Is your company seeking to incorporate finance as a core line of business? This SAP Executive Insight examines the changing role of the finance organization in today's business environment - and describes how companies can develop best-run finance organizations.

1. Building a Best-Run Finance ORganizatiOn
A New Role to AddRess todAy’s BusiNess ReAlities
SAP Executive Insight

2. there is a company executive with a growing influence in
today’s boardroom – the chief financial officer. And the
role of the finance organizations that these executives lead
is expanding as well.
while the advent of the sarbanes-oxley Act has focused
enormous attention on the financial accountability and in-
ternal controls of companies across all industries, compa-
ny executives recognize that individual business activities
do not occur in a vacuum. All functions – such as sales,
marketing, manufacturing, service, and even human re-
sources – affect not only the bottom line but also a com-
pany’s financial integrity. increasingly, prudent companies
are drawing their finance organizations into greater collab-
oration with the operational aspects of the enterprise.
Moreover, companies are asking their financial officers to
take on a more prominent role in defining company
strategy.
this sAP executive insight examines the changing role of
the finance organization in today’s business environment.
Further, by answering the following questions, it describes
how companies can develop best-run finance
organizations:
• What operating characteristics help companies develop
best-run finance organizations?
• How do you measure a best-run finance organization?
• How does the focus of an organization change as best-
run finance methods are applied?
2 SAP Executive Insight – Building a Best-Run Finance organization

3. eXecutiVe agenda
At A GlANce
Recognizing Best-Run Finance Investing in Financial Processes Striking a Balance
leading companies that are successful in supporting these success factors are a the best-run finance organization will
incorporating finance as a core line of company’s internal processes. top- continue to address near-term priorities
business typically display some common performing companies have financial while helping to chart long-term business
characteristics. these companies are: processes that are: direction. As a result, the mission of
• Agile. As the economic environment • Automated. when a transactional pro- today’s finance organization is truly both
continues to change at an ever- cess is automated, the result is fewer tactical and strategic:
increasing pace, there is no time to errors and less effort. with process • Tactical. standard financial operations,
implement change in small, bite-size reliability, financial professionals can such as month-end close, remain criti-
chunks. centralizing processes – such shift their focus from repetitive and cal to a company’s success. Process-
as shared financial services, risk analy- manual transactional tasks to more ing financial transactions efficiently and
sis, and compliance – can provide con- strategic business analysis. in strict legal compliance solidifies a
sistency that enables a company to • Integrated. Financial processes should company’s standing in the financial,
implement changes once, quickly be plugged into business processes analyst, and shareholder communities.
reaching the entire enterprise. across the enterprise. organizations • Strategic. At a time when business
• Connected. No executive – or busi- need to pull down the silos and ensure models are changing rapidly, finance
ness function – is an island. Finance, that all relevant financial and operation- plays an increasingly important role in
especially, has dependencies on activi- al functions are considered when mak- charting the course of an evolving com-
ties in each line of business across the ing critical business decisions. pany. Finance must drive strategy and
entire organization. the integration of a • Consolidated. it is inefficient to imple- innovation – enabling the growth of an
company’s operations with its financial ment process or regulatory changes organization, facilitating the changes
function is a key success factor, foster- that affect an entire organization on a that come with that growth, and manag-
ing a common view of the current state system-by-system or subdivision basis. ing risk.
and future direction of an organization. A common technical platform can elimi-
• Metric driven. leading companies nate this potentially costly requirement. sAP and the Americas’ sAP users’
measure their successes – such as the Group (AsuG) have conducted bench-
effectiveness of their transactional pro- marking studies that provide important
cesses, the performance of core busi- insight in how leading companies achieve
ness operations, and the efficiency that the desired balance in their financial orga-
finance contributes to the overall orga- nizations. Further, by analyzing the perfor-
nization. Particularly for an evolving mance of businesses across diverse
business, metrics can also provide a industries, these studies also offer cFos
clearer picture of a company’s starting the metrics needed to assess their own
point, its transformation plan, and the company’s success.
results of its execution.
SAP Executive Insight – Building a Best-Run Finance organization 3

