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"To help you transform your organization into one that is performance driven, you need solutions that link together your processes and data to provide a common view of your business. SAP BusinessObjects enterprise
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The Renewed Finance Function: Extending Performance Management Beyond Finance
Performance Management is also known as :
Performance Management Process,
Performance Appraisal,
Balanced Scorecard,
Performance Management Systems,
Business Performance Management ,
Performance Management Information,
Management Planning,
Performance Management Network,
Work Measurement,
Performance Management Solutions,
Application Performance Management,
Performance Goals,
Performance Measurement,
Performance Measurement Management,
Performance Metrics.
Contents
- About this Report
- Executive Summary
- Chapter 1: The Strategic CFO
- Chapter 2: The New Role: A Holistic Leader and Partner"Not Merely a Technician
- Chapter 3: Standardizing and Streamlining
- Chapter 4: Conclusion
- Sponsor's Perspective
About this Report
In August 2007, CFO Research Services (a unit of CFO
Publishing Corp.) launched a research program to
explore the ways in which the role of the finance team
has changed in recent years due to increased oversight
from regulators, more active investors, and company-
specific changes in business operations.
We wanted to better understand the internal and exter-
nal forces that are causing these transformations and the
steps that companies and their finance teams are taking
to respond to these forces. This research program"
which includes an electronic survey and a series of inter-
views among senior finance executives"finds that the
finance team is indeed under new pressure from more
demanding external stakeholders. This pressure, espe-
cially from regulators, has prompted finance teams to
document and often repair core finance and operating
activities.
Pressure from more demanding
external stakeholders has prompted finance
teams to document and often repair core
finance and operating activities.
But companies aren't in business just to comply with
regulations. They are in the business of making valuable
products, rendering high-quality services, serving
customers, and generating value for shareholders. Amid
a marked increase in investors' expectations from com-
panies and their finance teams, executives in this study
show new enthusiasm for closer collaboration with
business unit management in an effort to improve
business performance and lessen risk. By doing so, they
will contribute to the core business activities that
satisfy customers and shareholders"as well as stake-
holders such as regulators, business unit managers, and
employees at large.
This report presents the findings of our online survey of
255 senior finance executives and in-depth interviews
with executives at the following companies:
- ABB
- Bank of Montreal
- CB Richard Ellis Group, Inc.
- Cengage Learning (formerly Thomson Learning)
- Cleveland-Cliffs, Inc.
- CMA CGM (America) Inc.
- Cox Communications, Inc.
- Levi Strauss & Co.
- MGM Mirage
- Silgan Plastics Corp.
- Turbocam
- Verigy Ltd.
- Wyndham Worldwide Corporation
- Executives at several other companies in North America, Europe, and Asia that asked not to be cited by name in this report
CFO Research Services and SAP developed the hypotheses
for this research jointly. SAP funded the research and
publication of our findings, and we would like to
acknowledge Erin Halfnight, Barbara Dischner, and Jim
D'Addario for their contributions and support. At CFO
Research Services, Elaine Appleton Grant conducted the
interview program and wrote the report. Sam Knox
directed the research and managed the project.
Executive Summary
These are demanding times for senior finance executives.
Investors want higher returns. Regulators require more
complete documentation of companies' compliance with
stricter requirements. And in the face of stiffer market
competition, business managers want more capital to
invest in the business and more assistance in making
investment and operating decisions for their increasingly
complex businesses.
Companies and their stakeholders have always had high
expectations for their finance teams. But this research
program reveals that, most recently, these pressures"
from regulators, from investors, and from competitors"
are pushing companies to look for more from their
finance teams in two main, but often conflicting, areas.
Regulatory pressures, especially the Sarbanes-Oxley Act,
push finance teams toward more rigor in their transac-
tional duties of controllership and financial reporting. At
the same time, competitive pressures, demands from
line-of-business management, and higher expectations
from investors pull finance executives toward a more
active role in setting, validating, overseeing, and ensuring
execution of business strategy.
The need for finance executives to play a greater role in
business performance management creates the demand
for new and different skills among finance management
and staff. To use these skills, finance executives need
technology and systems that often go beyond standard
transaction processing and core accounting. And finance
executives need a cultural mandate from business and
functional management to work collaboratively on
improving performance.
Sources interviewed for this study are voluble on the
importance of the finance function playing a higher-value
role. One CFO says, "I think the business environment
is absolutely demanding it. When you think about the
financial returns from the stock market in the last ten
years, they've been extremely attractive. Now, CEOs are
actually seeking out more financial guidance and part-
nering because it's harder to drive superior shareholder
return." He continues, "As we look at the next ten years,
it's not going to be as easy to drive that type of produc-
tivity and value creation. So, I think most businesses are
longing for that strategic partner and the insights, so
that they can make better decisions, drive transforma-
tional productivity, and ensure they're choosing the right
strategies."
Whether or not finance embraces an emerging mandate
to contribute more fully to performance management,
the finance function remains responsible for companies'
core transaction processing, financial reporting, audit
management, and other traditional controllership
activities. The demand to keep transactional processes
running with close control, improve their efficiency, and
lower their cost pushes finance into a continual evolu-
tion of its processes and systems. This evolution in
processes"sometimes gradual, sometimes rapid"
allows the finance team to standardize, streamline, and
simplify routine transaction processing. Companies are
then able to execute routine activities more quickly and
with fewer errors, to free up finance executives' time to
act as a partner to the CEO and operational leaders, and
to provide better and faster information for competitive
decision making throughout the corporation.
"When you think about the financial
returns from the stock market in the last ten
years, they've been extremely attractive. Now,
CEOs are actually seeking out more financial
guidance and partnering because it's harder to
drive superior shareholder return,"
says one CFO interviewed for this report
Key Findings
- The role of the finance function is changed by three
things: Regulations on the one hand, with competition
and investor expectations on the other. As a result, the
finance function is pulled in two directions.
- Most finance executives seem to agree that as the role
of the finance professional becomes more strategic,
the skills of the new finance employee must become
broader"much like those of a CEO, without diluting the
technical skills of finance's traditional controllership
role. Finance leaders in this study call for business schools
and company-run training programs to provide their
finance and operating executives with a broader base
in both finance and business support skills.
- As the opportunity for top-line growth slows, growth in
profitability becomes a more important source of value,
and information to support decisions made by operations
and functional managers becomes critical.
- Companies that have elevated CFOs to strategic leadership
positions have done so in part to satisfy the needs of
stakeholders, such as investors. CFOs can speak their
language.
- In order for finance to play a greater role in driving
business performance, say executives, it needs to
collaborate more closely with business unit and line
management. A majority of respondents say such
collaboration is underway"although it's not without
challenges"at all levels of the organization, including
partnerships with the CEO and Boards of Directors.
