or descending order.First, consider the cost of producing and filing SEC Form 10-Q. The fastest companies—those that prepare and file their quarterly statements in 10 or fewer days—reside in the top quartile and spend relatively less money to perform financial reporting per $1,000 in revenue (Figure 4). Obviously, the slowest organizations—those that take more than 25 days to complete the quartertly cycle and comprise the bottom quartile—are at a disadvantage.A 10-Q is a comprehensive report of a company's performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission. Its annual counterpart is SEC Form 10-K.The top quartile is the performance level above which 25% of all responses occur. The bottom quartile is the performance level above which 75% of all responses occur. The median is the middle value in a set of values that are arranged in ascending or descending order.
  • Notes:

How Leaders Use Benchmarks and Best Practices to Transform Finance How Leaders Use Benchmarks and Best Practices to Transform Finance Presentation Transcript

  • 1© 2013 How Leaders Use Benchmarks and Best Practices to Transform Finance
  • 2© 2013 Process Improvement in Finance: Transformation for Delivering Higher Value to the Business Mary Driscoll, APQC Senior Research Fellow ©2012 APQC. ALL RIGHTS RESERVED.
  • 3© 2013 Welcome and Introductions …this is where you get to participate. ©2012 APQC. ALL RIGHTS RESERVED.
  • 4© 2013 Who is APQC… …and why you should care. ©2012 APQC. ALL RIGHTS RESERVED.
  • 5© 2013 Who We Are APQC is a member-based, 501(c)3 nonprofit specializing in benchmarking, knowledge management, measurement, and process improvement. Our mission is to work with organizations around the world to improve productivity and quality by: discovering effective methods of improvement, broadly disseminating findings, and connecting individuals with one another and with the knowledge they need to improve. ©2012 APQC. ALL RIGHTS RESERVED.
  • 6© 2013 APQC’s Core Competencies Frameworks and maturity models Benchmarking and best practices Knowledge Management Process improvement and measurement Metrics and measures ©2012 APQC. ALL RIGHTS RESERVED.
  • 7© 2013 Getting Started… Why benchmark finance? What is involved? ©2012 APQC. ALL RIGHTS RESERVED.
  • 8© 2013 Where Did the Word “Benchmark” Come From? First used by cobblers to measure people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes. You can see how this term has evolved to be used in business today. Source: Wikipedia ©2012 APQC. ALL RIGHTS RESERVED.
  • 9© 2013 Benchmarks and Benchmarking How much to improve Standards and/or measures Benchmark How to improve Best practices and/or what works Benchmarking ©2012 APQC. ALL RIGHTS RESERVED.
  • 10© 2013 Informal Definition Benchmarking is the practice of being humble enough to admit that others are better at something and being wise enough to learn how to match, and even surpass, them at it. ©2012 APQC. ALL RIGHTS RESERVED.
  • 11© 2013 Best Practice/Practice Methods and techniques that have consistently shown results superior than those achieved with other means Used as benchmarks to strive for, however: There is no practice that is best for everyone or in every situation No best practice remains best for very long as people keep on finding better ways of doing things ©2012 APQC. ALL RIGHTS RESERVED.
  • 12© 2013 Typical Benchmarking Life Cycle “I want to see how I compare.” “I don’t believe it, let’s compare again.” Wash, rinse, repeat. (for the really stubborn) “OK, I give up, how are they able to perform that way!?!?!?!” Practices Metrics ©2012 APQC. ALL RIGHTS RESERVED.
  • 13© 2013 Discussion Point Who has documented any, most, or all of their key finance or accounting processes? Who uses an external process or business frameworks? ©2012 APQC. ALL RIGHTS RESERVED.
  • 14© 2013 Process Classification Framework APQC’s Process Classification FrameworkSM (PCF) is a taxonomy of business processes that allows organizations to objectively track and compare their performance internally and externally with organizations from any industry. Built and regularly updated through collaboration with experts, practitioners, consultants, and academicians. Most downloaded document. Developed in the early 1990s Used for many purposes Benchmarking Standardization and measurement Governance and accountability Managing key functions and entire organizations ©2012 APQC. ALL RIGHTS RESERVED.
