How to formulate a Finance COE
Step 1 - Discover
‘Discovering’ the present organization challenges and understanding its ‘impact’ on the organization, both in terms of decision making and cost-effectiveness, should be the first step to setting up a Finance COE. Defining your business demographics from a People-Process-System perspective, will help you analyze the investments and dependencies that are currently prevalent in the system. This helps you create the blueprint of a Finance COE. Take for instance, the multinational technology major had challenges of a dispersed finance organization across the world, with multiple reporting systems and processes. This resulted in 70% executive bandwidth being consumed for reporting and aligning/reconciling corporate Management Information System (MIS) with regional/business MIS leaving little scope for strategic planning, analysis and informed decision making.
Discover the Challenge
Discover business and geographies creating dispersed finance teams and systems resulting in:
- Non-standardized process
- Diversified financial systems
- No single data collection strategy
Inability to invest in new systems due to:
- Dependance on legacy systems
- Upfront capital investment
- Lack of insights into new tools and systems
- Existence of long-term & Experienced labor
- Decentralized processes
- Reliance on onshore resources for adhoc activities
Understand the Impact
Lack of insights into business:
- Forecasting challenges due to inbuilt complexities
- Reconciliation of business unit data with corporate data
- Inconsistent financial terms across organization
- Delays in resolving discrepancies
Inability to take real-time decisions:
- Inconsistent interpretation of result across business
High dependency on manual work:
- More time spend on data collation and less on analysis
Losing out on cost reduction opportunities:
- High number of FTEs
- High resource cost
Step 2 - Evaluate
Once the parameters are identified, you have the opportunity to evaluate specialist service provider solutions that would help achieve your business goals. Specialist business service providers should be able to extend value realization beyond cost savings. Identify the essential components of the outsourcing solution, and potential benefits that could be realized. Defining the industry benchmarks, best practices and specialization can aid your judgement.
Consolidate Financial Planning and Analysis under one COE:
- Common data standards
- Common data security standards
Service provider - CFO strategy:
- Service provider drives standardization and automation
- CFO focuses on decision analysis
Introduce new tools and systems. Help organization choose the most appropriate tool:
- Cloud-based solution
- Robotics process automation
- Divert experts from reporting to decision making
Provide qualified offshore talent with significant functional knowledge and experience:
- Ramp down through standardization and centralization
- Lower FTE cost
Realize Potential Success
Improved business insights:
- Single source of truth
- Improved forecast accuracy
Faster information flow:
- Automated reports with built-in analytical drivers Improved profitability
- Faster and informed business decisions
- Cost reduction improves bottom line
Your FCOE should be built on the IT strength of your service provider to drive successful business outcomes. Consider the following technology aspects when you evaluate a service provider:
- Expertise in cloud-based solutions is an essential. BPaaS solutions and cloud-based planning tools can seamlessly integrate to your existing ERP, and help avoid upfront investments in extensive planning tools.
- Business Intelligence (BI) tools which can upgrade static reporting to web-based dynamic reports can be a game changer. These BI tools can be on premise or cloud-based, integrated to your various sources of information, including ERPs and other business systems, giving you visibility from multiple sources.
- Specialization in Robotics Process Automation (RPA) can be utilized to initially stage perform your routine repetitive activities, and later bring in machine learning to provide intelligent solutions.
Step 3 - Create
Create a Finance COE model, combining subject matter expertise, automation, decision support and interactive solutions. Your core focus should be on strategic business outcomes and empowering people to drive best practices. It helps a CFO remain ahead of the competition by bringing down cost and operational inefficiencies.
The technology major with FPA issues (cited above) initiated a successful COE creation by setting up a shared service organization. The shared services model aligned all common key functionalities under one umbrella, including sales analysis and forecast. It also created subject matter expertise in various domains including business and IT. A Business Intelligence (BI) platform was implemented for business finance and sales organization. The collaboration among IT and business stakeholders led to better and faster analytics in addition to standardized reporting. The BI platforms allow all finance, sales and business team members to generate web-based dynamic real-time reports according to the users’ requirement.