- While respondents in this study say the finance function
often has broad credibility with business unit managers,
finance's assessment of operations managers'
understanding of finance is far less favorable. Finance
executives report that business unit managers do not
understand the world of finance as well as they should.
More"and more formalized"financial education for
business unit managers would help finance executives
have better internal dialogue about performance.
- In response to regulatory and internal requirements,
companies have focused on documenting, standardizing,
streamlining, and automating their accounts receivable
(A/R), accounts payable (A/P), and other core financial
processes. More than half of the companies in this study
have completed or are currently executing projects to
standardize their charts of accounts, to streamline their
financial close processes, or to simplify/standardize
core finance processes. However, while large-scale
investments in enterprise IT systems are commonplace,
current or recent technology projects are less likely to
be dedicated to automating regulatory compliance or
to measuring and managing risk.
- Finance executives are also seeking to distribute
performance management systems to a broader
coalition of decision makers. In many cases, they are
pushing performance management and measurement
systems out into their organizations"thus, distributing
financial and operating information in an effort to allow
business and functional managers to make more timely
decisions in extraordinarily competitive markets.
The role of the finance function is
changed by three things: Regulations on the
one hand, with competition and investor
expectations on the other. As a result, the
finance function is pulled in two directions.
Chapter 1: The Strategic CFO
Over the last decade, finance executives have evolved
from serving primarily as chief accountants to becoming
more closely engaged with business unit managers.
Rather than focusing on keeping a historical record of
company activity and performance, CFOs and their
teams are providing advice, counsel, and decision sup-
port to business managers on a broader array of finan-
cial and operating activities. While the role of the finance
team varies with the unique requirements of each com-
pany, executives in this research program affirm that
business activities and the role of the finance function
have been altered in recent years by shifts in their com-
petitive environment, increased complexity of business
operations, and investors' scrutiny of company performance.
Accordingly, they aspire to contribute more materially
to developing business strategy. (See Figure 1.)
At the same time, regulatory oversight has weighed
heavily on companies in recent years. In this survey of
more than 200 senior finance executives, fully 38 percent
of respondents said "regulatory compliance require-
ments (e.g., SEC regulations, privacy, security, environ-
mental, trade, labor, and other regulations)" had a "dra-
matic impact" on their companies' business activities in
the last two years. Although we are now five years
beyond the passage of Sarbanes-Oxley, and most com-
panies have concluded their initial investments and
internal controls assessments, the stringent audit
requirements of Sarbanes-Oxley still draw finance teams
away from activities that support decision making
and presumably generate value for customers and
shareholders.
"There are two forces over the last few years that have
been pulling in opposite directions," says Laurie Brlas,
chief financial officer of Cleveland-Cliffs, Inc., a $1.9 billion
mining company in Cleveland, Ohio. "I think Sarbanes-
Oxley has pushed finance executives to be less strategic
and more control focused"kind of ‘the cop,'" she says.
On the other hand, she adds, "most folks recognize that
the skill set and the approach that a finance executive
brings to the table are very valuable in strategic decision
making, so companies are always pulling in that direction."
The tension between these two roles"strategy and con-
trollership"is significant. At the minimum, it can stretch
resources thin. At the extreme, it can go so far as to con-
tribute to decisions to cast off the burdens of Sarbanes-
Oxley altogether. "Until six weeks ago, I would have said
what kept me up at night was interacting with our exter-
nal auditors to get compliant with Sarbanes-Oxley," said
a finance executive at a food-service conglomerate earli-
er this year. He calls the Sarbanes-Oxley work a "night-
mare": "We were not allowed any incremental resources.
We had to basically come under compliance with the
existing resources that we had." But this summer, the
food-service conglomerate delisted from the NYSE, in
part to escape the onerous Sarbanes-Oxley requirements.
Still, it will take some time for their finance department
to overcome the effects of those resource constraints, the
finance executive says, because Sarbanes-Oxley forced
the finance team to lessen its role guiding operations
management in strategic decisions and moved it into a
"more nuts-and-bolts control function," a move that he
says has been "a point of contention."
Other finance executives working for U.S. public compa-
nies also say the Sarbanes-Oxley compliance require-
ments have reduced their abilities"but not the desire
nor the need"to contribute to developing, executing,
and measuring business strategy. Meeting Sarbanes-
Oxley compliance without adding to staff has challenged
his team, says Rick Arpin, vice president of financial
accounting for gaming company MGM Mirage in Las
Vegas. "A project comes up and we say, ‘Who's going to
do this project? Who's going to look at this changing
environment? Who's going to look at this deal we might
do?' And all the finance and accounting people are busy
doing flowcharts and the other work that needs to be
done for 404," he says. Mr. Arpin adds that in the last
year the initial work for Sarbanes-Oxley compliance has
abated somewhat, and, as a result, the finance and
accounting group has been able to reassign some Sar-
banes-Oxley compliance duties into other areas of the
company, and has been able to take on more strategic
projects as a result.
However, the impact of Sarbanes-Oxley and other regulato-
ry regimens may not be entirely negative, say some execu-
tives interviewed for this study. Sarbanes-Oxley "has had a
lasting impact on the way we run our finance back office"
all the way from a more robust audit program to more dis-
closure in our forms 10K and 10Q," says Gil Borok, executive
vice president of finance at CB Richard Ellis Group, Inc.
(CBRE), a large commercial real estate services company
with operations in 50 countries. He continues, "There's
always the argument that the costs don't justify the bene-
fits, but there are some good things that have come of it. It
has made us function differently. The demands have gone
up significantly. I think it's overall good, overall positive."
While Compliance Requirements
Mount, Markets Mature and Become
More Competitive
The rigors of Sarbanes-Oxley aside, more than one-third of
survey respondents and many of the executives we inter-
viewed for this study say that a shifting competitive environ-
ment has had a dramatic impact on their companies in recent
years. Globalization (of capital, labor, information, and sup-
ply chains), new competitors, industry maturation, and M&A
each have increased the pace and intensity of competition in
many industries. And in response, companies are turning to
their finance teams as strategic advisors to help develop busi-
ness strategies, manage risk more effectively, and extract
organic growth from current lines of business.
"The trends have to do partly with globalization, which in
turn has spurred on the need for discovery of where the next
incremental growth and shareholder value will come from,"
says Ashish Gupta, vice president of pricing and business ini-
tiatives for Cengage Learning's Academic Group. "Industries
mature and consolidate, so the top-line growth from just rev-
enue and business as we've known it in the past cannot con-
tinue at the pace it used to in most industries." Mr. Gupta
argues that in many industries, finance executives work to
bring business unit management to the table. "Growth does-
n't have to always come from top-line sources. Sometimes,
it's the traditional sales channel or could be alternative sales.
