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| Management Briefings
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Best of enemies?: Grant Waterfall & Tom Gunson, PwC (October 2008)
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Earlier this year, the CFO of a major company asked PwC to investigate what he believed were some major shortcomings in
his business’s IT function.
The CFO was holding back from signing off on a major technology-dependant investment because he had concerns about IT’s
ability to adequately support the business to deliver such investment. Over the previous couple of years, IT had been
managing or was heavily involved in a series of failed projects, and was not delivering the quality of support, infrastructure and
services that finance needed to do its job properly for the business.
However, when the consultants went in, the situation turned out to be more complex than it first appeared.
On the one side, the CFO was indeed very disenchanted with IT’s performance and delivery against his (which he considered
to the one and the same as the business’s) objectives. But on the other hand, while there was recognition of some
‘challenging’ projects in the past, the IT function in general – and the CIO in particular – had no idea that it was regarded as
failing.
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Biting the BPM bullet: Robert Gill, Parson Consulting (August 2008)
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Recent consolidation in the business performance management (BPM) software market has
raised a number of questions for CFOs and other finance professionals.
All the leading vendors claim to provide solutions which are able to integrate smoothly with any
data warehouse, ERP and operational system, whilst also promoting ‘enhanced’ levels of
integration with their own product family. But can both positions be true? And what are the key
considerations for organisations investing in a BPM solution at a time of significant market and
application change?
First of all, let’s examine what has happened in the market. Last year witnessed a dramatic
consolidation as software giants SAP, Oracle and IBM together acquired five of the biggest
BPM players – Business Objects, Hyperion, Cognos, Cartesis and OutlookSoft.
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Neither fish nor fowl: Alasdair Gill, James Gill & Co (May 2008)
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Most organisations spend more on developing, using and maintaining spreadsheets than they need to. One reason why costs
get out of control is that spreadsheets are taken for granted and hence forgotten – nobody is paying attention to how they are
used or to their total cost of ownership.
In part, this is because spreadsheets are neither fish nor fowl. IT departments tend to provide only limited support for them
because they are seen as a business tool. Business users on the other hand tend to assume that the IT department is
responsible for them because they are software.
Spreadsheets are, however, ubiquitous. Even in companies that run Oracle, SAP or Sage as their primary accounting and financial
reporting software, there is often some residual spreadsheet use: at the board meeting of one former client, just before sending the
annual report to the printers the chairman wanted to have one last look at the summary spreadsheet – ‘just as a check’.
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Tips to improve change: Martin Taylor, Allasso Consulting (March 2008)
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My first tip for improving the implementation of financial & accounting systems dates back to my
earliest experiences in this area.
I was working in the finance department of a FTSE100 company, on a site that employed over
3,000 people. The company ran its three financial ledgers on three different systems, at three
different locations.
The general ledger comprised hand-written ledger cards; bought ledger details were entered
into an ICL system that produced a payments schedule on disk that was sent to London for
processing; and the sales ledger was operated by a different division on another site. Financial
reporting was a long manual process, with the final schedules produced on a typewriter…those
were the days!
This situation could not continue as the company had expanded and become extremely profitable, so one of the accountants
initiated a review of available software and a proposal was presented for introducing an integrated financial system. This would
negate all the duplicate data entry and provide a single unified view with the promise of a report writer to automate the financial
schedules.
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MiFID: surviving or thriving?: Dillow/Leggett/Smith/Sodhi, Atos (January 2008)
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The Markets in Financial Instruments Directive (MiFID) sets the stage to make Europe a more attractive market for investors.
Change is underway, even though parts of Europe are still running late in amending national laws to incorporate MiFID. New
trading venues, such as Chi-X, are emerging to create more competition. Trade volumes are increasing while the trade size is
decreasing.
Research by Atos Consulting on how prepared financial organisations were before MiFID came into effect last November
revealed a prevailing ‘wait and see’ attitude.
But to thrive now MiFID is in force, organisations need to differentiate their execution policies and demonstrate ‘best execution’
through publication of trade statistics. They also need to maximise order flow volume and reduce marginal transaction costs to
ensure competitive advantage.
This article looks at what financial firms can still do to gain and retain competitive advantage and so become one of the
winners in the new market that is now emerging.
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United front: Robin Hollington, Peapod Consulting (November 2007)
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The cost and impact of regulatory compliance is rising. Even conservative estimates predict that
compliance expenditure will rise by 22% year-on-year for the next five years.
Faced with this, it is not surprising that some organisations have reported failures in meeting
their projected financial targets due to the impact of compliance, both on expenditure and the
unhealthy inward focus.
