Most basic finance processes usually involve recording transactions or;
essentially getting the debits and credits right. photo | fotosearch
Historically, finance teams have devoted the bulk of their time
and attention to “the basics” — their traditional transaction processing
and bookkeeping roles — and less time to the more strategic,
value-
adding finance activities. Finance activities can broadly be classified into three groups.
adding finance activities. Finance activities can broadly be classified into three groups.
The first group of
activities are finance operations. These are the most basic finance
processes usually comprised of recording transactions; essentially
getting the debits and credits right at the most basic level.
The
2013 KPMG’s Global CFO Research estimates that most finance functions
spend 50 per cent of their time performing such activities. A majority
of these activities can be automated as they require little judgement or
are deterministic.
The second group of activities are
aimed at financial reporting and control. These are activities that
focus on weekly, monthly, annual or other regular reporting as well as
activities aimed at managing or monitoring financial resources such as
financial reconciliations of assets such as cash or fixed assets. It is
estimated that most finance functions spend 30 per cent of their time
performing such activities.
The third group of activities are financial performance. These
aim at drawing insight for the business such as explaining financial
trends, correlations and ratios.
This also encompasses
forward looking analysis such as financial forecasting and scenario
planning. It is estimated that most finance functions spend only 20 per
cent of their time performing such activities.
A
majority of these activities require specialised financial resources who
are able to tailor outputs according to the needs of the business and
add their own insight.
KPMG’s Global CFO Research shows
that finance functions, driven by both internal and external pressures,
are improving in many areas and advancing toward the desired future
state of the intelligent finance function.
The
ultimate objective of this finance transformation journey is to increase
operational efficiency, business support effectiveness and ability to
add real value to all its stakeholders.
The
intelligent finance function of the future, and indeed of today, must go
beyond its business-as-usual financial reporting and control role to
become a value-adding provider of intelligence that the board and
business units can depend on to make strategic business decisions.
This
means that businesses with this focus in mind, will need to change
their finance functions to have financial performance activities at 50
per cent or more, financial reporting and controlling at around 30 per
cent and finance operations at around 20 per cent or less.
So what will this intelligent finance function look like? We can categorise this along five key categories.
What does an intelligent finance function look like?
Finance
services will be aligned to the overall business vision and strategy,
with the finance function being a business partner that focusses on
business value drivers and can be relied upon to provide a single
version of the truth to enable strategic and operational decision
support.
Finance will also take the lead on communication of performance to stakeholders.
The
finance function will be organised in a regional or centralised
location, with clear roles, responsibilities and accountabilities. The
function will also have a clear governance framework, transparency,
training and internal mobility. Finance employees will support all
regions of the business and will possess global finance competencies.
They
will be able to provide commercial challenge to the business and be
highly motivated and enthusiastic. There will also be a clear talent
management and succession planning for all finance employees.
Finance
processes will be backed by standardised policies, procedures and
controls. There will be integrated processes and common data models and
reference data.
A majority of processes will be
standardised and automated. There will also be integrated finance
performance management and complex scenario planning.
Finance technology will enable common reports, data models and reference data that is well understood across the business.
There
will be a single Enterprise Resource Planning (ERP) system supporting a
single instance of group consolidation, general ledger and chart of
accounts. Above all finance technology will be well governed, scalable
and flexible to the needs of the business.
Companies
that expect to be significant in the market or in their industries will
need to embrace the concept of an intelligent finance function to
leverage on the strategic and value-adding services that finance can
offer.
Companies that have to adopt upcoming changes
in accounting standards such as International Financial Reporting
Standard (IFRS) 9: Financial Instruments and IFRS 17: Insurance
Contracts both of which will ultimately require speed and insight to
enable communication of financial results to stakeholders will require
to rethink how they structure their finance functions, processes and
technology; ultimately how they will adopt an intelligent finance
function.
David Mbatha is Associate Director with KPMG Advisory Services Limited.
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