Finance Transformation – Enhancing your bottom line

By - May 12, 2017

Last month, Cyndi Mergele discussed the, “Ten reasons why companies don’t believe they need an employee handbook.” Although presented as a humorous quip about organizations and the need to document policies and procedures, these ten reasons ring true in many organizations, not only for employee handbook creation, but also for the finance function and the process of reporting financial results. In a previous posting, Erica Micken described the challenges of keeping up with the financial close process, writing, “…as organizations grow and evolve, their close processes don’t keep up. Companies are too busy running the business to reassess their close cycle but they feel the pain of outdated, lengthy and cumbersome close cycles”.

As organizations maneuver through rapid growth, there is a tendency to overlook process controls and bypass policies and procedures in favor of expediently solving the issue at hand and moving forward in the process. Oftentimes, when companies solve problems, they also create the need to handle exceptions, and, over time, these tend to take more and more effort and focus.  This process distracts attention from the normal flow of information and impacts the ability to obtain accurate and timely financial results.

This is especially accentuated where companies employ ERP solutions; where an essential process in one area impacts the process in the next area and so on, until finally ending up in the financial results.  If obtaining timely and reliable financial data is prevented by a cumbersome and exhaustive close process, and reporting needs are not delivered on a consistent basis, then it may be the opportune time to review those processes and the impact they have on the financial reporting process.

When it comes to the finance and accounting function, the ultimate goal is to enhance the timeliness, accuracy and reliability of financial reporting data. This is the fundamental premise of performing a finance transformation: to streamline financial data information flow from its inception through to its financial impact.

During a finance transformation engagement, we conduct a deep dive into how the various financial transactions occur and how they may be impacted during the process. Steps may include:

  • Identifying those processes within the organization which impact financial transactions
  • Analyzing the data flow as it passes through the organization
  • Fine-tuning the steps in the process
    • Eliminate redundancies
    • Simplify exception handling
  • Redirecting the focus on producing accurate data at the beginning of the process; not rely on correcting the data when it reaches accounting

Once the focus shifts to improving the accuracy of the initial data, following the means by which that data flows through the organization is critical in determining how it finalizes in the financials.

The end result may include simple changes to a current process or they may include a suggested organization shift in responsibilities.

For example, in a recent study, a company’s finance function was continually held captive to receiving timely project status updates from field operations. This impacted not only the cash flow functions, collection of receivables and payment of vendor invoices, but also impacted the company’s revenue recognition policies, which over time, was perceived by leadership as an inefficient accounting function.  After reviewing the steps to obtaining timely updates, it was decided that the job duties assigned to project administrators should be separated into two functions; the client relationship and operational functions remained in field operations and the project status updates controlled in the accounting function.  With the announcement, interviews were held to determine which field personnel would be best suited to stay in operations or move to the accounting positions.  Procedures were established in the newly formed accounting function to obtain contractual sign off from clients, as well as vendors, before the start of a project, including establishing agreed upon billing and payment schedules for both clients and vendors, and adoption of the accounting steps needed to record a more timely revenue recognition.

To find out more about this or other ways that RSM can assist you with your business needs, contact RSM’s management consulting professionals at 800.274.3978 or email us.


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