0533_cima_genpact_report_v0_7

8/2/2019 0533_cima_genpact_report_v0_7

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From efciency to eectiveness

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11

ntroduction

CIMAs 2009 report, Finance transormation: the evolution to value creation, showed that fnanceunctions have not been transormed into business partners as some commentators had seemed toexpect. However, there is evidence o an evolution. Finance unctions are still largely back ofcedepartments but they are becoming more business-acing. Some fnance people are already being engagedin helping to create value or the organisation.

We also reported that while some members o the fnance team are moving towards a more collaborativebusiness partnering role, most fnance proessionals still provide traditional accounting services. Financewill not necessarily move away rom more traditional roles, such as transactional processing. It will notnecessarily be physically moving out fnance proessionals into the business units to provide a businesspartnering service either. Instead, it is mainly helping to create value by increasing its own efciency,

improving business processes and providing better management inormation to support decision makers.CIMAs 2011 report, Finance and organisational perormance: shaping the uture, reported demand ormore ocus on management support and partnering activities, especially in larger organisations. Theargument that working in management support helps the organisation to meet its objectives wasendorsed by over 75% o 3,000 fnance and senior management surveyed.

The world is experiencing a long, slow recovery rom the economic and fnancial crisis. The role o a valuecreating fnance unction in supporting an organisations recovery can be key.

The need to understand the impact o fnance transormation, how fnance services are expected to bedelivered in uture, and how fnance proessionals can acilitate the required ocus on managementsupport and thus better meet organisation goals, has led CIMA to urther investigate the ollowing:

How is the fnance unction transorming to better support value creation?

To what extent are the fnance services traditionally delivered by the fnance unction now beingdelivered

by decentralised fnance proessionals internally

by external providers shared service centres and outsourcers?

What has been the eect o external provision on the eectiveness o the retained fnance unction andon the business partnering/management support services they provide?

What criteria do organisations use when selecting external providers?

Are the anticipated benefts o external provision borne out by experience?

What is the best mix o external and internal provision?

How are external provision and business partnering likely to develop into the uture?

How is the continued transormation o the fnance unction related to perormance?

The CIMA Centre o Excellence at the University o Bath School o Management was established or thispurpose. It is researching best practice in the development o fnance proessionals in the context o fnancetransormation. This research project is being conducted in three iterative cycles over a fve year period andon a global basis. We are trying to fnd the answers to such questions among others, and to determine bestpractice in the urther development o the fnance unction.

This report is based on the centres second research cycle and its analysis o a substantial volume o datasourced rom more than 3,000 fnance and senior managers through a global online survey.

Further strategic context and insightul content or this report has been contributed by members o the seniorglobal fnance community. This has been sourced through interviews with senior executives and eedback romCIMAs Global Finance Transormation Panel o senior fnance executives.

Our thanks go to the 5,500 plus fnance and management proessionals who participated and engaged inthis study throughout 2010 and early 2011.


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From efciency to eectiveness transorming the fnance delivery mix2

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ntroduction nd contet 2

1.1 Executive summary 6

ptions in te deier o nnce serices 10

1.1 Introduction 11

1.2 Organisational design or delivery o fnance services 12 1.3 Structural elements or fnance service delivery 12 1.4 Types o fnance services 13 1.5 Competencies required or delivering fnance services 14

eier o nnce serices to te ornistion: trends in te cnin structure 16

2.1 Introduction 17 2.2 The extent o external fnance service delivery 17 2.3 Centralisation in internal fnance service provision 19 2.4 The eect o organisation size on centralisation 19 2.5 The eect o external fnance service provision on internal delivery 20 2.6 Decentralisation o fnance proessionals in the uture 22 2.7 Contact with the business in service delivery trends 24 2.8 Conclusions 25

eier o nnce serices to te ornistion: te cnin serice deier i 28

3.1 Introduction 293.2 Externally provided services: today 29

3.3 Externally provided services: uture potential 313.4 Types o fnance service delivered by internal provision 33

3.5 The individual perspective the ocus on the business 33 3.6 The individual perspective ocus on the business in large organisations 35 3.7 Internally provided services: changing fnance to meet organisation needs 36 3.8 Impact o external provision on internally provided services 37 3.9 Barriers in leveraging the ull benefts rom external service provision 38 3.10 Costs and benefts o internal delivery o fnance services 39

3.11 Conclusions 40


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finnce serice deier nd ornistion perornce 42

4.1 Introduction 434.2 Finance unction and organisation perormance 434.3 The high perormer fnance unction a summary 444.4 Best perorming unctions: internal and external provision 454.5 Organisation perormance and external delivery 464.6 SSC use and perormance return on investment (ROI) 464.7 Outsourcing use and perormance margin on revenue 47

4.8 Conclusions 47

e otition nd driers or etern serice proision 52

5.1 Introduction 535.2 Motivations or service transer rom internal to external provision 535.3 The outsource supplier view 545.4 Criteria or selecting outsource providers 555.5 Importance o skills in the outsourcing relationship 565.6 Demand or outsourced fnance services: the suppliers view 575.7 Conclusions 58

et steps 60

eserc etodoo 62

fiures, crts nd tbes 66


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I think the shit to be more open to decentralised and external service delivery has beenhappening over a number o years now and was given a boost by the downturn ineconomic conditions starting in late 2008. The business partner role is the latestincarnation o what has been called management accountant or business analyst in thepast. In truth the role has historically been mostly data integrity checking and reporting

with a bit o advice based on strong personal or physical connection to a business unitthrown in. Typically the roles dont add any value at all in terms o hard cash what theydo is identiy where and how value is added in a business. The need or this insightcontinues to grow rapidly. The better partners have provided a stronger link betweenbusiness planning and fnance planning (tax, treasury and regulatory management) wherereal value can be added.

The sheer volume o demand on this role is typically orcing work out to shared services orout through elimination. I dont distinguish between captive and outsourced sharedservices, they are two execution options o the same thing. Providing inormation whether management or the statutory and tax type that we are obliged to provide in setorms against set rules gets highlighted as a process and is best satisfed through anorganisational unit dedicated to this and which can pull the levers o continuousimprovement, consolidation and sourcing to add efciency. I dont believe that manyfnance leaders dispute this the challenge is in executing the change and fnding the rightcapability to make it work in practice.

