PwC explains why leading finance functions are 60% more efficient than the average
PwC’s 2011 Finance effectiveness benchmark study 2011 has an interesting title: “Drifting or Driving”. While it does not say it bluntly, the clear implication is that while some finance functions are drifting along, with much higher costs and a lower level of effectiveness, leading finance functions have taken and are continuing to take significant steps to improve.
Not only are leading finance functions 60% more efficient (in terms of cost) than the average, but they are also allocating a higher percentage of their team (as much as 40% higher) to analysis and providing business partners with insights into business performance.
The report identifies a number of factors:
- Many companies continue to make extensive use of spreadsheets. While they have avoided the cost of investing in automated solutions, they are incurring a higher and continuing labor cost: not only are more people involved in maintaining the spreadsheets, but the level of error is higher and that leads to additional costs of rework.
- Companies that have invested in technology have achieved significant cost improvements. This extends not only to the replacement of spreadsheets, but moving to a single ‘instance’ of their ERP and acquiring ‘smart’ tools for budgeting, planning, managing spending, etc.
- Improving the quality and reliability of data sources, such as a corporate data warehouse. Instead of checking and correcting the data, staff can spend more time on using it in valuable analysis.
- Shared services centers and standardization of processes has reduced cost. Companies are now extending shared service centers to non-finance functions.
- As the mundane work is reduced, opportunities open up for more interesting analytical and business advisory services. With a lower level of cost, funds are also available to attract and retain a higher level of talent – leading to further improvements in the level of service to the business.
While the PwC study indicates that progress has been made since their last study (in 2009), opportunities for improvement remain. These include:
- Further investments in technology to improve efficiency and quality.
- Additional streamlining of the cost of SOX (including reducing the number of key controls).
Where does your company stand? Is it a leading finance function? Are you still placing too much reliance on spreadsheets and have under-invested in ‘smart’ tools for finance?