It could be different ways of structuring your business to get
to the desired target."
The maturing gaming industry provides a case study.
Because the industry is crowded with casinos, gaming
companies are beginning to look elsewhere for growth,
cash flow, and profits. For instance, rather than using any
available real estate to build casinos, companies such as
MGM Mirage are experimenting with other value-creation
models. "So there's an option analysis, I guess you might
call it, of ‘What should we actually do with these assets
and is there a better way than just owning and operating
a casino resort?'" Mr. Arpin explains. "Should we own
and operate a mixed-use development? Should we
partner with someone to do a project? Should we
master-plan the property like a real estate company?"
As the questions become more complex, MGM Mirage
looks to its finance team to help determine which options
will create the most value in the future, Mr. Arpin says.
Other finance executives, such as Bill Fitzsimmons, vice
president of accounting, financial planning, and analysis
at Cox Communications, Inc., find themselves in similar
positions. For the last several years, the Atlanta-based
cable company acquired market share as fast as it could.
Now, though, markets are becoming saturated; the pool
of prospective customers from which to draw is shrink-
ing; and voice, cable, and data service providers are
muscling in on each others' markets. As a result, the
whole telecommunications industry is scrambling for the
same customers. Mr. Fitzsimmons says, "It's going to
cost more to acquire [new customers]. We've got to real-
ly understand our costs of acquisition, whereas in the
past that was not as important as just managing volume
growth." As the competitive landscape becomes more
complex, operating decisions"for instance, how much
to spend on marketing to these scarce customers, for
what return, and so on"become more difficult to make
and require a greater depth of financial input, such as
analysis of marketing campaign costs versus "the
ultimate payback" that's associated with that kind of
campaign, including the monthly revenue generated by
new customers. "The nature of our industry is getting
more competitive and so there's a greater reliance on the
role of finance as an advisor," Mr. Fitzsimmons says.
Additional competition from globalization, new market
entrants, or industry maturation puts pressure on prices
and margins. And as the opportunity for top-line growth
slows, growth in profitability often becomes a more
important source of value. With this in mind, many
finance executives are seeking to provide more up-to-
date information to operating managers in an effort to
support better decision making. Such decisions vary
broadly, of course"from near-term tactical spending on
marketing programs, to headcount, to investment and
asset allocation decisions.
At the American subsidiary of CMA CGM S.A., a multi-
billion dollar privately held container-shipping company
headquartered in Marseilles, France, senior vice presi-
dent and chief financial officer Jim Arnold is driving activ-
ities to shrink costs. "We have a lot of rate pressure in
the shipping industry, and competition caused rate
decreases last year," he says. To help pull costs out, the
new CFO"he's been there for a year"is sponsoring a
data warehouse project that, along with new perform-
ance dashboards, will allow operating executives
throughout the company to make decisions about
shipping and inland transportation routes, pricing, and
sourcing much faster than they've been able to
previously"activities that should improve both margins
and competitive position.
As the opportunityfor top-line
growth slows, growth in profitability often
becomes a more important source of value.
With this in mind, many finance executives
are seeking to provide more up-to-date
information to operating managers in an
effort to support better decision making.
Industry maturity and margin erosion"along with
access to capital"can breed M&A activity, as compa-
nies constrained in stalling markets look to acquisitions
for growth or fall prey to others' acquisition strategies.
Opportunities for mergers and acquisitions and the need
to make deal decisions quickly also transform the role of
the finance executive; many of the executives we spoke
with were deeply and regularly involved in analyzing deal
opportunities. Some were new to organizations that had
recently been spun out of larger companies; others were
brought on to help initiate acquisition processes or inte-
grate recent purchases. While the circumstances of each
executive we interviewed are different, the finance func-
tion plays a pivotal role in M&A targeting, evaluation,
and structuring in nearly every instance.
Derek Schmidt, chief financial officer of the Plastic divi-
sion at Silgan Holdings, Inc., a $2.7 billion manufacturer
of metal and plastic food containers, explains how the
maturation of his company's industry drives both acqui-
sitions and an expanded role for the finance function.
"The plastics [market] is very fragmented, and there's a
substantial amount of consolidation happening.
Organic growth in our industry is typically lower single-
digits, so acquisitions represent a viable option to grow
more rapidly. As we start to look at acquisitions, not only
do we look for [cost] synergies, but we look at whether
we can expand our geographical capabilities and get into
different consumer segments than we currently have
today."
A large part of the company's business strategy, says
Mr. Schmidt, hinges on the acquisitions, not just from an
operating point of view but also from a financial value
perspective. Mr. Schmidt argues for including the business
development function within the broader finance
function"in part due to finance's independence and
broad analytical capabilities: "We need someone with
a strong mindset around value creation who can
objectively look at acquisition candidates and choose
those that not only have strategic fit but also those
where there's considerable financial value-creation
potential."
Investors Call for More Information
and Closer Relations with Finance
While globalization, regulation, and competition have
driven changes in the role of finance in recent years,
investors in companies both public and private now have
higher expectations for companies and their finance
teams. Queried on investors' expectations, a solid major-
ity of respondents in our survey say their investors
demand more information, more access to the CFO, and
better performance from the companies in which they
hold shares. (See Figure 2, next page.)
The heightened scrutiny has increased the demand for
outward-looking CFOs who can speak to the investor
community in ways that CEOs, COOs, and other operat-
ing executives cannot. When Cleveland-Cliffs' former
CEO"who was also the company's CFO"left, its board
decided the company needed a sitting CFO, in part to
have an executive who could communicate with an
active investor community, says current chief financial
officer Ms. Brlas.
Investor scrutiny has increased the
demand for outward-looking CFOs who can
speak to the investor community in ways that
CEOs, COOs, and other operating executives
cannot.
Elsewhere in the survey, a solid majority of respondents
say that increased scrutiny from investors has had a
moderate-to-dramatic effect on their companies'
business activities. "I think that our investor relations
function has needed a lot more support than it might
have needed three or four years ago," says Mr. Borok, of
the Los Angeles-based CBRE. "We have a very active
investor relations program, which requires us to stream-
line information, summarize it, and make it user-friend-
ly. We have most of the data, but we have to make it such
that it's easily interpreted by investors and sharehold-
ers. And I think that investors ask a lot more questions
today than they did years ago and that does put an
additional strain on the organization."