Based on the shit o the more administrative parts o a business partners role to sharedservices, there is a tendency to reer to the latter as the back ofce. I dislike this termintensely. With the inormation service there is a hard to quantiy value in providinginormation that can be turned to insight. On the other hand, cash handling services orindirect tax services that are typically organised into shared services and away rom thebusiness partners are highly value-adding. At Kimberly-Clark (K-C) we commit to givingback our shared service cost base every year in cash generation improvements howsthat or value.

I frmly believe that while cost reduction is the undamental bedrock o any outsourcinginitiative, any scheme based mostly on this is doomed to ultimate ailure. I and whenbetter economic times return, this sort o model will begin to unravel. For example, theEuropean version o shared services in K-C was built on the premise that we needed tooperate in a highly consistent manner with a rapidly consolidating European retailercustomer base. This rationale has endured even through the tough times on service andcost execution. I higher value processing supports the business imperative beyond costthen confdent and sel-aware businesses make the switch. At K-C, despite having a majormanuacturing aspect to our business, we need our business partners ocused on customerand consumer investment analysis which may create manuacturing investment. We havecentralised monthly manuacturing reporting, product costing and frst line cost analysis in

order to ree up our business partners to ocus on the questions the business needsanswers to. I think this is the sort o task that the BPO world calls higher value. Within our

ion ewton, vice President red erices, Kiber-rk

With nearly 140 years in business, Kimberly-Clark is the global leadingconsumer, professional and healthcare products organisation employing57,000 people in 36 counties. Its brands are sold in more than 150 markets.

finnce trnsortion insit


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K-C shared services world, we have developed a brand profle which eectually characterises ourhigher value oering: reedom to ocus on growing your business. That is the value proposition thatwe strive to perpetuate and deliver against each and every day.

I also frmly believe that connection with the business and insight into specifc commercial contextsis something that can never be centralised or standardised. There is a limit to just how high in aprocess we can go. This limit will vary based on confdence and circumstance.

I think that the logic o outsourcing ocus and moving work to the best value talent, is irreutable.The challenge is in the practice. Major change programs are always disruptive to the business.Oten they can be handled better, but typically slower in-house. The business process outsourcingindustry continues to enjoy phenomenal growth and is having to deal with the organisational and

talent deployment challenges that this brings. I think fnance unctions are right to be cautious inevaluating the benefts and the implications o the change programs they may embark upon.

I certainly expect the shared service model to grow dramatically. I think unctional businesspartnering including the type conducted by fnance will become even more tightly integrated withother business sta while more ocused on identiying where and how value can be added. Inproviding inormation, cash, compliance and other administrative services to the business, I seemore centralisation and a blurring o unctional lines across services. For instance, there is nothingparticularly dierent in the process to provide fnance, marketing or logistics inormation. Stayingwith the same example, the business will demand ever aster, more accurate and more relevantinormation. This can only be provided through a shared service approach o process improvement,harmonisation and careul sourcing. Outsourced solutions will continue to grow where they oer

good value talent or a aster route to achieving the desired result.Whilst I dont operate in the small and medium sized enterprise feld, I would be excited by thepossibilities that outsourcers may oer as they develop plug and play end to end processcapabilities. The cloud concept can extend to whole standardised processes that may redefne thefnance unction or businesses that will be born in the uture. Broadly speaking, I think largerorganisations are too invested in their own end to end process and systems right now and I am not

yet seeing too much rationale rom the outsourcers that this will change any time soon.


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Transormation evolution: senior management oresee a need to switch fnance unction resources intomanagement support and perormance management services and away rom accounting operations tobetter ulfl the organisations goals and objectives.

Generally, the central fnance unction remains the core provider o fnance services to the organisationand is responsible or the ull range o such services. On the whole, externalising service provision viaoutsourcing or shared service centres (SSC) does not appear to radically diminish the fnance unctionsresources in terms o number o fnance sta. However, or organisations not reducing sta whenexternalising services the challenge is to ensure there is a change in how and to what activities they areallocated to take advantage o the benefts a higher ocus on management and perormance support couldbring to the organisations perormance.

The shit o this resource into value creating areas in management support is patchy despite this being one

o the more cited explicit motivations or such change in how fnance services are delivered.Using external service delivery or the more routine accounting operations seems to be the bestprescription but the evidence is that this does not necessarily secure the advantage sought in terms oenabling greater attention on management support. There are some possible explanations:

There is a management issue in that control o supplier work is substituted or work on theunderlying processes.

There is an allocation issue in that resources reed up are allocated to other tasks without sufcient ocuson those activities which might add more value to the organisation.

There is a skills gap in the fnance sta that do the general accounting role and are not prepared suitablyto undertake the higher value added activities.

In a push or eectiveness in fnance service delivery both the external provider and the customer need tobetter understand expectations and work outside just the process mapping, transer, management andreporting to achieve and leverage the ull benefts.

e cnin i o serices deiered etern

Most organisations which use a SSC receive some fnance services that extend to higher levels such astreasury and fnancial risk management and external reporting but the requency o provision o theseservices is dominated by more routine services such as general fnance and accounting and payrollprocessing.

Where a SSC is used other than or general fnancial accounting, treasury and payroll support services arestill most likely to be delivered via the SSC. Furthermore, no radical changes are anticipated in relation tothe mix o services that is likely to be delivered in this way in the uture.

By contrast there is more variation in the fnance services that are outsourced although the two mostrequently being the same as or SSCs: payroll processing and general fnance/accounting.

Purchase to pay and sales order to cash processes fgure lower in the ranking or outsourcing, input rominterviews indicates a desire by the organisation to retain at least some control over the core cash-owrelated processes within the unction. This is particularly evident rom eedback received rom some seniorexecutives that elt control o cash became even more paramount during the recent fnancial crisis.

Furthermore, there appears to be an acceleration o moves towards the use o outsourcers ormanagement reporting and budgeting/orecasting. Commentators and insight rom MNC organisationsexplain this shit o transer in higher level analytical services is happening as the outsourcing relationshipsmature, efciencies have been leveraged and the outsource provider builds on the eectiveness o therelationship, knowledge o the business and trust.

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The implication o this or outsourcers is that the sta employed to deliver these higher end services willincreasingly need a better understanding o the qualities o useul management inormation and itsapplications. This seems to be reinorced by the client community on average rating the fnancequalifcation status o the outsourcing suppliers sta as important in supplier selection. For outsourcers tobecome partners to their clients and acilitate the transer o their internal resource to creating value, thismove along the value chain will be critical. It appears that without a suitably qualifed delivery fnanceteam it is more unlikely that management will push along this value chain.

e i perorer nsis

We looked at how the better perorming organisations, as rated by respondents to our global survey, arestructuring the changing mix in the delivery o services. Higher perormers on fnancial measures,

particularly amongst larger organisations, tend to have a lower proportion o their fnance sta engaged inaccounting operations and somewhat more in management support or partnering roles than do lowerperormers.