The scale of the problem requires finance and other managers to take a fresh look at how they
address and measure compliance: a unified approach is the only way ahead.
Many companies do treat compliance very seriously but, in the main, their laudable efforts are
conducted in silos of activity – leading to different approaches, disjointed activities and, at times,
conflicting data capture. As they address different compliance activities, there is much repetition
and little co-ordinated visibility across the organisation.
In order to achieve unified governance, companies have to take an holistic approach to the challenge.
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Snapshot of IFRS: Ian Dilks, PwC (September 2007)
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The adoption of International Financial Reporting Standards (IFRS) by European companies
was a major development in corporate history. Now elsewhere around the world, more countries
are also showing support for IFRS, with Korea a recent example. The Securities and Exchange
Commission also appears to be warming to the international standards.
There is some way to go before US domestic registrants might be allowed to use IFRS, but this
is no longer a fantasy. The removal of the IFRS-US Generally Accepted Accounting Principles
(GAAP) reconciliation requirement would be a step on the way and give the International
Accounting Standards Board a further boost.
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Hidden gem: Keith Rodgers, Webster Buchanan Research (July/August 2007)
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How strategic can you really get about expense management? Frequently seen as
something of a tactical side issue, it’s usually viewed as an administrative and compliance
matter – a fairly simple end-to-end process that starts with the submission of a claim and
ends with the preparation of payroll data. As far as financial activities go, it’s not exactly one
of the most complicated – and it’s certainly not the first thing organisations think about
automating.
That common perception, however, ignores a bigger picture. Manual expense management
systems tend to be both fallible and wasteful – they eat up administrative resource when
spreadsheet data has to be re-keyed into financial systems, and they rely too heavily on
overworked line managers to monitor them. As a result, errors – deliberate or otherwise – tend
to get missed, and the audit trail can be hard to follow.
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Conformance vs performance: Jon Fuller, Centrix (May 2007)
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Probably the most common complaint in business today is that the burden of conforming with a
raft of related corporate governance directives – Sarbanes-Oxley/SAS99, Basel II and The
Freedom of Information Act – distracts management from dealing with real business matters.
However, while regulation and compliance may feel like a burden to some, it is designed to
protect all stakeholders and reduce risk. The proof is in the long-term success of those
organisations that work hardest at compliance.
Everyone needs good governance but in a fast-moving world, senior executives need to strike
the right balance between conformance and performance. In order to do this, CEOs need to
take a more sophisticated approach to managing risks in their operations and focus their
attention on areas of the business where they may have previously abdicated responsibility,
such as their financial & accounting technology.
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Becoming an ideal partner: David Ketchin, Parson Consulting (March 2007)
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At many companies, the finance function is constantly challenging itself to enhance the value it can add to the business. At the
same time, however, finance often finds itself stretched thin in diligently performing its routine activities, reducing its ability to
focus on ‘value add’ or strategic work.
This article highlights finance business partnering and how it can be implemented effectively in any business. A number of organisations are choosing to adopt a specialised operating model for finance. This model separates roles that
have traditionally worked within a single structure and with somewhat blurred responsibilities. The aim is to reduce duplication
and cut the cost of operations while allowing those working in commercial roles to remain focused on what really matters. Business partnering means bringing insights, challenges and analysis from a finance perspective into the business decision-making
process.
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Playing by the rules?: Cliff Mills, PMP Research (January 2007)
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In November 2005, Chancellor Gordon Brown announced the abolition of the Operating and Financial Review (OFR) reporting
requirements for listed companies. Many companies heaved a sigh of relief – however, the move did not eliminate the need for
them to produce additional information on their company’s performance.
The OFR was a specific implementation of the European Union Accounts Modernisation Directive (EU AMD) which requires
directors to produce an enhanced directors’ report incorporating a ‘Business Review’. The new Companies Act 2006 (formerly the
Company Law Reform Bill) has consolidated existing company legislation and encompasses the requirements of the EU AMD.
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Green guidelines: Simon Thomas, Trucost (January 2007)
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The UK Companies Act 2006 has entered the statute books and what all company directors
should be clear on is that they will face increased environmental management obligations.
The DTI has warned directors that it will not be sufficient to pay lip service to such obligations,
and in many cases they will need to take action to comply.
In fact, the Companies Act 2006 requirements are an extension of the wider EU Accounts
Modernisation Directive (EU AMD) and the UK Government has developed guidelines to help
companies meet these obligations. There is considerable confusion surrounding the reporting requirements of environmental
issues, particularly after the abolition of the Operating and Financial Review (OFR) by Gordon
Brown in November 2005.
