Finance and Accounting (F&A) function is of immense significance for any organization. It is the only way an organization, however large or small, can showcase and commit its performance and growth results to its promoters, shareholders, authorities, and to the world, by preparing and publishing Financial Statements containing three key elements; Balance Sheet, Profit and Loss Statement, and Cash Flow Statement. Furthermore, all strategic business propositions involve financial impact as key drivers of the proposal; whether it is new product/service line or increase in production capacity or mergers and acquisitions (M&A).
Efficient running and managing of F&A department producing timely and accurate Financial Statements, classified as General Accounting and Management reports or Business Accounting, while ensuring legal and statutory compliance, is a mammoth task for CFOs and their teams. It is further challenged by complex organization structure, dynamic business operations, geographical spread, disparity in processes, ever changing reporting needs, statutory compliance, and not to forget, the auditors.
CFO’s constant endeavor is to optimize the F&A function and run it as efficiently as possible:
- to reduce period closing cycles and produce financial statements
- to standardize and automate business processes
- to provide relevant and timely KPIs and dashboards
- to implement and monitor business controls
- to comply with statutory and auditors demand
Organizations invest in ERPs, BI, and tools but more often are not able to realize the complete benefits of such outsourcing. Redundancies and productivity lapses exist in outdated Chart of Accounts, delayed period closure, manual efforts in reporting, and many more. All this outsourcing is done in isolation as IT investments are often overlooking or ignoring key interdependent elements such as Chart of Accounts, Business Process, KPIs & Dashboard, and Organization Structure needed for real transformation.
Super-six – Transforming F&A
There are six core elements which define the state of F&A function; I like to call it the Super-six. These are of paramount significance to the F&A function as their design and stability directly affect the functioning of F&A. These six elements are:
- KPIs and Dashboard: should facilitate faster decision-making, raising alerts, predicting threshold cross-overs in a simple and manual-free manner.
- Chart of Accounts: should have enough detailing and enough summary to help you get your reports while keeping your accounting efficient.
- Process Flows: should be uniform across the organization with a clear governance structure in place.
- Organization Design: should be clearly identified as centralized, decentralized, or hybrid model for F&A organization roles and responsibilities.
- Key Controls: should be implemented to ensure zero leakages and eliminate or minimize chances of fraud.
- Shared Services: refer to the part of day-to-day activities, which should be performed by shared resources specializing in those activities to enhance productivity.
However, it is not enough to recognize these as important individual elements. It is equally, or rather more, important to understand and appreciate their interdependence. All these components are highly inter-connected. For example, the way F&A organization is designed highly impacts the process flows, key controls, and shared services. This inherently affects KPIs and Dashboard for the reporting and closing cycle.
The following diagram shows key connections between the super-six.
Transformation of an individual element may bear only limited fruit unless the other elements are also evaluated and accommodated. A complete end-to-end holistic transformation generates true and wholesome benefits. This, when combined with ERP systems, gives an optimal F&A function to the CFO. A real transformation will enable the CFO to meet the expectations of various stakeholders mentioned above.
Super-six in Action
One of our clients, a startup company, whose focus was on setting up and running the business, rather than investing time and energy in F&A function, wanted a nimble F&A to be up and running quickly. The above super-six with our ready-to-go templates, standardizations, optimization, and ERP on cloud platform were deployed rapidly in 12 weeks’ time. Transformation is not a one-time activity. It is a continuous endeavor and we undertake it constantly in partnership with our clients.
Another client was an established company using ERP since 15 years. Over the years they became comfortable with the ‘as-is’ setup which led to inefficiencies and manual work. An agile deployment strategy was adopted to transform the F&A function using the above super-six over a period of time leading to operational efficiencies at lower cost.
Have you hit a super-six in the F&A function yet?