Better perormers are also more likely to display attributes associated with more transormed andcollaborative fnance unctions. Similarly, those organisations using a SSC tend to display more o theseattributes. While not necessarily a cause and eect relationship, this may show there can be a positive linkbetween delivering some services externally acilitating fnance in becoming more o a value creatingunction.

In summary, the use o external delivery o fnance services may enable organisations to ocus moreinternal eort on management support activities and this could be seen to reinorce the fnancetransormation evolution, in the direction o a collaborative and business partnering unction. In turn thismay contribute to enhanced organisation perormance in that the majority o proessionals surveyed

believe that the involvement o fnance in management support helps meet organisation objectives, andthose rating their organisation as fnancially high perorming tend to ocus more eort on managementsupport and less on accounting operations.

The eect is more pronounced in relation to SSC use rather than outsourcing. Organisations whichoutsource may not reduce the eort devoted to accounting operations as much as those using a SSCbecause they eel the need to maintain some controlling unction over the work perormed by theoutsource provider. Commentary rom fnance leaders adds to this debate by highlighting the need to buildtrust and migrate processes eectively and over time in tandem with the need to move outsourcingrelationships rom a relationship ocused wholly on efciencies to one o eectiveness.

60% use or plan to use

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Over the next fve years I expect to see a change in the way that fnance will deliverservices to the rest o the organisation and I think this will be a positive thing. We have anelement o internal shared services in BG Groups fnance unction, and this allows dierentteams to ocus on distinct areas. Business process operations is the backbone o an

eective fnance unction and is something which can protect a huge amount o value doing it in the right way, with the right people, is very important.

Undoubtedly BPOs can provide an eective ramework within which a good businessintelligence solution can grow. However, deep business knowledge is required to makebusiness intelligence work or an organisation. In order to know how to use the inormationwithin a business to drive behaviours and increase value, you need to understand what

your desired outcome is its essential that you need to start with the end in mind.

Suppliers can be guilty o over promoting the benefts o outsourcing and fnance can betoo slow and unocused on leveraging the benefts external provision can bring. Supplierscan be over-zealous when trying to win your work while at the same time organisationscan think that outsourcing will solve all problems instantaneously. I you outsource

something which is problematic internally, it will take time and eort to address theproblem. Control can be retained whether activities are insourced or outsourced.

Cost savings are attractive, but an outsourcing contract has to be a win-win situation andpushing a supplier too hard or cost savings could lead to a reduction in service quality. Youneed to understand what you want to outsource and what you want to retain. Inormationsecurity is very important or example and understanding how that works with a BPOprovider is critical.

The top criteria or outsourcing in my view, should be efciency increases labour costarbitrage will eventually eectively disappear over time. The secondary nature o costefciencies also comes in where the quality o sta in a BPO or shared service isconcerned. The skills o the sta employed by BPO providers are very important, as is a

low sta turnover. Surety o good quality sta employed on your account is ar moreimportant than simply lower costs. Ultimately, efciency and eectiveness are ar moreimportant than labour and cost arbitrage. Service providers tend to ocus more on theseitems, with less being made o cost savings.

Having well qualifed sta is essential whether that is qualifed accountants or analystswith MBAs depends on the tasks which need will be outsourced. Having BPO employeeswho understand your business is essential to move urther up the value chain. However, inmore complex industries such as oil and gas, you are unlikely to fnd deep industryknowledge in many BPOs. Strategic partnerships between BPOs and companies to ensureproper skills and knowledge transer is likely to be the most successul model, but it caninvolve a huge investment on both sides.

ris e, finnce irector aric, midde st & asi, Bg group

BG Group is a leading player in the global energy market, with operationsin more than 25 countries over ve continents. The group employs over6,000 staff globally. While its headquarters are in the United Kingdom, thecompany has over 60% of its staff based in other markets.



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1.1 ntroduction

The modern fnance unction is at the centre o the successul organisation and is expected to play anactive role in contributing to the ulflment o the organisations goals and objectives. The unction isexpected to provide a series o services to the organisation undertaking a range o roles and responsibilitiesincluding:

The provision o efcient and eective fnance processes.

Delivering the specialist services such as tax and treasury unctions.

Ensuring eective fnance management o the organisation via control, risk and regulatory compliance.

Providing the strategic insight to support decision making through the analysis o perormance, fnanceand business inormation.

Engagement with the wider business to support and implement the strategic initiatives.

By the end o the frst cycle o research into the changing fnance unction it was clear that thetransormation o its role into a business partner or at least advisor, in the modern organisation was anevolutionary one, complementing rather than supplanting its traditional role in the other areas outlinedabove.

The majority o respondents indicated that their fnance unction supported strategy and decision-making,or instance, by supporting the management o risk and complexity. About hal reported the fnanceunction was involved in leadership and non-routine reporting, such as initiating and leading change. And asmall segment reported the transormation was such that the fnance unction had let its traditional roles o ocusing mainly on fnancial inormation and on transactional accounting work behind.

Cross-unctional collaboration by fnance proessionals with the organisations business units was seen asmost productive and generally welcomed where the ocus was on creating value via improved internal

processes and ocusing on products and services, rather than just supporting cost efciency, and where thefnance proessionals independence and skills were not compromised.

We also ound the transormation was having a proound eect on the fnance unctions structure. Whilethe vast majority o fnance proessionals continued to be very much part o the fnance unction, evenwhere this was the case they were oten business-acing with ront ofce duties, namely using theirfnance and accounting skills either in support o or actually with operating units.

Purely back ofce fnance proessionals, engaged in general operations or specialist fnance andaccounting, were in the minority. Furthermore, we ound it was primarily fnance proessionals with a rontofce, business-acing ocus that had become decentralised rom the fnance unction, so that they wereworking primarily or exclusively with operating units.

The ocus o our second round o research has been to see how ar these developments in the delivery ofnance services have continued and or this output in particular what role external service delivery has to

play and impact organisational perormance.

Having a nance function that adds real commercial value and one that the rest of the business will pick

up the phone and ask for advice is critical. That is not the future, it is already the present for successful

companies.