  • 15© 2013 Easy Access: www.apqc.org ©2012 APQC. ALL RIGHTS RESERVED.
  • 16© 2013 PCF Details ©2012 APQC. ALL RIGHTS RESERVED.
  • 17© 2013 APER Example What is the value in this type of inventory? ©2012 APQC. ALL RIGHTS RESERVED.
  • 18© 2013 Value Shows When You Make It Yours REALLY VALUABLE! ©2012 APQC. ALL RIGHTS RESERVED.
  • 19© 2013 Selecting Measures… … Quantifying process productivity ©2012 APQC. ALL RIGHTS RESERVED.
  • 20© 2013 Cost Effectiveness Provides information concerning how well operating cost are managed. Key performance indicators usually include: Cost per unit (e.g., invoice, check, and square foot) Cost as a percentage of revenue Cost as a percentage of total budget (e.g., accounts payable cost as a percentage of total F&A cost) Actual cost versus budgeted cost Supporting indicators usually include cost components as a percentage of total. ©2012 APQC. ALL RIGHTS RESERVED.
  • 21© 2013 Staff Productivity Provides insights into how much output each full-time equivalent (FTE) employee has produced. Key performance indicators usually include: Units of output (e.g., invoices and purchase orders) per FTE Workload (e.g., customers and general ledger accounts) per FTE Supporting indicators usually focus on factors that influence staff productivity such as hours of training per FTE and employee tenure. ©2012 APQC. ALL RIGHTS RESERVED.
  • 22© 2013 Process Efficiency Provides insights into how well procedures and systems support operations. Key performance indicators usually include: Error rate (i.e., rework rate) Forecast accuracy rate (e.g., actual vs. forecast and non-cost measures) Supporting indicators usually focus on factors that influence process efficiency such as system downtime rate and the degree of process automation. ©2012 APQC. ALL RIGHTS RESERVED.
  • 23© 2013 Cycle Time Indicates the duration to complete a task. These Key performance indicators are measured in units of time (e.g., hours, days, and months) and usually include: Processing time Time to resolve customer inquiry Supporting indicators usually focus on factors that influence cycle time such as the frequency of system breakdowns. ©2012 APQC. ALL RIGHTS RESERVED.
  • 24© 2013 Examples of Top vs. Median Performance Source: APQC. Number of peers providing data Top Median ©2012 APQC. ALL RIGHTS RESERVED.
  • 25© 2013 Data Reporting Synthesizes analysis into concise and relevant findings. Display findings using graphs, tables, and narration. Measurement reporting should be clear, concise, and most of all visual. ©2012 APQC. ALL RIGHTS RESERVED.
  • 26© 2013 Benchmarking Peer Groupings ©2012 APQC. ALL RIGHTS RESERVED.
  • 27© 2013 Applying Judgment and Experience ©2012 APQC. ALL RIGHTS RESERVED.
  • 28© 2013 Financial Management Excellence ©2012 APQC. ALL RIGHTS RESERVED.
  • 29© 2013 Most Important Goal for a Major Process Improvement Initiative 72.41% 15.86% 11.03% 0.69% Both efficiency and effectiveness Efficiency (improve finance cost/productivity profile, accelerate cycle speed, reduce error rates) Effectiveness (deliver more effective analytical support to the business) N = 145 ©2012 APQC. ALL RIGHTS RESERVED.
  • 30© 2013 Most Popular Targets for Finance Process Improvement 78% Plan, budget, forecast/analyze, re-plan 72% Close/consolidate/report 70% General accounting (any sub-process) 50% Accounts payable transaction management 46% Working capital management ©2012 APQC. ALL RIGHTS RESERVED.
  • 31© 2013 Look at Correlations Think through how performance in one area relates to performance elsewhere Give the information context and a gut check. ©2012 APQC. ALL RIGHTS RESERVED.
  • 32© 2013 AP Performance Gap: Best vs. Worst 29 firms 29 firms 29 firms 29 firms Percentage of invoice line items matched the first time 36% 85%--99% 116 companies with > $1 billion in revenues ©2012 APQC. ALL RIGHTS RESERVED.