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Testing for SEPA success: Jerry Norton, LogicaCMG (December 2006)
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There is an ever-increasing amount of material and commentary on all things SEPA – the
Single Euro Payments Area. Worryingly, however, most of this seems to focus on the changes
that SEPA will bring and not on how the banks and other financial institutions will implement
these changes.
After 2010 it is intended that every corporate and individual bank account holder will have
moved over to SEPA instruments, heralding a fundamental change in the European and
international banking landscape. However, in order for the financial industry to meet the twin
deadlines of 2008 (compliance) and post-2010 (full migration) not only is there a need for much
modified or renewed technology, there is also a need for a co-ordinated cross-enterprise testing
infrastructure.
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A new frame of mind: Peter Moller, Deloitte (October 2006)
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There’s no doubting the current war for talent. Demand for skilled, qualified accountants is high. To recruit and retain the best
you must offer an exciting career proposition.
In part, this means reforming your finance function into an effective team that combines four core elements – strategist (helping
to develop the business), custodian (taking care of corporate governance and risk management), operations chief (ensuring
streamlined transactions processing and production of reports and accounts) and catalyst (leading from the front in ensuring
that any stewardship, operations or strategic activity is executed effectively and delivered on time).
This model requires the streamlining of back-office activities and the creation of shared service centres, giving central finance
and the FD time to concentrate on higher-level strategic issues, in particular how to increase shareholder value.
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Transforming your finances: Simon Tennant, PA Consulting (August 2006)
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Business complexity is increasing. This is driven by a range of factors including greater governance, regulation and intensifying
competition brought about by globalisation and emerging technologies. Chief executives feeling the pressure to deliver are
looking towards their CFOs to enable their organisation to succeed.
As a result, today’s financial management is much more than a series of transactional processes. The finance function is an
integral part of any organisation’s decision making, as it plays a central role in positioning the organisation to deliver its
strategy.
CFOs have begun to restructure their operations and capability by reducing the administrative burden, driving out cost through
standardisation and introducing integrated systems. However, it is clear that no one solution fits all. To become a true business
partner finance must implement the correct balance of interrelated sourcing options, processes, capabilities and technology in
line with the organisation’s goals.
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Making compliance 'business as usual': Liz Gower, Atos Consulting (June 2006)
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The majority of companies affected by Sarbanes-Oxley have achieved SOX compliance. Yet
regulation continues to represent a challenge for the finance function, both in terms of spiralling
costs and increased workloads – leaving CFOs with less time to focus on the important ‘value-added’
aspect of their roles. In fact, a recent survey by Atos Consulting found that even in the
areas of corporate governance and risk reduction, the regulatory burden is not helping seven
out of eight European CFOs increase the strategic value that they add to their companies.
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The next big thing...:Stephen Dunn, Everest Group Consulting (April 2006)
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Financial and accounting outsourcing (FAO) is taking off, and 2006 is due to be another
year of rapid growth. FAO is now establishing itself as the second most prominent
application of business process outsourcing (BPO) after call centres.
Having grown rapidly in 2004, Everest Group believes that FAO has now reached the
‘emerging rapid growth’ stage of its lifecycle, from almost a standing start four years ago.
Of the estimated 108 FAO contracts agreed to date, 70% have been signed since 2002.
In terms of deal volumes, there was a significant leap in 2004, when 31 deals were
signed, which continued through 2005. We expect this kind of growth to be maintained
throughout this year. FAO should enjoy strong double-digit growth for the next five years
and we anticipate the cumulative average growth rate (CAGR) to be 24% over that fiveyear
period.
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Sending the finance function offshore: LogicaCMG (February 2006)
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In an increasingly competitive market, CEOs and CFOs are looking for ways to minimise cost and maximise competitive
advantage. Many have identified inefficient working practices within their finance functions and have explored options to
increase productivity. These include the creation of a finance shared service centre (FSSC), which is increasingly seen
as an effective way of addressing the inefficiencies and freeing up valuable management time to focus on core
functions.
Within this, a recent phenomenon has been a drive among companies to move their FSSCs offshore – which has been
growing by 74% a year, according to NelsonHall. The driver behind this has been increased competition: the
requirement to reduce headcount, salary and location costs further, as well as to improve competitive advantage.
Certainly, moving the transactional elements of the accounts payable department offshore has been particularly
successful with, in some cases, headcount and location-related cost reductions of up to 30% compared to onshore
costs.
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The case for new financials: Mike Holmes (January 2006)
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A business case can be defined as a structured proposal used to justify commitment of resources to a project. It is a
working document prepared in order to convey, to the senior management decision makers, the proposed project’s
costs, risks and benefits, so they can decide whether to approve funding for the project.
