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PwC explains why leading finance functions are 60% more efficient than the average

September 5, 2011 Leave a comment Go to comments

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?

 

  1. mpcangemi
    September 6, 2011 at 5:15 AM

    Great report – thanks for the heads up! No question the use of technology by finance departments will improve their effectiveness. The recommendation in the report to use more continuous monitoring is very valuable.

  2. Dipak Shah
    September 6, 2011 at 6:30 AM

    Thanks for Sharing the report. Great improvement of CFO office in creating the shared services for the line of business. We are seeing that trend in progressive companies. Yes, indeed CM is finally getting acceptance.

  3. Debashis Gupta
    September 6, 2011 at 8:54 PM

    I’m a bit intrigued though as to why they’ve put “Internal audit”, under ‘Compliance and control processes’ (presumably -related compliance and control processes), within their Finance assessment framework (pg. 4). If it denotes internal audit or or IA value addition, that seems logical. But if it means IA as part of the Finance function itself, I have issues.

    Am I being too touchy?

  4. Debashis Gupta
    September 6, 2011 at 8:58 PM

    Sorry, the comment was truncated (probably because of use of control characters). It should’ve read:

    I’m a bit intrigued though as to why they’ve put “Internal audit”, under ‘Compliance and control processes’ (presumably Finance-related compliance and control processes), within their Finance assessment framework (pg. 4). If it denotes internal audit aspects or coordination or IA value addition, that seems logical. But if it means IA as part of the Finance function itself, I have issues.

    Am I being too touchy?

  5. Frans
    September 6, 2011 at 9:09 PM

    Thank you for sharing this report. For many years, I blame my organisation for the use of spreadsheets instead of improving their financial systems.
    I’m triggerd by some of your remarks:
    1) Instead of checking and correcting the data, staff can spend more time on using it in valuable analysis: if your data is not correct, how can you be sure, your analysis will be right? Is the underlying assumption that the analysis will also reveal incorrect data?
    2) reducing the number of key controls: either the key controls are no real key controls or you will face the risk of not being ‘in control’ any more.

  6. Norman Marks
    September 7, 2011 at 6:09 AM

    Frans, those are good questions.
    1) If there are reliable controls and security over the data source, and the staff use enterprise applications rather than spreadsheets, they will have more time for analysis.
    2) Many companies still have more controls identified as key and tested than necessary. They could benefit from controls streamlining:
    – A closer review of what is really key
    – The replacement of local controls with entity controls
    – The automation of more controls

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