Global Finance 360

CREATING A LEAN FINANCE ORGANIZATION

SIX FOCUS AREAS FOR EFFICIENT SERVICE DELIVERY
Author: Stephen G. Lynch

The journey to becoming a lean finance organization takes vision, discipline and effort. Yet the rewards are substantial for organizations that achieve the goal of high performance supported by a world-class cost structure. Finance can make substantial progress towards its goal of becoming a lean organization by implementing these six key concepts.

There is nothing so worthless as doing efficiently that which should not be done at all."
--Peter F. Drucker Every finance organization has as its goal the effective delivery of services to its organization at the least possible cost. Yet most organizations continue to struggle with making this vision a reality. Fortunately, there are organizations that have made the journey to delivery excellence and have provided a roadmap for others to follow. Through the process of achieving delivery excellence, these finance organizations are able to focus their energies on strategic activities that add real value to the business and position them as true business partners. How do these finance organizations accomplish this? While every company is unique, there are established patterns of behavior that separate these leading companies from the rest. Key focus areas include: Reduction in process complexity Lean finance organizations focus on creating processes that support corporate strategy while eliminating undue complexity. The components of the process value chain are well understood and documented. Steps in a process that add little or no value are eliminated in a continuous effort to simplify and streamline the processes. Although leading finance organizations focus on reducing process complexity, they still enforce rigorous internal controls that balance the twin goals of reducing process complexity while maintaining an appropriate internal control structure. These controls should reflect the underlying materiality, risk and impact of potential errors. There should not be a one size fits all perspective on internal controls. As processes are designed and maintained, its essential to build in proper controls without over-engineering them. An improperly designed control structure adds to process complexity. Standardization of processes Standardized and easily repeatable processes are essential to reducing cost as part of the lean journey. As part of the transformation effort, each finance organization must go through the exercise of determining which processes enable and support sustained competitive advantage and which processes are commoditized. Processes which are essentially a commodity and dont support sustained competitive advantage should be standardized across the organization to improve efficiency and reduce cost.

Copyright 2011 | Stephen G. Lynch | All Rights Reserved

About Global Finance 360 Global Finance 360 covers the world of corporate finance and accounting and how these activities are impacted by globalization. Focus areas include Finance Delivery Strategy, Shared Services, Business Process Outsourcing, Process Improvement and Organizational Design. Global Finance 360 is run by Steve Lynch. Mr. Lynch is a Principal in the Finance Transformation practice of a global consulting company. He is responsible for the marketing, sales and delivery of Finance Transformation services in North America and serves as a key liaison for his companys global Finance practice. He brings more than 15 years of experience advising global companies on their service delivery strategies and has served over 60 clients in a variety of industries including consumer product and industrial manufacturing, aerospace & defense, transportation, technology, entertainment and financial services. He has also served as a Controller in private industry and as an auditor in public accounting. Mr. Lynch is an active content contributor on the topics of Finance Transformation and globalization and has presented at various forums including the IQPC Shared Services & Outsourcing conference. He can be found on the web at www.globalfinance360.com. Contact Information: Steve Lynch Toll-free: +1.800.216.2512 Office: +1.719.481.2599 1042 W. Baptist Road Suite 194 Colorado Springs, CO 80921 slynch@globalfinance360.com www.globalfinance360.com

Standardization of core applications Leading companies know that strong technology support facilitates standard and efficient processes. When an organizations processes are integrated end-to-end by enabling technology, relatively little time is spent manually collecting and reformatting data. By reducing manual intervention, higher transaction volume can be achieved with a lower cost per transaction. This integration also enables the finance organization to focus on higher value-added activities that support business operations. Standardized processes enabled by technology also improve the change management process by reducing the time needed to train personnel. It also provides the platform for plug-and-play integration for any potential acquisitions. Strong data and process governance Without a strong governance function to provide oversight to the finance organization and its processes, any advances made will eventually be lost due to the lack of control over those processes. While there are many aspects of corporate governance, two essential areas that should command the focus of management include governance over data and processes. Finance, along with its business partners in the organization, must define the data and information that has relevance for its chosen strategy. Lean finance organizations maintain effective governance over information assets and the related processes to ensure that inefficiencies dont creep in and that consistency is maintained over time. Comprehensive delivery model Lean finance organizations focus on building a comprehensive delivery strategy that incorporates both captive and 3rd party suppliers. An organizations service delivery strategy should support the overall corporate strategy and includes a consideration of the companys existing and planned business lines and geographic presence. It also includes an objective analysis of the supplier-side capabilities from both the captive service organization and 3rd party service providers. Another consideration is the global distribution of support services including an analysis of onshore and offshore delivery options. Lean finance organizations make effective use of 3rd party and offshore service providers to add capabilities to their organizations while driving down cost. Performance metrics that support strategy The saying what gets measured, gets done is relevant for finance organizations. As finance crafts and executes the strategy required to support corporate strategy and to perform as a true business partner, performance metrics that track the execution of that strategy should be collected and evaluated to measure the journey as a lean finance organization. An integrated scorecard that ties to corporate measures should be updated and reviewed regularly by management to ensure that timely corrective measures are taken if the finance organization is not meeting its defined goals. Conclusion The journey to becoming a lean finance organization takes vision, discipline and effort. Yet the rewards are substantial for organizations that achieve the goal of high performance supported by a world-class cost structure. Finance can make substantial progress towards its goal of becoming a lean organization by implementing these six key concepts.
Copyright 2011 | Stephen G. Lynch | All Rights Reserved