Pu venbes, group finnce irector, hs pc mas finnce nd ornistion perornce:spin te uture report 2011

CIMAs recent report Finance and organisational perormance: shaping the uture reported that 75.4% oglobal survey respondents, backed by interviews and eedback rom the fnance community, agreed thatwork in the management support area helps the organisation achieve its objectives.

In turn, it reported evidence o a demand and pressure rom business or increased allocation o fnanceocus and resource in management support areas, in particular rom large organisations.


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fiure 1.1 ontribution o neent support ctiities to ornistion perornce

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To this end, we have added in another dimension to the research or this report to better understand utureservice delivery and how it can allow fnance to achieve this higher ocus on management support. Namelyhow the use o external provision o fnance services can be leveraged better to help the value creatingfnance unction better meet its goals. Overall we have sought to establish what good practice in deliverylooks like by identiying the models that the best-perorming organisations, as rated by surveyrespondents, might be adopting.

BPO and shared service centres are used for the purpose of driving efciency in managing non-value

added activities and freeing up nance resources to add value to the business. In this way they can

dedicate more to providing analysis, insight foresight and impact to the business and delivering

compliance that creates value for the business. Furthermore, BPO or shared service centres can help an

organisation to drive standardised systems, processes, and workow across borders where the end result

is creating a dynamic, efcient and effective organisation. For me therefore, the role these external

providers can be important in bringing more focus to the business objectives.

KK , finnce irector asi Pcic, ct otwre mas finnce nd ornistionperornce report 2011.

1.2 rnistion desin or deier o nnce serices

Organisational design or delivering fnance services can be broken down into three building blocks:

structural elements

types o fnance service

competencies.

1.3 tructur eeents or nnce serice deier

The organisations needs or fnance services services underpinned by expertise in fnance and accounting can be met within a structure that comprises internal and/or external provision.

Internal provision o fnance services can be eected in two ways:

By the fnance unction, that is a group o fnance proessionals and others who report ultimately to afnance director or similar position such fnance proessionals are denoted as centralised.

ptions in te deier o nnce serices


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By other fnance proessionals who are located inside the organisation but outside the fnance unction.There are two types:

Those who have only a secondary reporting responsibility into the fnance unction partiallydecentralised.

Those who have no reporting responsibility into the fnance unction at all decentralised.

External provision o fnance services can also be eected in two ways:

By outsourced service providers oten called BPOs or business process outsourcers which areindependent organisations.

By captive shared service centres (SSCs), which are related entities providing centralised fnance servicesor a group.

1.4 pes o nnce serices

There is a wide range o activities that all within the umbrella term o fnance services, including:

General fnance and accounting Payroll processes

Treasury/cash/fnancial risk management Purchasing to pay processes

Financial/regulatory reporting Sales to cash processes

Budgeting/orecasting Non-current asset register

Indirect tax compliance Management report preparation and analysis

Direct tax compliance Project analysis (including capital budget)

Tax planning Inormation systems support

Each fnance service can be internally or externally provided to service users in the organisation.

Furthermore, the research also defned broad categories o internal activities or services defned on thebasis o results rom previous research as representing groups o activities in terms o their importance andtime spent on them. These include:

Accounting operations and internal fnancial reporting transaction processing, accounts payable/receivable, payroll, internal fnancial reports.

Statutory reporting and specialist activities external reporting, corporate fnance, treasury andfnancial risk management, regulation (internal audit, compliance with regulatory requirements, tax,ethical/CSR issues).

Management accounting inormation and analysis preparing and interpreting management accountinginormation (e.g. orecasting, budgeting, costing, reporting on variances), cash ow management.

Management support and perormance management identiying and analysing strategic options,decision support, KPIs, benchmarking, strategic management accounting, business risk management.

Accounting and management inormation systems developing, implementing and maintainingaccounting and management inormation systems.

Other activities not covered above, e.g. sta management, training others, administration.

In addition, respondents were asked about the general category in which they saw their own duties asprimarily ocusing:

general fnance/accounting

specialist activities (internal audit, tax, treasury etc.)

fnance/accounting supporting operating units

other unctions/units.

The latter two categories are thus distinctive in being business-oriented or business-ocused.


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1.5 opetencies required or deierin nnce serices

Where a fnance proessional is situated within the organisational architecture and what activities they arecalled on to perorm inuence the competence set they should have.

This set consists o not only technical knowledge but the range o skills needed to eectively operationalisethat knowledge and trust. The idea that the eectiveness o the fnance proessional depends not only onthe qualities they possess but also on service users perception o the value o those qualities.

This perception is related to how independent the fnance proessional is seen to be. Trust is thereore amutual relationship between the fnance proessional and the user o fnance services rather than simply aquality o the individual fnance proessional (though it can be argued that procuring and maintainingservice users trust in the value o the fnance proessionals qualities is in itsel a skill).

ptions in te deier o nnce serices


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Finance has been a key member o cross-unctional decision making in British American Tobacco orsome time, supporting the business, along with marketing and operations in making decisions that addshareholder value. The implementation o shared service centres and above market supply chain servicecentres has positively changed the way fnance services are delivered, by allowing commercial fnanceorganisation the time to ocus on added value activities, or example analysing pricing decisions, tax

strategies and the cost o innovations.

Many organisations have moved some service delivery externally (BPO and SSC) and seen cost savingsand while weve not outsourced any services to external providers at this time, we moved to sharedservice centres or transactions fnance or example procure to pay about our to fve years ago. This hasdriven some efciency gains through aggregation but more importantly has allowed the commercialfnance/business partnering to ocus on supporting the business and creating shareholder value.

I believe that or fnance unctions whose end goal is to better support the business, and where the risko implementation is managed appropriately, then I do believe there will be a marked change to howfnance will deliver services. Maturing shared service centres and outsourcers will be able to managemore, higher value added services on behal o the fnance unction. However or BAT, I eel this is morelikely to be a continuation o the journey than a marked change rom current strategies.

Our productivity programme has been running or seven years now, so while weve taken the

opportunity to review our cost base again or us its an ongoing process rather than an initiative inspiredby the recession. Our prime ocus within the fnance unction is on satisying customer needs, then riskmanagement; so once were certain that any internal or external aggregation o activities wontnegatively impact our ability to service our customers then we look to drive efciency. I think we willconsider outsourcing in the uture ater weve optimised the gains we can obtain ourselves, then look orgreater efciencies through aggregating with other companies.