  • 33© 2013 Total Cost of AP per Number of Invoices Processed Annually $5.43 $2.84 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 Bucket 1 Bucket 4 Median Figures Median Source: APQC Open Standards Benchmarking ©2012 APQC. ALL RIGHTS RESERVED.
  • 34© 2013 Cycle Time in Days Between Completion of Quarterly Consolidated Financial Statements and the Release of Earnings Cycle Time in Days between Completion of Quarterly Consolidated Financial Statements and the Release of Earnings Figure 12 6.0 15.0 20.6 10.0 15.0 23.5 12.0 20.0 30.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 Top Performers Median Bottom Performers SSC N = 25 HQ N = 64 BU N = 107 ©2012 APQC. ALL RIGHTS RESERVED.
  • 35© 2013 Percentage of Business Entity’s Inter-Company Transactions Processed by Automated Systems 65% 30% 23% 95% 50% 60% 0 10 20 30 40 50 60 70 80 90 100 SSC HQ BU Median Top Source: APQC Open Standards Benchmarking ©2012 APQC. ALL RIGHTS RESERVED.
  • 36© 2013 Total Cost of Financial Reporting Per $1,000 in Revenue $0.11 $0.23 $0.57 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 Top Performers Median Bottom Performers All Industries, Revenue greater than $1 Billion N = 148 ©2012 APQC. ALL RIGHTS RESERVED.
  • 37© 2013 The Faster Close Costs Less $0.10 $0.22 $0.33 $0.42 $0.67 $1.06 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 The Fastest: Quarterly Cycle Time N = 49 The Slowest: Quarterly Cycle Time N = 42 Top Quartile Median Bottom QuartileSource: APQC ©2012 APQC. ALL RIGHTS RESERVED.
  • 38© 2013 Part 3: Discover Best Practices… …the “how” is just as important as the “how much.” ©2012 APQC. ALL RIGHTS RESERVED.
  • 39© 2013 Qualitative Information Tells the “how” story Focuses on the critical success factors What allows companies to perform in a stellar manner? People? Process? Technology? Culture/Leadership? How companies close the gap in performance ©2012 APQC. ALL RIGHTS RESERVED.
  • 40© 2013 The idea is to isolate and analyze operating metrics and patterns that drive financial outcomes. This case study explains how the CFO works with business managers to understand and influence interactions between financial and non-financial variables, all with the intention of generating best-possible financial results for the enterprise. http://www.apqc.org/knowledge-base/documents/new-cfo-turbo charges-revenue-modeling-using-bi-tools-and-techniques-aapa-ca ©2012 APQC. ALL RIGHTS RESERVED. CFO Turbocharges Revenue Modeling Using BI Tools and Techniques: AAPA Case Study
  • 41© 2013 Gap Assessments to Light the Path to Financial Management Excellence Manpower Group ©2012 APQC. ALL RIGHTS RESERVED.
  • 42© 2013 Manpower’s Approach to Finance Transformation ©2012 APQC. ALL RIGHTS RESERVED.
  • 43© 2013 The Effective Finance Charter: Intel Link finance actions to the enterprise’s goals and needs 1. Keep Intel legal worldwide and maintain the highest standard of integrity 2. Maximize and grow profits by exercising business expertise, independence, influence and leadership 3. Provide efficient world-class services 4. Protect shareholder value through effective risk management and control 5. Develop world-class finance professionals ©2012 APQC. ALL RIGHTS RESERVED.
  • 44© 2013 The Effective Finance Charter: OCC ©2012 APQC. ALL RIGHTS RESERVED.
  • 45© 2013 Summary: Critical Success Factors Alignment of financial management to overarching corporate objectives Move to a more IT-savvy financial employee base who can manipulate/analyze large amounts of data Formal training regimen to embed “business influencing” skills: analysis, negotiation, collaboration, etc. Standardized and clearly communicated financial close process with associated due dates and gates Process management principles and techniques What else? Discussion? ©2012 APQC. ALL RIGHTS RESERVED.
  • 46© 2013 http://www.apqc.org/knowledge-base ©2012 APQC. ALL RIGHTS RESERVED.
  • 47© 2013 Thank You! Process Improvement in Finance: Transformation for Delivering Higher Value to the Business
  • 48© 2013 Thank You Sponsors! PLATINUM GOLD SILVER DIAMOND