FSN: Collaboration in the finance function

Collaboration in the finance function

18th February 2008
Despite the ever increasing demands heaped on the finance function any increase in headcount is scrutinised very carefully. In the past, finance functions have been very successful in driving down average transaction costs. Shared services centres, business process re-engineering and outsourcing have all played a part in securing a more efficient transaction processing engine. However, they have been collectively less successful in reducing the costs associated with processing, managing and maintaining management information systems, such as budgeting, planning, forecasting, management and statutory reporting. Gary Simon , FSN's managing editor argues the case for more collaborative technology.

There are of course some very good reasons for this, many of which are beyond the control of the average finance function. The last 5 years have seen a steady onslaught of new regulation, such as IFRS, Basel 11, the Companies Act 2006 and the EU Transparency Directive that have swamped every organisation, soaking up any meagre efficiency gains in the finance area.

Perhaps it is because there has been so much going on in the regulatory arena that few finance functions have had a chance to look critically at management information processes. So the typical group lurches from one period end to another, or one quarter to another, never quite finding the time to launch a performance improvement project or to review that new budgeting software that would make a difference. Spreadsheets, hard graft, sweat and blood keep the finance engine ticking over. But with the pace of regulation apparently slowing and regulators even looking at simplification (I'm thinking here of the SEC in the United States ) then perhaps this is a good time to reconsider the way we do things.

When researching my latest book, “Fast Close to the Max” I was surprised to discover how few companies derive internal measures to benchmark the performance of their financial reporting cycle. Yes, there are tons of superficial external surveys which purport to measure how well your group reporting cycle is performing but few companies really examine their productivity. For example, what man effort (man days per entity) is expended in producing your monthly management accounts? What should it be? How can you reduce it? Clearly, if you have no performance measures at all it is difficult to make any inroads into the process.

Putting performance measures to one side for a moment where should you start to look for process improvements? There are of course many areas, ranging from data collection and data quality through to organisational structure within the finance function. But one of the less obvious avenues for investigation is “collaboration”.

In common with many other business processes, the finance organisation relies on a hotchpotch of informal communication methods, such as email, fax and telephone calls to prop up its core processes. Unreconciled items, misclassifications, posting errors and queries over inter-company balances are often resolved by lengthy telephone calls and email exchanges.

Unfortunately, commonplace productivity tools such as Microsoft Outlook sit outside of the formal reporting process, placing the finance function at a disadvantage. In effect the finance organisation occupies two distinct and unconnected worlds, operating parallel processes. On the one hand financial information (structured data) is communicated through standard financial applications, but the informal communications (unstructured data), which is just as insightful and important, is outside of scope. Structured and unstructured data which should be naturally combined are compelled to follow different processing paths.

Worse still the finance organisation is effectively confined to operational silos where each reporting unit in the same organisation is cut off from the others and the key processes in which they are all stakeholders. The ‘disconnect' between the finance organisation and its processes makes it impracticable to share best practice and to respond efficiently to change. This is where collaborative technologies can make a real difference.

So what are the aims of collaborative technologies and what solutions can enhance the way that group finance works? The key objective of collaboration is to remove organisational and geographic barriers so that structured and unstructured information can flow unimpeded and so that authorised users have visibility of information and the supporting process.

But collaboration is not merely confined to the communication of structured and unstructured information – important as this is. Collaboration also extends to the management of the process itself, such as the prior approval of a change to the chart of accounts, the digital signature on a compliance statement or the rejection of a management commentary and explanation of variances. Informality around these activities frequently reduces the dependability and speed of core financial processes.

The software industry has made great strides in the management of financial processes and the ability to capture text is probably the single most obvious area of improvement in recent times. Most systems allow ad –hoc information such as a comment on performance to be added in a wide variety of places. Audit trails usually highlight the author of the comments, date and time stamp them. Furthermore, in some instances it is possible to add attachments to individual cells or entire data entry forms, such as the image of an invoice, or perhaps a more detailed explanation in a Microsoft Word document.

But this capability is passive, i.e. lacks interactivity and a proper two-way exchange of information. In reality, queries and observations on the original comment are likely to be hived off to an email exchange. So the technique usefully allows the exchange of information but could not earnestly be described as full collaboration, particularly as other users may be totally unaware of the original information exchange and attachments. This approach communicates the minimum but affords little in the way of cross-fertilisation of ideas and best practice.

Recognising, the importance of human interaction is crucially important. Unlike factory processes which are often linear and predictable, or even transaction processes which can be routed across business functions with a fair degree of certainty, information processes can have a variety of outcomes. So process automation has to accommodate human decision making, management review and appraisal as well as collaborative working and control. This is where Workflow technology fits in.

Workflow technology offers the dual benefits of communicating information bi-directionally within the same environment, as well as promoting an efficient and standardised process. It is one of the key transformational technologies at the disposal of the finance function.

Finance organisations should feel unconstrained in the definition and scope of a workflow since most workflow technology is designed to be totally user definable and equally at home covering regular activities as well as process elements that are idiosyncratic or particular to an organisation or industry.

Workflow also has the advantage of overcoming the limitations of geographical boundaries and functional silos. Assuming that individuals have sufficient access rights and permissions, it ensures that personnel from different functional areas, reporting entities and geographical regions can work collaboratively on the same application.

Although workflow has the potential to be transformational, few finance organisations have embraced these technologies. The result is that many groups are saddled with inefficient working practices, high levels of overtime and dissatisfaction. Collaboration is not ‘rocket science' and the technology is readily available, often building on standard Microsoft toolsets. In the absence of any information to the contrary there seems very little downside to utilising this technology.

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