Moreover, a growing flood of acquisitions, buyouts,
mergers, and spin-offs creates more demand for infor-
mation from an investor community that must make buy,
sell, and hold decisions on companies they may know
little about. About a year ago, Cendant Corporation spun
off $3.8 billion Wyndham Worldwide Corporation as a
new public company; Virginia Wilson, the Parsippany,
New Jersey, company's executive vice president and chief
financial officer, says, "Many of the people in the invest-
ing community who ended up owning our shares after
the spin-off hadn't necessarily bought the old Cendant
shares because they wanted to be involved in the
hospitality space… So there was a big decision for them
to make about whether they wanted to continue to own
the shares."
Whether investors are as informed as they would like to be,
it is finance's job to step in and give investors the information
they seek. Verigy Ltd., a $778 million semiconductor test
manufacturer based in Singapore, was spun off from Agilent
Technologies in 2006 (which was itself an offshoot from
Hewlett-Packard) and has had a similar experience in man-
aging shareholder relations after a spin-off, albeit with
investors more informed about industry performance, says
Michael Jung, vice president of corporate financial planning
and analysis. "We used to be part of a conglomerate. Now
we're a pure play semiconductor test company, and as a
result, we've got investors who are familiar with the industry
and are more focused." He says, "These new investors have
probably raised the bar a notch, and the rest of the share-
holders get more keen insight into Verigy and are likely to
drive the bar higher, too."
Investor Demand for Better Performance
Not only do investors want more information, they demand
better performance. For instance, as $7.1 billion MGM Mirage
reacts to its competitive landscape by moving into new busi-
nesses, investors want accelerated rates of activity and of
return, says Rick Arpin: "When operating as just a gaming
company, it might be okay to open up a property, generate
some cash flow, pay down the debt and then say, ‘In five
years I'll open the next property.' Real estate investors don't
want to hear that. They want to know what land you are buy-
ing next and what building is going up next."
Increased expectations for performance can translate into
fundamental organization changes, resulting in dramatical-
ly new and more encompassing roles for the finance team.
In mid-2007, Silgan Plastics, a division of Silgan Holdings in
Chesterfield, Missouri, created a new CFO position and hired
Derek Schmidt, who now oversees finance, IT, and corporate
development. "Our purpose is all about driving shareholder
value," Mr. Schmidt says, "hence the need to combine corpo-
rate development and finance. Regarding IT, we have strong
technical people, but they had no clear vision, no strategy as
to how IT would actually create a competitive advantage for
the entire business." Moreover, he adds, "a lot of the diver-
sity in my role has to do with the fact that we're in a lower
margin, competitive industry, so you can't necessarily afford
to have a CIO, CFO, and chief strategy officer."
While investors have always clamored for higher perform-
ance and better returns"when wouldn't they want more
from their investments?"investor expectations have driv-
en CFOs and their teams toward enhancing business advi-
sory capabilities, even in the face of daunting compliance
requirements. By doing this well, say sources, the finance
function can fulfill an expanded mandate as the steward of
both controls and company performance. Says Cathy
Cranston, senior vice president of financial strategy at the $16
billion Bank of Montreal, "The last few years have been just
crazy with governance, with Sarbanes-Oxley, Basel II, and
all the rest." And as a result, her company's finance team has
had to focus on compliance matters more than it would like.
She continues, "Our investors are very demanding in terms
of the returns they want, and our industry is extremely com-
petitive. Absolutely, the force from investors is pulling us for-
ward to improve our performance. We in finance have a role
to play, and it's a lost opportunity when the full value we can
bring to the table isn't harnessed and leveraged. It's a huge
missed opportunity [to focus on governance at the risk of
ignoring performance improvement]."
"When operating as just a gaming
company, it might be okay to open up a
property, generate some cash flow, pay down
the debt and then say, ‘In five years I'll open
the next property.' Real estate investors don't
want to hear that. They want to know what
land you are buying next and what building is
going up next," says Rick Arpin, VP of financial
accounting for MGM Mirage.
Chapter 2: The New Role: A
Holistic Leader and Partner" Not Merely a Technician
Senior finance executives say they serve as partners to
the CEO and to operational leaders as companies strive
to improve performance. In some cases, this has been
long-standing practice. At CBRE, Gil Borok says his com-
pany's business management seeks out the finance func-
tion for "thoughtful analysis and the impact of decisions
on their business." He continues, "I've always tried to be
client service-oriented, and the lines of business are a
client of ours. That's just what we do. The business
comes first. They are the ones generating the revenue. I
think that the finance organization here has improved.
It has become recognized that we can add value to the
businesses, and they come to us more frequently." In
other organizations"including a majority of the com-
panies represented in this survey"the finance team has
recently assumed an expanded role as a counselor to
functional and business unit leaders. (See Figure 3.)
At educational materials publisher Cengage Learning in
Belmont, California, Ashish Gupta says finance works on
strategic projects more closely with the company's CEO
and Board than it had it the past. This trend, says Mr.
Gupta, "spans across industries, but I've seen it more in
my current position, perhaps because of our recent sale
to private equity." He says, "Finance is a key player in
various metrics-driven projects to analyze where the
gaps are in the business, to find opportunities for improv-
ing not only revenue but margin, and therefore cash flow,
as cash flow becomes extremely important across
businesses."
In a majority of the companies
represented in this survey, the finance team
has recently assumed an expanded role as
a counselor to functional and business
unit leaders.
Cengage Learning is exploring ways to improve yield
optimization"for instance, by looking creatively at how
to make money in the used textbook market. (The $1.8
billion company, formerly Thomson Learning, was spun
off from Thomson Corporation in mid-2007 and was pur-
chased by private equity group Apex Partners.) Mr.
Gupta is also exploring ways to improve the bottom line
and generate more free cash flow by providing incentives
to its distributors to reduce textbook returns. "These
kinds of incremental opportunities"and in some cases,
quantum opportunities"are the kinds of out-of-the-box
scenarios that the Board seems to be more and more
interested in," Mr. Gupta says.
Why are Boards and CEOs turning to finance executives
for guidance on these sorts of decisions, rather than
relying exclusively on operational executives, such as the
COO? Our research suggests some fundamental
reasons. First, the finance team is often responsible for
performance measurement activities and therefore has
the metrics-driven knowledge to contribute to decision
making at this level. (See Figure 4.)
Simultaneously, investors are demanding more commu-
nication with"and a deeper, more strategic level of
information from"senior finance executives. According
to a U.K.-based senior finance executive for a global
chemical company, both investors and analysts expect
the CFO to present strategic information, and they also
expect the first point of contact to be with the CFO, not
the CEO. "If you're going to go out and represent your
company"either to rating agencies, banks, or
investors"if you're looking for funds, I think they need
or expect the CFO to have a broader view and a business
view that they can represent to these potential stake-
holders," he says. "Has that changed significantly over
the years? Perhaps. I just think that with all things, as
the Internet has opened up levels of communication,
it drives information hunger. People expect more.