In essence, when it comes to selecting new financial and accounting software – and other systems – the business case
should contain sufficient information to enable the organisation’s decision makers to support the go-ahead of the
project. It will form the framework for decision making.
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Ten days of chaos: John Coppins, Guided Analytics (December 2005)
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All business functions have their moments of ‘planned crisis’. As an IT exponent, for me this has come to mean the
period leading up to and just after the ‘go live’ date for a project, during which time we tend to lose a lot of sleep and
our families can only vaguely recall who we are. Having worked in retail, the opening of a new store is hard to beat in
terms of the ludicrous timescales and sheer panic engendered.
However, in no other function is there such a regular period of ‘planned crisis’ as the financial close within the finance
function. Whether month-end, quarter-end or year-end, you can guarantee a fair amount of wailing and gnashing of teeth
within the finance department during these periods. The time leading up to a financial close, combined with the work required
for the close itself, is typically an angst-ridden affair and is usually associated with some fairly stressed and overworked
employees. This results in a 10-day period of chaos that any company would be willing to reduce as much as possible.
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European financial services embrace outsourcing: A Maehre, Datamonitor (Nov 05)
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All is about to change in the relatively mature and fragmented area of horizontal business process outsourcing (BPO) in
financial services. To date, the outsourcing of finance & accounting and other central enterprise services within
Europe’s retail banking, insurance and financial markets has been fragmented – dominated more by individual task
outsourcing than by end-to-end function or shared service centre outsourcing. Now there is a clear move towards a
more strategic view of horizontal BPO, manifested through the increasing interest in cross-function horizontal BPO
services and complete centralised shared service outsourcing. This shift is being driven by increasing vendor credibility,
operational risk regulation and improved acceptance of global sourcing models.
Effectively this means a more complete outsourcing of the function in question, but multi-function outsourcing too – for
example Accenture’s Deutsche Bank agreement which spans procurement and certain finance and accounting
functions.
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Sending financial services offshore: Anders Maehre, Datamonitor (May 2005)
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While the benefits of offshore outsourcing are well documented, including lower costs and higher quality, its use has
remained mostly limited to certain functional areas such as contact centres and application services. Now however the
offshoring of core financial services functions – such as mortgage processing, insurance underwriting and claims
processing – is increasing as confidence in the offshoring market is improving rapidly.
This shift in the business process outsourcing strategies of financial services firms (FSIs) is enabled by a growing
number of outsourcing and IT services providers having a credible global delivery capability; an ongoing simplification of
the outsourcing process from the FSI point of view; and improving industry specific expertise among the service
providers.
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What the finance future holds: Stewart Clements, Accenture (March 2005)
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Executives in high-performing businesses are increasingly utilising outsourcing as a
means to achieving improved results. For many CFOs today, outsourcing is simply about
transferring current finance and accounting operations to someone else on the basis that
the outsourcing provider can perform these tasks better and cheaper. To others,
outsourcing involves fundamental improvements in service and quality.
That said, many CFOs are understandably cautious about outsourcing large chunks of
their business due to their perceived exposure to risk and feelings of vulnerability.
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Coping with compliance: Rob Graham, Datawatch Europe (March 2005)
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The Basel ll Accord – or for that matter the Sarbanes-Oxley Act (SOX) where
appropriate – may seem to be directed at financial auditors, but their ramifications
directly affect IT auditors as well. The imperative of these directives is to assure the
integrity of an enterprise’s data and resulting financial statements, and the key feature of
that integrity is the control and security of the financial systems and IT infrastructure that
supports those systems.
When the CEO and CFO sign off on the annual reports, they are stating that the
organisation’s financial systems have suitable controls and security to guarantee that the
resulting financial statements are accurate. With Clause 404 of SOX now coming on
radar, the ultimate catch-all compliance joins the party. In this case, it requires
dependent enterprises to detail any perceived faults in their accounting systems which
may result in inaccurate reporting to interested parties.
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The CFO's new hobby: Richard Sandwell, IBM Business Consulting Services (Mar 05)
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Influential thinkers through time have been fascinated by the contemplation of the future. Indeed, its study – known as
‘futuring’ – even has its own dedicated following, the World Future Society. Its founder, Edward Cornish, said this: “The
goal of futuring is not to predict the future but to improve it. We want to anticipate possible or likely future conditions so
that we can prepare for them. We especially want to know about opportunities and risks that we should be ready for.”
This laudable aim could well have been the design brief for a new way of looking at business, and in particular one of
its components that has latterly become one of the most important – financial management. CFOs want, more than
anything, to make their financial organisations more nimble and responsive. To do so, however, will involve some
futuristic thinking. Take a step into the DeLorean…
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