Looking ahead, we have ring-enced areas where we believe it is more eective to maintain internallywithin fnance. For example, tax, treasury and decision support. However as the shared service centreshave matured they are beginning to oer more higher and complex activities, such as tax returnsspecifcally, and this trend may continue.

err mconne, group hed o pertions finnce,Britis aericn obcco

British American Tobacco (BAT) is the worlds second largest quotedtobacco group, with brands sold in more than 180 markets. The groupemploys over 60,000 people.



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From efciency to eectivenesstransorming the fnance delivery mix16

eier o nnce sericesto te ornistion: trendsin te cnin structure

2

edservices;creatingvaLue stru

ctur

estru

ctur

estru

ctur

estru

cture

stru

ctur

e

stru

ctur

estruc

ture

struct

urestruc

ture

stru

ctur

estruc

ture

struct

ure

struct

urestru

ctures

tructu

restru

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structure

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structurestru

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structure structurestructurestructure


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17

2.1 ntroduction

As part o a general business trend, in recent years it has become increasingly popular or routine fnanceservices, along with other types o service required by an organisation, to be handed over to an externalprovider or business process outsourcer (BPO). At the same time, larger organisations have perceived thepotential benefts o obtaining at least some fnance services via a captive shared service centre (SSC), thisis along with other services such as logistics and human resources or instance that can be reduced toprocesses and a standard set o services which are at base similar, particularly in the context o improved ITand data management.

Reinorcing this trend, The 2011 FAO Annual Report produced by the Everest Group (in March 2011) oundthat annual contract value or multi-process fnance and accounting outsourcing grew almost 15% in 2010year and 10% in 2009. The report indicated that the fnance and accounting outsourcing market is

expected to grow 15 to 20% in 2011 and top $4 billion in annual contract value. The report declares thisrepresents a $150 to $200 billion opportunity, split equally across third-party service providers andcaptives or shared services.

We look here at the motivation or and actual extent o this trend, the split between usage o SSCs andBPOs, and the likely uture developments in this area based on our survey work.

We link it to the other aspect o non-centralised provision, namely how ar fnance services are deliveredby fnance proessionals who are either partially or completely decentralised in the organisation. So theyare either loosely linked to the fnance unction or have no responsibility to it.

Finally we see how ar service externalisation and decentralisation o fnance proessionals lead toreductions in the size o the fnance unction.

2.2 e etent o etern nnce serice deierUse o external provision or fnance services is widespread o the organisations represented byrespondents to our survey:

60% either use or plan to use one o the sources o external provision (Figure 2.1).

Current usage suggests that the SSCs have the upper hand, with 31.2% o organisations currently using aSSC and only 20.2% currently outsourcing, though it is notable that 5.2% o organisations currently doboth.

However as ar as planned uture use is concerned, it appears that outsourcing is considered potentiallydesirable by a bigger proportion than current usage suggests, indeed it is more requently contemplatedthan SSCs:

14.8% o organisations are considering using a SSC or delivering fnance services. 16.0% are looking at outsourcing or delivery o fnance services in the uture.

60% use or plan to use

external delivery o

fnance services

14.8% considering using

SSC in uture

16% considering using

outsourcing in uture


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Organisation uses captive shared service centreProportionof sample

No, we do not use

currently nor planto use in the future

Yes, we use currently Yes, we plan to

use in the future

50%

10%

30%

20%

40%

0

50%

10%

30%

20%

40%

0

50%

10%

30%

20%

40%

0

No,wedonotuse

currentlynorplan

touseinthefuture

Yes,weusecurrently

Yes,weplanto

useinthefuture

O

rganisationoutsources

4.2% 9.5%2.3%

9.8%5.2% 5.2%

7.3%

16.5%

40.0%

fiure 2.1 Use o etern proision

Shared service centres are more attractive to larger organisations:

37.7% o large organisations currently use them (compared to 31.2% overall, Figure 2.1).

Only 44.7% neither use nor plan to use a CSSC (compared to 54.0% overall, Figure 2.1).

Public sector organisations however lag some way behind: 62.5% o them neither use nor plan to use aCSSC. This would indicate scope or the public sector to consider the advantages perceived by the privatesector, where standardisation could be even more advantageous to such large complex organisations.

Outsourcing on the other hand is a strategy that can be adopted successully by SMEs as well as large andpublic sector organisations. This is particularly the case in relation to specifc services or which investmentin own-resources is not worthwhile or the SME or example bookkeeping and tax. The smaller scale othe SME limiting the implementation o SSC.

In addition, large enterprises may outsource whole service areas which the organisation has previouslyperormed or itsel. In act we see that enthusiasm or outsourcing, while overall currently more mutedthan or SSCs, is quite widespread in non-public sector organisations:

20.9% o large organisations and 21.5% o SMEs currently outsource at least one service

A urther 18.6% and 13.4% respectively plan to do so.

It is again the public sector organisations which are at variance; only 8.4% use outsourcing (though 14.5%plan to do so), which means 77.1% o them neither use nor plan to use outsourcing.

It would appear thereore there is tremendous scope or both shared service use and outsourcing by thepublic sector in uture, a possibility o considerable interest given the restrictions on the sectors undingarising rom the fnancial crisis and its political atermath, and the ongoing pressures or more efciency.

eier o nnce serices to te ornistion: trends in te cnin structure

Ke

Organisation outsources

No, we do not usecurrently nor plan touse in the uture

Yes, we currentlyuse

Yes, we plan to usein the uture


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19

8%

11%

81%

As planned use in the public sector is at a comparable level to that o the other types o organisation,however it is possible that the situation may be in the process o changing and we shall soon see the publicsector aligning with the private sector.

The move towards using external fnance service providers is pronounced thereore, with a greatermovement so ar towards shared services rather than outsourcing, but with considerable interest in plansor using outsourcing more in uture.

Insight rom some large organisations indicates that initially the investment in SSC is to obtain cost andprocess efciencies in-house beore they then look to outsourcing some areas to use the suppliersexpertise in leveraging urther efciencies. One may see going orward as SSCs mature, a shit to includemore outsourcing as part o the delivery mix to leverage their specialism and gain these extra efciencies.

However, it should be borne in mind there is still some 40% o the sample overall that neither uses nor

plans to use any orm o external provision preerring to maintain provision at the centre o the fnanceunction. This is the case or a larger proportion o SMEs where perhaps the benefts o externalisingservices are limited to bookkeeping and tax services, their smaller scale not providing a drive to externaliseurther services or processes as in the larger frms, and public sector organisations.