Certainly, the City [of London] expects more from
the CFO."
As investors raise their expectations for performance
metrics-driven data, CEOs have begun to turn to finance
teams to serve as independent voices within companies
that challenge the assumptions of operational leaders,
particularly when they assess new opportunities. (In this
way, the finance team is acting as a surrogate for the
investment community, asking the hard questions that
they expect from investors and analysts in the future.) "I
tell everyone on my team, ‘I look to you to be the CFO of
your team and that doesn't mean just putting together
the numbers. You need to provide the insight, you need
to challenge people's assumptions. You need to really
act as though you're running the organization,'" says
Michael Jung, vice president of corporate financial plan-
ning and analysis at Verigy, the semiconductor test man-
ufacturer that was spun out of Agilent Technologies in
2006. "By necessity, I need those people to play that
devil's advocate role, to challenge the team and make
ure that what comes out of the team is strong."
Partnership at Many Levels
Finance executives are increasingly partnering with busi-
ness unit and functional leaders in addition to support-
ing the Board and CEO. More than 80 percent of respon-
dents to our survey agreed either strongly or somewhat
that business unit and functional leaders are seeking a
greater contribution from and closer collaboration with
the finance team. (See Figure 5.)
Indeed, survey respondents say that business unit lead-
ers give finance executives high marks for their abilities
to contribute to solving a broad range of problems. To do
so requires candor, good information, and trust devel-
oped over the long term. (See Figure 6.) Says Cathy
Cranston of the Bank of Montreal, "I think the onus is on
the finance group to earn the right to be at the table. You
do that by being good"by bringing useful, actionable
information to the table, by being a devil's advocate, by
bringing information forward that sometimes people
simply don't want to hear." She says finance executives
should work to "become trusted advisors, and in some
cases, finance people have earned that position. They've
proven their value." Conversely, she says, "if finance peo-
ple stay in the background"just doing what they're
told, producing the numbers but not challenging them"
never bringing anything more to the table, they have not
earned the right to be at the table, and they won't be."
At a well-known international information aggregator, a
vice president of finance points out the change in busi-
ness managers' thinking about how to work with the
finance team. "Finance was typically a scorekeeper; it
produced these reports that would make sure that the
rules are followed. I think what the business is saying
now is, ‘Look, finance, it's great that you're showing me
these reports, but they're not enough. We want you to
understand a few things and convey your understanding
to us to provide us with insight in business decision mak-
ing so that we're more knowledgeable.'" He calls on
finance executives to truly master the underlying busi-
ness: "Understanding the business itself so that you can
predict financial results better and more accurately and
analyze the mass of information that is out there will
help the business have key insights into where it can
improve itself."
Collaborating with business leaders to assess potential
value-creation opportunities may be CFO Virginia Wilson's
most important role at Wyndham Worldwide. "We're help-
ing people make decisions about whether there is a greater
growth opportunity if you pursue one set of options versus
alternatives. Is there risk associated with that? It is impor-
tant for us to both help guide [business unit leaders] and
then to communicate [these opportunities and risks] to our
investing community," Ms. Wilson says.
Less Confidence in Business Management
"A Call for Training Emerges
Unfortunately for the health of such partnerships, the
finance team doesn't give such high marks to their business
unit peers when it comes to understanding finance. In fact,
only 2 percent of respondents reported that "business unit
managers have an excellent understanding of the finance
function." Recently, says a finance executive at the food-
service conglomerate, "operators have really focused pri-
marily on just performing their duty and keeping their
employees happy and almost divested themselves from any
financial responsibility because they had a finance guy
attached to the hip." That's a problem, he continues,
because "some of our operators in the field don't have the
ability to see niches and opportunities in the market because
they don't have the full financial pallet available to them."
Yet there is a chasm between finance's doubts and the
actual responsibilities of most business unit managers.
Our research shows that business managers are routine-
ly held accountable for performance tied to financial and
operating metrics. (See Figure 7.) Executives interviewed
for this study confirm this focus on accountability among
business managers for performance results. Cathy
Cranston at the Bank of Montreal says, "My CEO recent-
ly asked my group to create a much better line-of-sight
into how we were going to meet our targets for next year,
so we had to work across the organization to create met-
rics and targets at a lower level to really be able to see
how we were going to get there, and to be able to track
them more rigorously. We already do that; this was sort
of an extra effort that was meant to create transparen-
cy and accountability." As a result of this effort, says Ms.
Cranston, "we've got much better metrics, and that's
because we want to create that transparency to set up
the right discussions. It's not enough to just say at the
end of the year ‘Oops, we missed.' There are monthly
performance meetings with every group."
Despite the need, less than one-third of companies have
formalized programs in place to better educate business
managers on financial concepts and how to apply them to
the business. (See Figure 8.) Such programs for nonfinan-
cial managers are often optional, but, according to our
research, companies are starting to put training programs
into place to bring financial and analytical expertise to their
functional and managerial leaders.
Silgan Plastics, for instance, currently has no formal pro-
gram in place to train business managers in finance"a sit-
uation new CFO Derek Schmidt plans to remedy. "That is
one of my objectives," he says. "At the end of the day, it's
the frontline managers within our plants and sales force
that are making the decisions, and we need to do our best
to equip them with the right knowledge to make great
financial choices for the company." At the food-service con-
glomerate, the finance team is just beginning to train oper-
ations managers in finance. Says a finance executive at the
food-service organization, "We want a better, well-round-
ed operator who not only can interface with a client, who
can not only manage the careers of our associates, but who
also can analyze and report his own financials."
It's important to note that, at least according to our inter-
views, finance executives do look critically at their own
departments, not just at those of their operations counter-
parts. In fact, for finance teams that are transforming from
transaction-oriented groups into strategic ones, upgrading
their talent may be the first order of business. Silgan's Mr.
Schmidt previously worked for Masterbrand Cabinets, which
had grown from a $300 million-plus company to a $2 billion-
plus business in less than ten years via organic growth and
acquisitions. "They had grown so fast that the investment in
finance talent and IT systems was far behind what a $2 bil-
lion organization needed," Mr. Schmidt says. "I was brought
into that role to overhaul talent, implement performance
management systems, upgrade key financial processes, and
bring more financial partnering to the key business leaders."
Out of a 33-person finance team, he replaced 13 positions
"with very strategically minded and savvy business people,"
he says. "After repositioning talent, the second most impor-
tant action was instilling that performance management
system and an operational focus around things that truly
drove financial success for the business."