4. agile
oPtiMiziNG FiNANce to
MAxiMize eFFicieNcy
Streamlining Processes with Responding Efficiently to Risk and
Automation and Shared Services Compliance Issues GRUMA
Industry: consumer products – food
like best-run operations everywhere, in addition to controlling financial expo- Summary
more and more finance organizations sure, companies are expected to maintain GRuMA is the worldwide leading pro-
are looking for ways to streamline their consistent operational and audit process- ducer of corn flour and tortillas and
processes. Automation is an obvious es. to ensure compliance with legal regu- sells its products in over 50 countries.
strategy. By automating transactional pro- lations, companies must implement GRuMA required a process and tool to
cesses, top finance performers are low- checks and controls – based on the con- ensure that its end users had the right
ering the cost of financial activities, text of individual business processes – access privileges to perform day-to-day
reducing errors, and increasing turn- that define who can access and change business operations without exposing
around speeds. in fact, benchmarking information. AsuG/sAP studies indicate the business to risk. GRuMA selected
studies reveal that top quartile perform- that targeted governance, risk, and com- the sAP® GRc Access control ap-
ers have finance costs that average just pliance initiatives can help companies plication and established a compliance
0.7% of company revenue, compared to measurably improve their ability to detect program with minimal investment that
greater than 1.3% for the bottom quartile. and prevent fraud while reducing the enables exceptional change and access
Automated processes can also ensure resources spent on compliance. control.
that an organization’s core data is reliable
Results with SAP® Software
and readily available. Further, as financial and operational rules
• internal it audit revision time
change, new processes must be imple-
completed 90% faster
But without a systematic method to mented throughout an organization as
• external it audit revision time
ensure compliance with these processes, soon as new rules take effect. A central-
completed 50% faster
companies can still experience costly ized model to control risk and compliance
• Greater ability to track compliance
localizations across business units and facilitates the ability of an organization to
with auditors’ recommendations and
geographies. A growing trend in best-run turn on a dime in a changing global
measure improvements
finance is to drive efficiency through economy.
• Faster, risk-free user setup
shared services. A finance organization
• improved risk assessment
with a single business process platform
can provide consistency across different
regions and divisions – and still address
the requirements of local regulations. the
advantages of this approach include the
stages of Maturity
Effectiveness Improvement %
32%
sharing of financial resources, quicker Net Cost Savings %
and more accurate financial consolida- 23%
tion, and increased speed in complying 15% 14%
with legal and regulatory changes. 8%
5% 84
1% 0.5%
Benchmarking again shows that compa- No Shared Service Emerging Established Leaders
nies with mature shared-services organi-
typical Profile
• Fragmented • Centralized • Automated • Highly Automated
zations achieve cost savings and • Varying Processes • Mostly Standard transactions • Highly Integrated
increase organizational effectiveness Processes • Consistent Service • Comprehensive
• Varying Service levels Metrics
(see Figure 1). levels • Efficiency Metrics • Customer Governance
source: AsuG/sAP 2006 shared-services study
Figure 1: Shared-Services Adoption Driving Improvements in Efficiency and Effectiveness
4 SAP Executive Insight – Building a Best-Run Finance organization