2.3 entristion in intern nnce serice proision

Within the organisational architecture there are three sites within the organisation rom which fnanceservices can be delivered:

rom the centralised fnance unction

rom partially decentralised fnance proessionals who still report in part to the fnance unction

rom ully decentralised fnance proessionals located in and answerable to the business units.The split o internal provision is very stark when looking across all organisations, as shown in Figure 2.2:

The vast majority (81.1%) o all fnance proessionals see themselves as centralised.

A very small minority (7.6%) being ully decentralised.

11.3% being partially decentralised.

fiure 2.2 tructure b reportin oction o nnce st

Ke

Centralised

Fully decentralised

Partially decentralised

2.4 e eect o ornistion size on centristion

Increasing organisation size allows or increasing decentralisation o internal fnance service delivery. Figure2.3 summarises the size o centralised, partially and ully decentralised internal fnance service deliveryagainst organisation size.

While even in the largest organisations most fnance proessionals are still centralised in the fnanceunction, nevertheless a signifcant trend emerges and we see increasing numbers become moredecentralised away rom the fnance unction as organisation size increases.


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Organisations with ewer than 50 employees generally only have between one and fve fnanceproessionals, and these are all ully centralised in the fnance unction.

When an organisation has grown to between 51 and 100 employees, one fnance proessional becomespartially decentralised, taking on some reporting responsibility to a business unit or other unctionoutside fnance as well as some reporting within the fnance unction, with two to fve fnanceproessionals in the fnance unction. As organisation size continues to increase, more and more fnanceproessionals become partially decentralised.

When the organisation has grown to more than 500 employees we see in addition some fnanceproessionals becoming ully decentralised, with no reporting responsibility to the fnance unction at all.

fiure 2.3 rnistion oction o nnce proessions b ornistion size

Median numberof people

Employees in country

100+

11-20

21-30

31-50

51-70

71-100

6-10

2-5

1

01-10 11-50 51-100 101-250 251-500 500-

2,500

2,500-

10,000

10,000+

Ke

People infnance unction

Proessionals withsome reportingresponsibility to FF

Proessionals with noreporting responsibilityto FF

Increasing decentralisation o fnance proessionals reects, at least in part the classical approach toefcient deployment o resources:

In the smallest organisations, ull centralisation means all the fnance proessionals lie within the span ocontrol o a single director/chie who can direct eort most efciently to the tasks in hand.

As size increases, the number o specialist fnance proessionals stretches beyond the span o control o asingle director/chie and it becomes more efcient and eective to partially or ully integrate those

fnance proessionals who are most useul to the business within the business. Ultimately the organisation becomes so large that individual business units or unctions have the

resources and capability to retain and control their own fnance proessionals. In these cases, reportingto the central fnance unction becomes unnecessary and can be inefcient.

The other actor at play however is the externalising fnance service delivery, a strategy that we have seenis avoured more by large organisations, but that is still a serious option or young, growing businesses atrend we examine later.

2.5 e eect o etern nnce serice proision on intern deier

While one would perhaps expect that moving fnance services to BPOs and/or SSCs would lead to areduction in the total number o fnance proessionals in the organisation, whether centralised or

decentralised, on average the use o external fnance service providers has little apparent impact on thesize o their internal resource (Figure 2.4).



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21

fiure 2.4 ize o intern deier b ornistion size wen s/outsourcers re used

4



Currently uses CSSC

No

10

8

6

4

2

0

1-10 11-50 51-100 101-250 251-500 500-

2,500

2,500-

10,000

10,000+

10

8

6

4

2

0

8

5 5

32.5

1

4

2

1

5

3

1

6

3

22

1 1

10

9

7

3

1 1

2

11.5

3

2 2

3

2

4

5 5

4

2.5

6

4

3

8.5

6

4

10

9

5.5

3

Yes



Yes

Currently outsources

No

10

8

6

4

2

0

1-10 11-50 51-100 101-250 251-500 500-

2,500

2,500-

10,000

10,000+

10

8

6

4

2

0

8

5

3 3 3

1

4

5

3

1

6

3 3

222

1 1

10

9

7

3

1 1

2

3 3 32.5

5

3 3

1

4.5

6 6

3.53.5

8

76.5

10

9

5

1 1

2 2

Ke

People infnance unction

Finance specialistswith some reportingresponsibility to FF

Proessionals with noreporting responsibilityto FF


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Large organisations o 2,500-10,000 employees which outsource have considerably more partially andully decentralised fnance proessionals (13.5) than ones that do not outsource (8).

This is not a eature o the same size organisations which use a SSC, where there appears to be little eect.

It would appear thereore that the opportunity or downsizing fnance resource internally is limited whenoutsourcing and not experienced or those using SSCs.

This ailure to drive sta reductions might be concerning given respondents claim that a reduction infnance headcount is the frst motivation or the transer to a SSC and the second motivation in the case ooutsourcing (Section 5).

In act, it seems to acilitate a shit in resource rather than a simple net reduction. We see cuts rom theoperational and transactional accounting activities and roles or an increased ocus or the higher value

ones o management support and perormance management ones. Roles which are more oten partially orully decentralised rom the central fnance unction due to their collaborative nature than the accountingoperations ones. We explore more on this later.

2.6 ecentristion o nnce proessions in te uture

While larger organisations have continued to invest in business partnering by decentralising fnanceproessionals rom the fnance unction into the business, fnance service delivery rom the centre isexpected to remain the dominant orm as reported by senior fnance managers.

Where there is an expectation o growth in internal fnance resource, much may be attributed to expectedorganisational and economic growth.

On the whole, the fnance unction seems in a healthy state and it is certainly not the case that reductions

in fnance resource are anticipated.

What is anticipated to happen to the number and deployment o fnance proessionals in an organisationgives some indication o the direction o decentralisation o internal provision o fnance services.

From Figure 2.5 we can see that where change is envisaged in the total number o fnance proessionals,numbers are expected to increase more oten than they are expected to decrease. The extent o changediminishes as we move rom centralised to ull decentralised fnance proessionals.

54.8% o survey respondents do not expect to see a decrease in the numbers o fnance sta

30.0% report an expectation that sta numbers in fnance would actually increase.