Less than one-third of companies
have formalized programs in place to better
educate business managers on financial
concepts and how to apply them to the
business. According to our research,
companies are starting to put training
programs into place to bring financial and
analytical expertise to their functional and
managerial leaders.
Chapter 3: Standardizing
and Streamlining
Like Y2K before it, the passage of Sarbanes-Oxley in 2002
spurred significant investments in information technology.
Five years down the road, most finance executives feel
companies have the software and systems that they need,
but that companies aren't using this technology to its full
advantage. (Note that there is a significant minority, in cer-
tain industries, still suffering with manual processes.)
Thus, the finance team has been spending its time and
resources standardizing processes, linking systems
together for better information flow, introducing more
performance measurement resources companywide, and
improving upon existing organizational structures.
At container shipping company CMA CGM, for instance,
Jim Arnold is working on a large, 14-month data-
warehousing initiative. He's using existing technology.
"The parent company has most of the systems," Mr.
Arnold says. "It's just they haven't always deployed those
systems into the subsidiaries in the past. When I came
onboard and started probing, [I discovered that] we have
all these very robust systems and I said, ‘Well, we've got
to be able to utilize those systems in the subsidiaries.' This
doesn't mean the current systems are a data warehouse;
it just means the systems that house the data are
available and they utilize well-known technology that can
be developed to provide the company with real-time
decision-making tools."
Similarly, when Derek Schmidt arrived in his new role at
Silgan Plastics, he and his team decided to initiate a major
project to introduce performance dashboards into all areas
of the company so that, eventually, all key employees will
have access to information for instantaneous decision
making. It's a phased project that will take two years to
complete"but it won't require major new technology
investments. "We [had] already bought the functionality
as part of our broader software package. So, there is no
incremental expenditure in terms of software purchase,"
Mr. Schmidt says. "We're going to have roughly three or
four individuals primarily dedicated to this internally. [And]
we've already contracted with an outside consulting firm."
Process Improvements
Clearly, finance teams are becoming more assertive when
it comes to maximizing the technology and the systems
at their fingertips. Over the last two years, respondents
say, they've undertaken or completed significant process
changes, mostly intended to ensure that all parts of the
organization are using accurate and timely information,
and also intended to improve efficiency and accountabil-
ity (for instance, centralizing certain accounting activi-
ties). As one example, well over 60 percent are working
on or have completed substantial process review and doc-
umentation projects for compliance purposes (an obvi-
ous effect of Sarbanes-Oxley); more than 60 percent are
working on standardizing their charts of accounts or have
completed doing so. (See Figure 9., next page)
Most of our interview subjects indicated that by
standardizing processes, they and their business unit
counterparts can both spend less time and effort on
recording transactions and have better information with
which to then drive strategy. For instance, Cox Commu-
nications, part of $13.3 billion (2006 annual revenue)
media company Cox Enterprises, Inc., is a highly decen-
tralized company, says Bill Fitzsimmons. While he
acknowledges that decentralization has its strengths on
the customer side, for the past six years he has been
working on centralizing and standardizing all of the
financial procedures, regardless of where they reside in
the company. "We standardized how the accounts were
structured; we streamlined departments; we got people
using a standard chart of accounts consistently. That set
up our conversion into a new system," he says.
"Now we're on a common platform and we have
common measurements," Mr. Fitzsimmons says. By
standardizing, he says, "you can draw efficiencies by
doing things better and faster and the result is a cleaner
and more accurate product. If I were out in the field, I
would be grateful for that, because that will allow me to
spend more of my time on true analysis as opposed
to just cranking through the brute-force number
calculations."
"If you're the CFO, efficiency in process has to be the
drumbeat that you march to," says another senior finance
executive at a division of a major pharmaceutical
company, who recently finished standardizing the
organization's accounts receivable management. The
result: The organization can reduce head count by four
or five people this year.
Simply because these initiatives are happening, however,
doesn't mean it's easy for strategy-minded executives to
make them happen, particularly in transaction-oriented
cultures. The pharmaceutical executive says, "It's
because we have pushed and pushed, but it takes a lot of
effort from the inside of the organization to get that
change to happen."
That acknowledgment nods at a truth within even the
highest-performing organizations: There is still much
progress to be made in streamlining processes and sys-
tems"and making sure the right information is avail-
able for various activities. Our research indicates that
finance executives feel they are well prepared in some
areas to execute on their companies' business strategies
over the next three to five years, but highly unsatisfied
in others. (See Figure 10.) Namely, more than 90 percent
say they are fairly or very well equipped when it comes
to having well-documented and controlled processes for
routine finance activities such as A/R, A/P, and so on.
That number dips to just over 60 percent when it comes
to IT systems for use in performance management and
business planning"reflecting, perhaps, the fact that
finance teams are truly still in the midst of transforming
from the traditional "backwards-looking" finance cul-
ture"one schooled in post-mortems"to the 21st cen-
tury's forward-looking finance environment.
There is still much progress to be made
in streamlining processes and systems"and
making sure the right information is available
for various activities.
Consider, for example, how some of these issues play out
at MGM Mirage. As the gaming company enters new
business arenas in response to the industry's mature,
highly competitive environment, it's incumbent upon
finance to gather different information in support of
these new arenas (requiring, in fact, some technology
investments). But constrained resources mean that
finance still lives with some manual processes, reports
Rick Arpin. "We've been able to find systems that can do
what we want in specific areas," he says. "It's just that
ultimately we'd like to link solutions end-to-end.
[Presently] our systems require a manual intervention,
taking information from one system and putting it into
another. I think that's a challenge and it probably won't
go away in the near term, but we keep looking for
efficiencies in the process."
Cengage's Ashish Gupta acknowledges that systems
complexity does sometimes force the finance team to
make less-than-perfect decisions. "The optimal business
decision needs be balanced with operational and sys-
tems complexity. Sometimes, given the 80/20, it's easi-
er to trade-off elements of the former with ease of imple-
menting, managing and updating [systems]," he says.
Also at play, of course, is that because the enterprise
keeps growing and changing, you cannot find a one-size-
fits-all solution and be done. Mergers, acquisitions, and
spin-offs force companies to change their processes
often, and often drastically. According to Wyndham's Vir-
ginia Wilson, "In connection with our transaction last
year [when Wyndham was spun out of Cendant], we
essentially had one very large company split into four
very large companies and we pretty much had to pull
apart all of the technology stuff"telecommunications
systems, mainframes, the data center, everything.
E-mail, security"all of that had to be re-implemented.
So that has been an enormous undertaking over the last
18 months."
Given those two drivers"the difficulty of working with
outdated systems and the need for technology i
nvestment as a result of M&A activity"it should not be
surprising that finance is still making some investments
in IT. Of greatest interest is ERP systems: A third of our
survey respondents call investing in ERP systems their
first priority, when it comes to financial applications, over
the next two years. (See Figure 11, next page.)
