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 internal
controls of companies across all industries, company
executives recognize that individual business activities
do not occur in a vacuum. All functions – such as sales,
marketing, manufacturing, service, and even human resources
– affect not only the bottom line but also a company’s
financial integrity. Increasingly, prudent companies
are drawing their finance organizations into greater collaboration
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:
Leading companies that are successful in
incorporating finance as a core line of
business typically display some common
characteristics. These companies are:
Supporting these success factors are a
company’s internal processes. Topperforming
companies have financial
processes that are:
The best-run finance organization will
continue to address near-term priorities
while helping to chart long-term business
direction. As a result, the mission of
today’s finance organization is truly both
tactical and strategic:
SAP and the Americas’ SAP Users’
Group (ASUG) have conducted benchmarking
studies that provide important
insight in how leading companies achieve
the desired balance in their financial organizations.
Further, by analyzing the performance
of businesses across diverse
industries, these studies also offer CFOs
the metrics needed to assess their own
company’s success.
Like best-run operations everywhere,
more and more finance organizations
are looking for ways to streamline their
processes. Automation is an obvious
strategy. By automating transactional processes,
top finance performers are lowering
the cost of financial activities,
reducing errors, and increasing turnaround
speeds. In fact, benchmarking
studies reveal that top quartile performers
have finance costs that average just
0.7% of company revenue, compared to
greater than 1.3% for the bottom quartile.
Automated processes can also ensure
that an organization’s core data is reliable
and readily available.
But without a systematic method to
ensure compliance with these processes,
companies can still experience costly
localizations across business units and
geographies. A growing trend in best-run
finance is to drive efficiency through
shared services. A finance organization
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
sharing of financial resources, quicker
and more accurate financial consolidation,
and increased speed in complying
with legal and regulatory changes.
Benchmarking again shows that companies
with mature shared-services organizations
achieve cost savings and
increase organizational effectiveness
(see Figure 1).
Responding Efficiently to Risk and
Compliance Issues
In addition to controlling financial exposure,
companies are expected to maintain
consistent operational and audit processes.
To ensure compliance with legal regulations,
companies must implement
checks and controls – based on the context
of individual business processes –
that define who can access and change
information. ASUG/SAP studies indicate
that targeted governance, risk, and compliance
initiatives can help companies
measurably improve their ability to detect
and prevent fraud while reducing the
resources spent on compliance.
Further, as financial and operational rules
change, new processes must be implemented
throughout an organization as
soon as new rules take effect. A centralized
model to control risk and compliance
facilitates the ability of an organization to
turn on a dime in a changing global
economy.
GRUMA
Industry: Consumer products – food
Summary
GRUMA is the worldwide leading producer
of corn flour and tortillas and
sells its products in over 50 countries.
GRUMA required a process and tool to
ensure that its end users had the right
access privileges to perform day-to-day
business operations without exposing
the business to risk. GRUMA selected
the SAP® GRC Access Control application
and established a compliance
program with minimal investment that
enables exceptional change and access
control.
Results with SAP® Software
- Internal IT audit revision time
completed 90% faster
- E xternal IT audit revision time
completed 50% faster
- Greater ability to track compliance
with auditors’ recommendations and
measure improvements
- Faster, risk-free user setup
- I mproved risk assessment
Connected
Integrating Finance to
Ensure Effectiveness
Embedding Finance in Closed
Loop Processes
Finance is no longer a back-office function.
Instead, today’s best-run finance
organizations reinvest the time and
resources saved by running an efficient
organization to provide proactive insights
that enable other lines of business to
make informed decisions supporting the
best interests of the entire company.
Holistic processes that encompass every
part of the business – and that facilitate
communication between departments –
are critical to ensuring that finance is integrated
with these operational decisions.
Finance, marketing, sales, and manufacturing
must all work together, for example,
to effectively determine appropriate
spend based on expected returns and,
ultimately, the bottom line. With closedloop
processes in place, a finance
department can forecast potential revenue,
run what-if analyses, and develop
contingency plans to manage costs. If
marketing targets more sales than manufacturing
can supply, managers can
adjust demand plans or secure additional
manufacturing resources. If manufacturing
costs increase, finance can flag offtarget
trends and initiate early corrective
action.
Enabling Integrated Information
In addition, a company cannot effectively
pursue a strategic direction unless there
is consistent, accurate, and real-time visibility
across the enterprise – especially
when it comes to its financial information.
A business, for instance, cannot react
proactively to demand forecast adjustments
if this information takes several
days to reach the finance department.
And in highly siloed environments, there
is the risk that critical information will never
reach other impacted organizations
such as manufacturing.
Finance needs information that is timely
and accurate if it is to fully assess the
operational situation of a company. Manual
processes open the door to error
when transferring data or rekeying
entries. Automation can ensure a free
flow of accurate information between
departments, lines of business, and
geographies – optimizing the entire
business.
Acting as Strategic Advisor
A truly connected finance organization
will identify opportunities that take its
company to the next level. With its ability
to analyze operational performance
across organizations, a finance organization
is in the unique position to identify
current trends, forecast future results,
and ensure consistency across these
organizational boundaries.
Studies indicate that as finance organizations
evolve, a greater percentage of
their time is spent on business analysis
(see Figure 2). Accompanying this shift
are increases in operating margins as
much as 38%. Top performers increase
efficiency with lower transactional costs,
while maximizing effectiveness with
greater emphasis on strategic decision
support.
Volvo Aero Services
Industry:Wholesale distribution
Summary
Based in Boca Raton, Florida, Volvo
Aero Services Corp. is a leading provider
of aftermarket parts and services
for the aviation industry. In addition
to being the exclusive distributor of
surplus parts for Boeing Company,
Volvo Aero Services offers a range of
services including warehousing, financing,
repair management, and leasing of
aircraft parts and engines. Part of the
larger Volvo Group of companies, the
company chose SAP® software to enable
an evolving business model and to
achieve operating efficiencies.