5. cOnnected
iNteGRAtiNG FiNANce to
EnSuRE EFFECtIVEnESS
Embedding Finance in Closed- Enabling Integrated Information across organizations, a finance organiza-
Loop Processes tion is in the unique position to identify
in addition, a company cannot effectively current trends, forecast future results,
Finance is no longer a back-office func- pursue a strategic direction unless there and ensure consistency across these
tion. instead, today’s best-run finance is consistent, accurate, and real-time visi- organizational boundaries.
organizations reinvest the time and bility across the enterprise – especially
resources saved by running an efficient when it comes to its financial information. studies indicate that as finance organiza-
organization to provide proactive insights A business, for instance, cannot react tions evolve, a greater percentage of
that enable other lines of business to proactively to demand forecast adjust- their time is spent on business analysis
make informed decisions supporting the ments if this information takes several (see Figure 2). Accompanying this shift
best interests of the entire company. days to reach the finance department. are increases in operating margins as
Holistic processes that encompass every And in highly siloed environments, there much as 38%. top performers increase
part of the business – and that facilitate is the risk that critical information will nev- efficiency with lower transactional costs,
communication between departments – er reach other impacted organizations while maximizing effectiveness with
are critical to ensuring that finance is inte- such as manufacturing. greater emphasis on strategic decision
grated with these operational decisions. support.
Finance needs information that is timely
Finance, marketing, sales, and manufac- and accurate if it is to fully assess the Volvo Aero Services
turing must all work together, for exam- operational situation of a company. Man-
ple, to effectively determine appropriate ual processes open the door to error Industry: wholesale distribution
spend based on expected returns and, when transferring data or rekeying Summary
ultimately, the bottom line. with closed- entries. Automation can ensure a free Based in Boca Raton, Florida, Volvo
loop processes in place, a finance flow of accurate information between Aero services corp. is a leading pro-
department can forecast potential reve- departments, lines of business, and vider of aftermarket parts and services
nue, run what-if analyses, and develop geographies – optimizing the entire for the aviation industry. in addition
contingency plans to manage costs. if business. to being the exclusive distributor of
marketing targets more sales than manu- surplus parts for Boeing company,
facturing can supply, managers can Acting as Strategic Advisor Volvo Aero Services offers a range of
adjust demand plans or secure additional services including warehousing, financ-
manufacturing resources. if manufactur- A truly connected finance organization ing, repair management, and leasing of
ing costs increase, finance can flag off- will identify opportunities that take its aircraft parts and engines. Part of the
target trends and initiate early corrective company to the next level. with its ability larger Volvo Group of companies, the
action. to analyze operational performance company chose sAP® software to en-
able an evolving business model and to
Effectiveness achieve operating efficiencies.
Strategic Decision Support Operating Margin
Results with SAP® Software
+38% • days sales outstanding reduced 15%
Expertise-Based Activities
Finance Costs as • on-time deliveries increased 18%
% of Revenues (up to 97%)
–30%
Transactional • time for general ledger reconciliation
Process Support reduced 50%
• increased visibility into product costs
Below Average Top Performer and market demand
Efficiency
Figure 2: The Benefit of the Right Balance
SAP Executive Insight – Building a Best-Run Finance organization 5

6. MetRic dRiVen
PuttInG tHE RIGHt MEASuREMEntS
iN PlAce
Maintaining Financial Excellence surements, however, must be evaluated that brings company-wide forecasts
in concert. For example, both cost and together in a single comprehensive plan –
the measurements that an organization speed are critical in time-to-close pro- providing what-if analysis, assessing risk,
puts in place – and how these perfor- cesses. Rapid financial results enable and identifying inconsistencies among
mance indicators are prioritized – often effective and timely business decisions departments.
determine which companies are business for all business units of a company.
leaders. Metrics that measure the effi- Best-run finance goes one step further
ciency of finance operations typically Financial organizations will continue to and compares company performance
include cost per transaction, fixed asset process the important daily transactions with external economic data. this com-
valuation, department headcount, and that invoice customers, pay vendors, and parison can reveal how the business
audit times (see Figure 3). such mea- capture operational costs. indeed, an on- stacks up to the general market, its
going mandate of finance is to generate industry, and its geography. By providing
the financial statements expected by the such insight, a finance organization can
market and shareholders. drive growth strategies. At the same
Slade Gorton time, these strategies can mitigate the
Driving Operational Excellence risks presented by business realities such
Industry: wholesale distribution
as economic downturns and emerging
Summary Beyond the necessary financial state- global regulations.
slade Gorton & co. inc. is the industry ments, the best-run finance organizations
leader in the development, market- also play an integral part in operations
ing, and direct distribution of seafood. planning. By performing operational anal-
since 1928, the company has worked ysis, finance can support the decisions of
hard to provide its customers with the departments across the enterprise:
finest and widest line of fresh and fro- sales, manufacturing, and services. in
zen seafood available. By offering only fact, it is often the finance department
the highest-quality seafood products
from around the world, slade Gorton is
transforming the way foodservice and
retail customers and consumers per-
ceive and buy seafood. Focus Metrics Comparison
Results with SAP® Software • Market • Market
effectiveness
• Ability to operate with very lean staff share • Internal
and minimal costs, while maintaining • Growth
strategic
very high levels of customer service • time to
decision
integrate
• thirty-eight Ftes in finance depart- support
acquisitions
ment per billion dollars in revenue
operational
(average benchmark is 100)* Planning and • Error rates • External
• Finance costs at 0.35% of revenue Business support • Cycle times • Internal
(average benchmark is 1.2%)* • Costs
• Real-time, accurate, timely reports • Staffing
with lower it support costs transactional levels
Process support
* As measured in an AsuG/sAP efficiency
Benchmarking study.
Figure 3: A Focus on Metrics
6 SAP Executive Insight – Building a Best-Run Finance organization

