Financial Makeover 101

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As Seen in CFO Studio Magazine Q2 2017 Issue

 

GETTING THESE GLITCHES FIXED CAN YIELD A HIGHY EFFICIENT FINANCE OPERATION

They say “there’s always room for improvement,” and this holds true even in the case of successful businesses that begin and end every fiscal year in the black— large, brand-name companies among them. “While there are many tight ships in the sea, it’s not uncommon to find some finance departments working with nonstandard and manual processes and controls, coupled with suboptimal systems and tools,” according to Alison Cornell, a senior-level Financial Executive and experienced business leader.

Ms. Cornell spoke on “Driving Finance Transformation—Higher Performance, Better Intelligence, Greater Confidence” at an invitation-only dinner discussion attended by CFOs from New York–area world-class companies. The event was held recently at Maloney & Porcelli in New York City, and is part of CFO Studio’s Executive Dinner Series.

Calling on her time spent in the C-suite at several multibillion-dollar companies, Ms. Cornell developed a multifaceted finance transformation approach, and she shared its key points with dinner attendees.

The Long View

“Before you can transform a subpar working environment into a high-functioning financial engine, you need to envision what you want your future to look like,” said Ms. Cornell. She suggested executives direct their focus to the most rudimentary—yet crucial—processes and controls that make up the backbone of their finance departments.

“I’ve seen a broad array of processes in my career,” she said, “and they’ve ranged from those that were tight and automated to ones that were ill-defined, nonstandard, mostly manual, and local.” In the case of the latter, “you often find calculations performed outside the system in Excel spreadsheets, with many of the controls also manual,” and the associated systems and tools “suboptimal and incomplete.”

Ms. Cornell said this often adds up to an unnecessarily high level of resources and complexity “with each region, and sometimes country, having their own staff, process, and code set.”

As part of her transformation approach, Ms. Cornell recommends that processes be standardized, simplified, globalized, and automated. “Beyond that, these key processes should be performed by the fewest number of people in the fewest places,” she added. Controls should also be automated instead of manual, thereby leveraging system capability. “If the system can do it, why not have the system do it?” she asked attendees.

Ms. Cornell said such basic and fundamental changes would result in a “consolidated, de-layered, and lower-cost organizational structure.” Audit fees would go down and resources could be reduced or redeployed to more value-added work. “In the end, finance teams would have the freedom to spend more time on thoughtful and insightful analysis that’s based on drivers.” Plus, mechanizing processes and controls also takes a great deal of the potential for human error out of the equation, and “that’s a huge positive,” she said.

All Aboard

While Ms. Cornell’s formula for finance transformation made sense to dinner attendees, many wondered how to broach the subject in cases where management is resistant to change. She said deciding whom to involve in the buy-in process tends to be closely tied to the culture of the organization. “Is it a command-and-control culture, or is it more relationship-based?” she asked, pointing out that “processes usually adapt to whatever the culture is at the company.”

Either way, it became abundantly clear from the dinner conversation that “today’s CFOs are embracing finance transformation as a catalyst to drive change and add strategic value to their businesses,” noted CFO Studio Business Development Partner Chris Nyers, a Partner at CFGI, a finance and accounting consulting firm with offices in Boston, New York, and Philadelphia.

He said it also was clear that there is no “one-size-fits-all” model to create a more effective and cost-efficient finance function. “Whether it be through the standardization of processes across geographies, integration of systems, leveraging of shared services, or the elimination of inefficient, manually intensive processes, each organization seemed prepared to approach their challenges in a different and unique way.”

To that end, Ms. Cornell offered a recommendation: “Start with a clean sheet of paper, and build processes that are best-in-class, instead of trying to fix or tweak existing suboptimal processes.” She said this approach results in the need for people to “think and act differently,” which is the first step toward a true transformation, be it financial or otherwise.

Copyright 2017