Performance Measurement
and Management
Judging from survey and interview research, finance
teams that have not yet begun significant performance
measurement and management initiatives may do so in
the next few years, as the Board, CEOs, and investors
search for continuously higher performance in a compet-
itive, global environment. Our research indicates that
business managers and finance are "not on the same
page," so to speak, when it comes to accessing critical
information. In 50 percent of companies, finance and
business managers equally share performance-
reporting dashboards"and for most companies, that's
not good enough, according to our interview subjects.
Business and finance share other applications even less
of the time"for instance, they share planning,
budgeting, and forecasting applications equally in only
36 percent of organizations. (See Figure 12, next page.)
Cox Communications is among those companies rolling
dashboards out to all of its professional employees (in
Cox's case, to 18 locations). It uses the dashboards,
which employ a simple-to-understand graphic, not only
to inform operations managers but also to motivate
them. "We have what we call a ‘frog in a blender' analy-
sis," says Mr. Fitzsimmons. "If you're in the top third in
a given statistic, you're rated green"you look pretty
much like a frog. If you're in the middle third, you're rated
white and if you're in the bottom third, you're red"
you're going to look more like a blended frog," he says.
"So that's an easy way to see visually where things are
and then, obviously, you can drill through into the num-
bers to really understand [the underlying characteristics
driving performance]."
Smaller companies, too, are beginning to adopt perform-
ance measurement tools such as dashboards. Doug Pat-
teson joined Turbocam, a $45 million, privately held man-
ufacturer in Barrington, New Hampshire, two years ago
as the company's first CFO. He was brought on specifi-
cally to work as a strategic partner to the CEO, who was
readying for a growth spurt (the company has doubled
in size since then). Mr. Patteson is an enthusiastic sup-
porter of dashboarding, but can do so only in a limited
fashion, because of resource constraints that don't allow
him to purchase necessary systems. "When you talk
about transforming what has historically been an infra-
structure support function into a strategic one, that may
require fairly extensive capital outlays. That's a hard sell
and we're not there yet," he says. "So we do [dashboard-
ing] manually," he says. "But the concept is huge, so let's
do whatever we can to adopt the concept now and then
let's adopt ever-better tools to deliver on [its promise]."
Sources interviewed for this study maintain that finance-
driven performance management requires very high-
quality information from companies' various IT systems,
analyzed and presented with clearly defined business
decision making in mind. But they caution that perform-
ance management isn't a pure technology problem"
one that can be solved with the ultimate spreadsheet or
leading-edge application. The CFO of Levi Strauss & Co.,
the $4.2 billion global manufacturer and retailer, says,
"Finance and business managers have to learn to give
and take. The spreadsheet won't give you the answer. It
will give you a number on a piece of paper but then deter-
mining what is the right solution is a matter of leader-
ship." He says finance executives should provide good
information and help managers find the right answers
themselves. "Once people get the tools they need and
keep them simple"and if finance keeps asking the right
questions"people will arrive at the answer themselves.
Most people prefer to have a clear understanding of why
the answer is strategically correct, instead of having
finance push the answer to them. I think that's also
about leadership style. Just ask the right questions and
then people will come to the right answer themselves."
As companies seek to squeeze out better performance from
existing resources, they not only must assess opportuni-
ties, they must also evaluate potential risk. Our research
indicates that 72 percent of organizations have a dedicat-
ed risk management function; almost half of all risk man-
agers report to the CFO. (See Figure 13, previous page.)
However, there exists the possibility that these dedicat-
ed risk managers do not have all of the information they
need to perform their jobs optimally, because technolo-
gy investments in risk assessment are insufficient. Only
8 percent of companies have completed substantial risk
management technology projects during the last two
years; another 22 percent have significant projects under
way. (See Figure 9, page 18.)
Sources interviewed for this study suggest that evaluating
operating risk"the negative outcomes from business
process failures, poor strategic and tactical decisions, and so
on"is as much a collaborative mental exercise as it is a sci-
entific analysis of probability and expected values. The finance
executive at the information aggregator says this about oper-
ating risk management: "The problem with our business is
it's so diverse that we have a knowledge sharing portal, but
that's really it." Risk management at this international infor-
mation company, he says, "requires a lot of talking with peo-
ple, a lot of analysis of information that is out there and avail-
able, and then it requires a cognitive process of thinking things
through, sort of like thinking of a chess board. ‘What happens
if this occurs?' It's a very logical, critical-thinking position." The
abstract problems of risk management are best solved, he
says, through human analysis based on experience and sup-
ported by information technology.
This executive cites diagnostic and therapeutic information
as an example. "Let's say you have a doctor with a handheld
device," he says. "The doctor observes that the client has a
condition, and through our handheld device, he pulls up infor-
mation about the patient and his other prescriptions. We pro-
vide a recommendation on what dosage of a particular drug
to take. Now, if that dosage is wrong, we're in trouble. So the
risks of some of our information and [its use] are critical. They
[operating risks] must be well managed."
Other sources cite a risk management model that consid-
ers purely financial risks"those that stem from currency
fluctuation, interest rate, product liability, and workforce
injury, for example"separately from operating risk. At
ABB, a global electrical engineering firm based in Switzer-
land, senior vice president and chief financial officer for
North America Herbert Parker says the company has two
classes of risk management: major projects and more tra-
ditional insurable risk. Says Mr. Parker, "Prior to us signing
any large contract of say, $15 million or so, our risk review
committee thoroughly reviews the details of contracts
while they are still in the proposal stage. During this review,
we assess the risk of such items as new technology, coun-
try risk (labor, political, safety, etc.), prior experience with
the customer, consequential liquidated damages, and any
other type of typical risks inherent in large projects." The
finance organization is instrumental, he says, in these
reviews. In addition, he says, the company has a separate
group for conventional risk management "that's more on
the insurance side, looking at product liability claims and
any type of major catastrophes that could happen in a nor-
mal business transaction, including large projects."
But sources are adamant that their risk review function not
inhibit business growth or productivity. Says one European
executive, "We realize as a company that without taking
risk, we're not going to get growth. So the businesses in
and of themselves are definitely the engine for growth; we
in finance just act as a counterbalance to them. They also
must manage their own risk and that's one thing that we
demand of them, but there are cases when they're taking
risks that are not in our best interest that we need to
highlight."
Sources interviewed for this study
suggest that evaluating operating risk"the
negative outcomes from business process
failures, poor strategic and tactical decisions,
and so on"is as much a collaborative mental
exercise as it is a scientific analysis of
probability and expected values.