Results with SAP® Software
- Days sales outstanding reduced 15%
- O n-time deliveries increased 18%
(up to 97%)
- T ime for general ledger reconciliation
reduced 50%
- I ncreased visibility into product costs
and market demand
Metric Driven
Putting the Right Measurements
in Place
Maintaining Financial Excellence
The measurements that an organization
puts in place – and how these performance
indicators are prioritized – often
determine which companies are business
leaders. Metrics that measure the efficiency
of finance operations typically
include cost per transaction, fixed asset
valuation, department headcount, and
audit times (see Figure 3). Such measurements,
however, must be evaluated
in concert. For example, both cost and
speed are critical in time-to-close processes.
Rapid financial results enable
effective and timely business decisions
for all business units of a company.
Financial organizations will continue to
process the important daily transactions
that invoice customers, pay vendors, and
capture operational costs. Indeed, an ongoing
mandate of finance is to generate
the financial statements expected by the
market and shareholders.
Driving Operational Excellence
Beyond the necessary financial statements,
the best-run finance organizations
also play an integral part in operations
planning. By performing operational analysis,
finance can support the decisions of
departments across the enterprise:
sales, manufacturing, and services. In
fact, it is often the finance department
that brings company-wide forecasts
together in a single comprehensive plan –
providing what-if analysis, assessing risk,
and identifying inconsistencies among
departments.
Best-run finance goes one step further
and compares company performance
with external economic data. This comparison
can reveal how the business
stacks up to the general market, its
industry, and its geography. By providing
such insight, a finance organization can
drive growth strategies. At the same
time, these strategies can mitigate the
risks presented by business realities such
as economic downturns and emerging
global regulations.
Slade Gorton
Industry:Wholesale distribution
Summary
Slade Gorton & Co. Inc. is the industry
leader in the development, marketing,
and direct distribution of seafood.
Since 1928, the company has worked
hard to provide its customers with the
finest and widest line of fresh and frozen
seafood available. By offering only
the highest-quality seafood products
from around the world, Slade Gorton is
transforming the way foodservice and
retail customers and consumers perceive
and buy seafood.
Results with SAP® Software
- Ability to operate with very lean staff
and minimal costs, while maintaining
very high levels of customer service
- T hirty-eight FTEs in finance department
per billion dollars in revenue
(average benchmark is 100)*
- Finance costs at 0.35% of revenue
(average benchmark is 1.2%)*
- Real-time, accurate, timely reports
with lower IT support costs
The Road Ahead
Becoming a Best-Run
Finance Organization
There is little doubt that today’s CFOs
are changing the focus of their organizations
and, as a result, influence business
operations far beyond the traditional
boundaries of finance.
SAP industry experts and the value
engineering (VE) team can help your
company build a best-run finance organization.
These experts provide support
throughout the value life cycle, from
developing business cases to sharing
knowledge on how to maximize the value
of SAP® software such as the
following:
- SAP ERP Financials solution: A comprehensive
financial management
solution engineered to support companies
from the midmarket to the
most complex, multinational corporations,
across a broad range of industries,
which supports global financial
reporting standards, multiple currencies
and languages with over 45 country-
specific versions, and tight
integration with operational processes
- Financial performance management:
Solutions for enterprise performance
management that help companies
capitalize on the value of their corporate
data, enabling organizations to
become more agile and competitive
by providing organizational alignment,
visibility, and greater confidence,
based on information coming from
many different parts of the business –
including financials and operations,
external partners, vendors, and
customers
- Governance, risk, and compliance:
Solutions that promote corporate
accountability by unifying corporate
strategy, control initiatives, opportunity
discovery, and loss mitigation
across the extended enterprise
The VE team consists of more than 175
professionals providing in-depth
industry and business process expertise
in strategy, IT planning, global
deployments, and benchmarking. For
more information, contact
value.engineering@sap.com.
The ASUG/SAP Benchmarking and
best practices program can help
organizations assess strengths, identify
potential areas for improvement, and
recognize best practices and IT strategies
that enable companies to excel.
Benchmarking and best practice
reports are available for financials;
shared services; and governance, risk,
and compliance. Additional reports
address other operational areas, such
as human capital management; supply
chain and manufacturing; and
business intelligence. For more information
about the ASUG/SAP
Benchmarking program, visit
www.asug.com/Benchmarking or
contact benchmarking@asug.com.
About the Author
Birgit Starmanns is a senior director
in the Customer Value Network group
within SAP value engineering. Starmanns
concentrates on developing
solution-focused communities and
networks, creating value-oriented
thought leadership, and working with
strategic customers – principally in the
area of financials and customer
relationship management (CRM).
Previously, Starmanns was a vice
president in SAP’s CRM product
management organization for partner
channel management and a director for
e-commerce. Prior to joining SAP, she
was a manager in management
consulting organizations, with a focus
on financial and management accounting.
Starmanns holds an MBA and a
BA from the College of William and
Mary.
Further Reading
To learn more, please visit
www.sap.com/usa or contact your
SAP representative about the
following:
- ASUG/SAP Benchmarking Reports
- Driving Financial Performance: How
Top Organizations Excel – SAP
Insight
- Best Practices in Creating a Strategic
Finance Function – SAP Insight
- Fujitsu Siemens Computers –
SAP Customer Success Story
- Thrifty Foods – SAP Business
Transformation Study
- San Luis Obispo County, California
– SAP Business Transformation Study
- Sentry Group – SAP Business
Transformation Study