7. the ROad ahead
BecoMiNG A Best-RuN
FiNANce oRGANizAtioN
there is little doubt that today’s cFos the VE team consists of more than 175
are changing the focus of their organiza- professionals providing in-depth About the Author
tions and, as a result, influence business industry and business process exper-
operations far beyond the traditional tise in strategy, it planning, global Birgit starmanns is a senior director
boundaries of finance. deployments, and benchmarking. For in the Customer Value network group
more information, contact within sAP value engineering. star-
manns concentrates on developing
sAP industry experts and the value value.engineering@sap.com.
solution-focused communities and
engineering (VE) team can help your
networks, creating value-oriented
company build a best-run finance organi- the AsuG/sAP Benchmarking and thought leadership, and working with
zation. these experts provide support best practices program can help strategic customers – principally in the
throughout the value life cycle, from organizations assess strengths, identify area of financials and customer
developing business cases to sharing potential areas for improvement, and relationship management (cRM).
knowledge on how to maximize the val- recognize best practices and it strate- Previously, starmanns was a vice
ue of sAP® software such as the gies that enable companies to excel. president in sAP’s cRM product
following: Benchmarking and best practice management organization for partner
• SAP ERP Financials solution: A com- reports are available for financials; channel management and a director for
prehensive financial management shared services; and governance, risk, e-commerce. Prior to joining sAP, she
was a manager in management
solution engineered to support com- and compliance. Additional reports
consulting organizations, with a focus
panies from the midmarket to the address other operational areas, such
on financial and management account-
most complex, multinational corpora- as human capital management; supply ing. starmanns holds an MBA and a
tions, across a broad range of indus- chain and manufacturing; and BA from the college of william and
tries, which supports global financial business intelligence. For more informa- Mary.
reporting standards, multiple curren- tion about the AsuG/sAP
cies and languages with over 45 coun- Benchmarking program, visit Further Reading
try-specific versions, and tight www.asug.com/Benchmarking or
integration with operational processes contact benchmarking@asug.com. to learn more, please visit
• Financial performance management: www.sap.com/usa or contact your
solutions for enterprise performance sAP representative about the
management that help companies following:
capitalize on the value of their corpo- • AsuG/sAP Benchmarking Reports
rate data, enabling organizations to • Driving Financial Performance: How
become more agile and competitive top organizations excel – sAP
by providing organizational alignment, insight
visibility, and greater confidence, • Best Practices in creating a strate-
based on information coming from gic Finance Function – sAP insight
many different parts of the business – • Fujitsu siemens computers –
including financials and operations, sAP customer success story
external partners, vendors, and • thrifty Foods – sAP Business
customers transformation study
• Governance, risk, and compliance: • san luis obispo county, california
solutions that promote corporate – sAP Business transformation study
accountability by unifying corporate
• sentry Group – sAP Business
strategy, control initiatives, opportuni- transformation study
ty discovery, and loss mitigation
across the extended enterprise
SAP Executive Insight – Building a Best-Run Finance organization 7

8. 50 090 293 (08/07)
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