Chapter 4: Conclusion
Surely the desire for finance executives to become more
strategic has existed within companies, and within the
finance team, for several years. Over the last two years,
the demand for finance to provide strategic guidance in
pursuit of corporate performance has accelerated.
Pushed by a number of factors"most significantly an
increasingly difficult competitive environment, combined
with a vigilant and sophisticated investor community"
the majority of finance teams have indeed moved further
along this continuum, despite a continued need to pay
attention to transactions and regulatory compliance.
Why, exactly? Over the last decade, large companies
have achieved significant growth and earnings. There-
fore, CEOs are seeking creative ways to generate new
profits"and they're looking to finance for help. In addi-
tion, the growth of private equity into the acquisition
marketplace has placed a new emphasis on the role of
cash flow. This new emphasis places demands upon
finance executives for metrics-driven analysis of the
ways in which organizations use"and tie up"their
cash and how to free it up. In sum, these influences are
forcing companies to look for growth in other places than
the top line. The finance professional, says Cengage's Mr.
Gupta, is the best person to seek those "nontraditional
levers that [can] spur the engine of growth."
The good news: Finance teams have made significant
progress in standardizing and streamlining their systems
and processes over the last two years. However, they still
have additional responsibility when it comes to imple-
menting performance reporting and measurement appli-
cations throughout the organization and in training
operations on the functions of the finance team.
Furthermore, companies evolving finance into a more
strategic role must attract and retain better educated
finance executives, because the skills needed in a strate-
gic finance organization"as counselor to functional and
business unit leaders, collaborator with the CEO and the
Board, and voice for the investor community"are dra-
matically different than those required in a transaction-
al finance group. "Being a strategic partner requires a
whole different skill set," says a senior finance executive
at a division of a global pharmaceutical company. "You
have to be more of a holistic thinker. You can't be just a
person who sits in your office and grinds away at the
numbers all day." Says Silgan's Mr. Schmidt, "They have
to understand how technology, purchasing, finance,
marketing, sales, and operations all play a critical yet
interdependent role in business strategy and execution."
Our interview subjects all indicate that such talent is
hard to find, and demographics would indicate that the
search for talent will only become more grueling. "That's
going to be our challenge in the next decade and
beyond," Mr. Schmidt says. "It's very challenging to find
an individual who has the capability to either grow into
that strategic partner role or who has the breadth of
business experience plus the technical finance founda-
tion to play both ends of the spectrum in a truly strate-
gic finance role."
Sponsor's Perspective
SAP partnered with CFO Research Services on this study
as part of our ongoing effort to better serve our cus-
tomers as well as understand how companies are pro-
gressing on their financial transformation journey. We
had two major goals in sponsoring this research. First,
we wanted to gain insight into the challenges and suc-
cesses that finance departments are experiencing as
they strive to make their operations more efficient and
play a more strategic role in the business. Second, we
wanted to deepen the knowledge we have gained
through both our own research and our 35 years of expe-
rience providing financial management solutions to the
world's leading companies.
This study confirms what we have learned through that
experience as well as through the benchmarking
research conducted by SAP's Value Engineering group:
Investments in IT solutions that automate and stan-
dardize critical finance processes not only help decrease
costs and cycle times but pay additional dividends in the
form of strengthened compliance and improved financial
returns. Moreover, these benefits are being realized up
and down the financial value chain, beyond core
accounting and reporting, to encompass broader finan-
cial management processes such as payables process-
ing and cash management. From closing the books to
straight-through payment processing, technology solu-
tions are helping companies harmonize financial data
across systems and organizational units, achieve greater
process consistency, minimize manual processing and
compliance risk, and enable their finance professionals
to apply their expertise to higher value-added work.
For example, companies are benefiting from greater
automation and strategic insight around the period end
financial reporting cycle. Closing the books can be very
challenging and time-consuming, especially when data
from multiple systems has to be consolidated and tasks
must be coordinated across operating units located in
different locations and time zones. Businesses can great-
ly reduce the time and effort required to close the books
by investing in technology that helps to standardize,
automate, and coordinate the companywide closing
process. The right products can enable more consistent
processes and better task coordination, collaboration,
and workflow needed to efficiently close the books. And
when these products allow users to work with familiar
office tools such as Excel"and give them graphical web
interfaces to centrally manage the closing process and
facilitate cross-unit coordination"companies benefit
from fast adoption and greater visibility. For example,
one customer found that SAP software that supports
business planning and consolidation was so easy to use
that in the same month that their financial reporting
went live, users successfully produced that month's
financial reports using the new software. At the same
time, it facilitated compliance with US GAAP regulations
and condensed their three-month consolidation process
to one week.
Strategic software investments can improve processes
in other areas as well"and realize significant cost sav-
ings and higher returns. For example, companies can
reduce costs by taking advantage of Internet-based pay-
ment networks that streamline invoicing and payment
processes and provide real-time visibility into global cash
balances needed to manage liquidity effectively. One
SAP customer"a $6 billion firm in the oil and gas indus-
try"completely automated its accounts payable and
cash management functions, enabling the company to
process thousands of payments every month with just
two full-time employees. The company also automated
its cash management activities, enabling the finance
department to perform reconciliations across its numer-
ous banking relationships in just a few hours a day.
Because of the automated processes, the company has
also reduced its bank fees, lowered its operating costs,
and generated higher returns on its cash positions.
Businesses can also leverage the transformative power
of performance management software to model and
optimize all drivers affecting profitability, and the
strength of governance, risk, and compliance (GRC) to
reduce risks and process costs. Using SAP software,
some companies have been able to substantially reduce
the cycle time needed to gain insight into profitability, as
well as dramatically lower their cost of ownership while
increasing net profits. From a GRC perspective, compa-
nies can significantly lower their external audit fees and
increase their internal audit efficiency, which can save
them hundreds of thousands of dollars per year. Most
also realize significant additional savings adding up to $1
million or more annually, thanks to improved compliance
and operational processes.
SAP is the world's leading provider of business software.
For more than 35 years, we have provided companies
with robust financial management solutions for
automating core accounting and reporting functions,
optimizing their financial supply chains, and achieving
better business performance. More than 30,000 compa-
nies worldwide (including many of those mentioned in
this report) across over 25 industries depend on SAP
financial management solutions. SAP is proud to spon-
sor this research to help finance professionals gain
insight into how their peers in leading companies are
transforming their roles and helping their organizations
achieve better performance.
For more informationabout how
SAP financial management solutions help
businesses streamline finance processes,
ensure compliance, and equip their finance
professionals to provide more strategic
value to the company, please visit
http://www.sap.com/solutions/index.epx.
You'll discover why the best-run businesses
run SAP.