Operational Excellence in Finance

Operational Excellence in Finance

A CFO's (Chief Financial Officer) concerns consist of the operational performance of their teams which directly influences the quality and speed of the information provided to all stakeholders.

As a matter of fact, any error or delay can mean unnecessary expenses, the payment of fines or even the sharing of incorrect information.

At the same time, the internal pressure for these departments to reduce their operating costs is increasing, as is the demand for the value they add to the business, and the need for control in an environment with increasingly strict and complex regulations.

All these challenges make it necessary for finance teams to improve their productivity, the level and quality of the services they provide and, in this way, cease to be merely depositaries of the company's profit and loss accounts and become true partners in the implementation of the organization's strategy.

By reducing process Lead Time, errors, bureaucracy, and time spent on non-value-added tasks, these teams are able to provide maximum quality information in the shortest possible time.

In this transformation journey, CFOs are often faced with unique characteristics of their teams that make the improvement process difficult. Knowing these cultural and processual characteristics is the first step to understanding the reasons for the inefficiencies of these departments and thus how to better lead this transformation.

High interdependence on other areas

In any organization, all areas provide information and at the same time receive inputs that they use in the creation of other deliverables. In the case of finance departments, this dependence is significant and can be the reason for delays, errors or downtime in processes. An example of this is the legal area which provides valuable inputs regarding tax and other regulations that must be complied with, but which, at the same time, is a customer of the finance department due to invoicing processes whose collection transits to litigation.

Dependencies also extend to the IT department with issues related to access to information systems and accounting standardization, as well as to operations with the need to invoice customers. All this can become difficult to manage and triggers productivity losses and creates difficulties with meeting deadlines.

Unreliable and inaccurate data

On average, the time spent by finance teams on searching for data and identifying and correcting errors is around 50% of their time. This area depends on information from various sources which, in most organizations, is centralized informatically. Despite the central access to information, the challenge lies in ensuring the visibility, consistency and reliability of data which depends on manual input performed by various stakeholders within and outside the finance department.

Difficulty in balancing the workload

The seasonality of tasks inherent to this department is one of the reasons that most impairs the reduction of Lead Time of its processes. In fact, it is an area with a high percentage of fixed and repetitive tasks on a monthly or weekly basis according to the established deadlines.

This means that workload peaks are harder to smooth out and often require the use of extra man-hours. In addition, the repeated validations or authorizations required cause information stoppages and delays in achieving final deliverables. These factors contribute to teams using large work batches to privilege individual task productivity. In fact, the use of large work batches in the execution of tasks leads to greater resource efficiency; however, it results in less efficiency in the flow of information, visible through larger volumes of work in progress, and longer Lead Times in the delivery of the result to the internal customer.

These are the main obstacles preventing finance departments from responding to the growing demands for a faster, more accurate and higher quality service. It is essential that CFOs challenge their teams to make operational excellence a priority. The focus of finance departments has been shifting to ensure operational efficiency that allows for more informed and assertive decision-making and to achieve this, leaders must focus on the following areas:

  • Invest in continuous training: the slightest error can have a significant impact on the quality of the reported data, so it is essential that teams are agile, flexible and proficient in the use of financial reporting software and in the execution of critical processes.
  • Reduce process waste by using digital tools: the elimination of tasks with no added value, and the automation of the remaining ones allows significant gains in team efficiency which is generally measured through OPE (Overall People Efficiency). The use of tools such as Process Design, with which processes are optimised prior to automation, can be instrumental in achieving this.
  • Improve inter-departmental collaboration: the definition of service levels between supplier and customer departments within the financial area is a measure that can contribute to this area receiving necessary information within deadlines. In addition, reducing the lead-time of operations (for example, the time it takes to enter all the documents for a given account) helps reduce batch sizes. This means entering each document as soon as it is available without waiting until the end of the month. This measure reduces capacity bottlenecks by evenly distributing tasks throughout the month.
  • Develop a talent management programme: for finance teams to strengthen their role in decision-making and process leadership, organizations must develop a talent management model that enables them to attract, motivate, hire and retain the best skills.

The focus on optimization and standardization in finance departments will allow them to establish increasingly close relationships with other business areas and enable them to deliver global processes leveraged with differentiating experiences for internal customers. These teams must also be able to identify opportunities and pressure points in financial reporting as well as forecast business performance and provide valuable recommendations to operations.

In finance, we work hand-in-hand with CFOs and team managers to develop productive and innovative financial operations that effectively and efficiently meet the constant demands of business areas.

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