Outside the central fnance unction the dominant expectation is o no reduction in sta:

21.7% o respondents expect growth in partially decentralised numbers, where the fnance proessional

has some partial reporting link to fnance. 17.5% expect to see an increase in the number o completely decentralised fnance proessionals. e.g

those in the business without a reporting link to fnance.

While expectations o cuts in fnance personnel are very low, what is perhaps more telling is the analysis owhere decreases are expected in relation to organisational location:

Just over 15% o respondents expect centralised fnance sta numbers to decrease.

However when we look at partially or ully decentralised employees the CIMA survey shows that lessthan 10% expect any decreases in the numbers o sta in either group.

Furthermore, where an increase in the size o the fnance unction is expected, it is not met with acorresponding reduction o fnance personnel located outside o the fnance unction.



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23

Only 1.5% envisages an increase in the number o fnance unction proessionals accompanied by adecrease in the number partially decentralised.

Furthermore, only 1.9% expect such an increase accompanied by a decrease in the number ullydecentralised.

Much larger proportions expect an increase in the size o the fnance unction being accompanied by nochange (14.8%) or even an increase (13.7%) in partially decentralised fnance sta.

fiure 2.5 pected cnes in nuber o nnce st b reportin oction

1.0

%

14.2%

54.8%

6.1

%

23.9%

2.0

%

7.0

%

73.5%

5.4

%

12.1%

1.2

%

8.4

%

68.6%

4.6

%

17.1%

Centralised in finance functionDecentralised with no reporting

responsibility to finance

Part a y ecentra sewith some reporting

responsibility to finance

Ke

Decrease substantially(by more than 50%)

Decrease (up to 50%)

No change

Increase (up to 50%)

Increase substantially(by more than 50%)

Overall, expectations are generally o either the status quo or o net increases in the numbers o fnanceproessionals, particularly within the fnance unction.

As we saw earlier, the increased use o external service delivery is not expected to aect the number ofnance personnel in the fnance unction, no cuts are expected in the overall sta numbers. Someorganisations intending to outsource may have some expectation that the number o employees will all.However what seems to be happening is a shit in resource rom accounting operations, where there ismore expectation o likely cuts, to management support activities rather than net cuts in sta. This isurther explored later.

We can also attribute much o the phenomena on expectations o organisational growth:

Smaller organisations (which can be expected to see prospects or uture growth) have strongerexpectations o an expanding fnance unction and are much less likely to oresee contraction.

Organisations in regions with higher economic growth are more likely to expect an increase in fnanceunction personnel.

Results rom the research survey and the eedback rom commentators seems to point to manyorganisations valuing a close collaborative fnance unction moving and recruiting sta into partially andeven ully autonomous roles. In these organisations where such decentralisation has already occurred, thestrategy seems to have been successul, oering the organisation value. The rationale being that wherefnance sta cuts are expected, they are generally expected in the centralised roles within the fnanceunction not at the expense o the more decentralised roles. This may indicate that they are oering theorganisation value. There is clearly no plan to cut or centralise fnance urther by the removal and/or shito fnance sta away rom the business integrated roles.

Insights rom the CIMA panel and fnance peer group suggest the prevalence o centralised fnanceproessionals at the top level can be linked to the need to maintain control o their activities andresponsibilities, avoid issues o cross over and saeguard the independence o the fnance proessional by

keeping them within the unction.


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CIMA also observes that in larger organisations, a CFO or FD cannot be everywhere, thereore fnance staare needed to cascade the FDs inuence throughout the business and flter up insights into perormance.This acts as a percolator eect and it is an area where organisations need to engage their managementsupport and accounting resource in these roles.

2.7 ontct wit te business in serice deier trends

Having identifed it is centralised internal delivery that is still the most signifcant channel or fnanceservices, we shall look briey at the degree o contact between the fnance unction and the business. Thiswill give us insight into the degree to which business partnering is progressing, and will also shed somelight on what scope remains or moving non-contact delivery to SSCs and BPOs.

The fnance unction shows its strongest degree o contact with the business when it is deliveringaccounting operations and management accounting/analysis services, and also when it is deliveringmanagement support services (Figure 2.6).

Contact is least when the fnance unction is delivering services to do with accounting and managementinormation systems, and statutory reporting and specialist activities

fiure 2.6 finnce tie in contct wit business durin serice deier

Mean timespent in contact

with business

50%

40%

30%

20%

10%

0%SME Large enterprise Public sector

5

39.1

27.424.6

18.9

11.4

28.932.4

21.4 20.0

12.1

35.3 37.540.2

29.1

25.4

17.319.0

32.7

Mean timespent in contact

with business

39.1

80%

60%

40%

20%

0%SME Large enterprise Public sector

5

20.2

74.1

45.6

39.4

33.1

42.0

20.4

69.1

37.5

31.126.6

33.0

21.7

66.7

33.328.326.728.3

Ke

Contact with business accounting operationsand internal fnancialreporting

Contact with business statutory reportingand specialist activities

Contact with business managementaccounting inormationand analysis

Contact with business management supportand perormancemanagement

Contact with business accounting andmanagementinormation systems

Contact with business other

fiure 2.7 finnce spendin no tie in contct wit business durin serice deier



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25

Management support services are recognised as the services delivered by a business partner, being a set oactivities that entail the deployment o fnance expertise in direct support o the organisations strategyand operations. While a type o fnance service, management support is given special attention since itrepresents a critical transormation in the services expected o fnance proessionals and the fnanceunction. The extent and nature o change towards business partnering is o interest in its own right and asa basis or assessing the impact o fnance transormation on organisational success.

It is surprising that large proportions o fnance unctions continue to spend no time in regular directcontact with the business (Figure 2.7), particularly in relation to business partnering. Around a third ofnance unctions claim to spend no time in contact with the business when delivering managementsupport and perormance management services. What we can perhaps conclude here is there is stillconsiderable scope or the fnance unction to develop contact with the business when conducting itsvalue creation activities.

2.8 oncusions

The external delivery o fnance services is widespread with 60% either using or planning to use one othe sources o external delivery especially in large and commercial enterprises.

The move towards using external fnance service providers is pronounced thereore, with a greatermovement towards shared services rather than outsourcing, but with considerable interest in plans orusing outsourcing more in uture.

The public sector lags behind and there is an opportunity or both shared service use and outsourcing inuture. This is potentially o considerable interest given the restrictions on the sectors unding arisingrom the fnancial crisis and its political atermath, and the ongoing pressures or more efciency.

External delivery does not seem to drive sta reductions, oten a high motivation or the transer to a

SSC or outsourcing. In act nearly 55% do not expect to see a decrease in fnance sta and 30%expecting numbers to grow.

External delivery does seem to acilitate a shit in resource however, with cuts rom the operational andtransactional accounting activities and roles or an increased ocus and resource or the higher valueones o management support and perormance management ones.

While overall the fnance unction remains a central unction, these roles within management supportare more oten partially or ully decentralised due to their collaborative nature than the accountingoperations ones.


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Moving fnance and accounting (F&A) processes to external service providers is nothingnew. As CIMAs research illustrates, business process outsourcing (BPO) has becomecommon or many fnance services, with companies turning to third-party vendors notonly to cut costs, but also to transorm F&A processes to make them more efcient andmore aligned with business goals. The idea is that with better processes, and ewerprocesses maintained in-house, companies can liberate resources and time spent byin-house sta so that they can collaborate more closely with the rest o the business andturn their attention to activities o greater value.

There has been signifcant impact rom business partnering, says Shantanu Ghosh,Senior Vice President or Practices, Solutions and Transitions at BPO provider Genpact.Most o our clients in the fnance and accounting space continue to upgrade the areaswe are responsible or. Their confdence in BPO is growing, so they are looking moreclosely at what they need to do in-house and how to create the capacity to be a true

business partner. We are playing a much bigger role in more o the higher end andcontextual fnance processes. There is growing desire among CFOs to streamline,optimise and change their business processes to drive core business goals, so they arelooking beyond the traditional efciency gains rom labour cost arbitrage. They wantbetter processes linked to business outcomes. Some buyers are very mature in thatsense, but others are still ocused on the cost side. The best o breed clients look at howto get more out o their fnance unction and our expertise.

Having begun as a captive o GE beore becoming an external service provider, Genpacthas seen at frst hand the evolution o outsourcing processes rom the simple to thecomplex, rom closing and reporting activities, statutory reporting and tax matters todecision-support tasks, including business planning and cost analysis. For Ghosh, this

reects the change in the main drivers o outsourcing rom cost cutting to real processtransormation.

It is not necessarily all about labour costs, he says, especially i a process is hard todecouple. It is more about the skills and scale o external service providers, which, orexample, can enhance the quality o analytics. Companies have more confdence now inthe quality o service providers and believe that the BPO model adds capacity and skills.They are more open-minded and willing to leverage our competencies and capabilitiesand to invest continuously in developing the partnership. It is not just about substitutingpeople.

As Ghosh explains, The market is maturing, particularly among buyers o BPO services.They may start out with the goal o cost-cutting, but given the overall success o the

model, customers are beginning to appreciate the ull range o benefts they can receive,and to look or more rom the engagement. BPO requires a big change managementeort and hard savings in the bank to begin the journey. While 30-40% savings in labour


ntnu gos, enior vice President or Prctices, outionsnd rnsitions, genpct.

Genpact is a global leader in business process and technologymanagement, offering a broad portfolio of enterprise and industry-specic services. It employs over 43,500 staff across 13 marketsworldwide managing over 3,000 processes to over 400organisations.


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27

costs is impressive, ater two years it may not be enough. The transormation agenda atthat point begins to expand.

In achieving transormation, Ghosh believes that BPO has distinct advantages overshared service centres (SSCs).

A client should only choose an external service provider when that provider has moreskills and experience than would be available in-house, he remarks. A BPO provider canbuild a bigger pipeline o talent, whereas a SSC has to obtain that expertise at a higherprice.

However, there is a big variation among BPO providers, so you must look at the core

philosophy o how they manage client relationships and whether they act like a vendoror a partner. Some come rom a consultancy or IT model, so they are very strong at thetop end o the relationship and have a dierent view o process execution, and they maynot be as transparent or consistent throughout the organisation. I am biased, but as wemoved rom being a division o GE to an independent service provider, our ocus ondriving innovation in our approach and instituting best practices changed dramaticallywith our exposure to multiple businesses and situations. We now have separate practicegroups who ocus on developing capabilities and competencies in all our service lines.

urnin BP into ue cretion

So, does BPO lead to a company turning its in-house fnance sta towards more

value-added tasks? That is certainly the opportunity and, oten, the goal that BPO opensup, but outsourcing F&A processes is just the frst step and oers no guarantees.

Clients always need time and bandwidth or fnance people to move to being businesspartners and trusted advisors to the rest o the business, notes Ghosh. They are usuallystruggling with tasks such as analysis and compliance, so BPO may be required. But,while BPO saves cost and time, that reed time may not necessarily be used eectivelyby the business. To gain maximum advantage rom their investment, the retainedorganisation at the client also needs the skill set or more eective business partneringand to understand the strategies used in the dierent parts o the business.

Recognising this, service providers have realised that they can play a part in helping theirclients steer fnance personnel towards higher end, value-add areas.

Our responsibility includes helping with skill mapping and the redistribution o work,says Ghosh. But frst the client needs to have a burning need to make this shit andcommit to upskilling and repurposing people.

Genpact reinorces the notion that once fnance services are moved externally and arelationship is established with a service provider, there are opportunities ororganisations to shit ocus onto value creation. This is clearly not an automaticoutcome. To gain such benefts, companies need to have a strategy rom the start andocus rom the top.


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eier o nnce serices tote ornistion: te cninserice deier i

3

edservices;creatingvaLue services servicesservicesservicesservicesservicesservicesservicesserv

icesservices

servicesser

vices

servic

esser

vicesservi

cesser

vicesser

vices

service

sser

vicesser

vicesserv

icesservic

esserv

icesservic

es

serv

ices

servicesserv

ices

serv

icesserv

ices


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3.1 ntroduction

We have seen so ar that there have been moves towards external provision but no actual or anticipatedshrinkage in internal provision o fnance services, not least because o the emphasis is on value creatingactivities.

We now turn to an examination o what types o fnance services are typically delivered externally in thisway. We would perhaps expect external provision to be predominantly in respect o routine, process-basedservices or instance.

In addition, while we know that internal fnance proessionals are increasingly used to provide value-added,business-oriented fnance services to their organisations (principally represented by the servicescategorised as management support and perormance management), we need to determine bothwhether this is set to continue and also how ar it is a unction o the degree o decentralisation that they

experience, and how ar it is a unction o the particular duties they undertake.

Finally we look to determine whether organisations which make use o value-added fnance services areboth higher perorming overall and have fnance unctions oriented to management support. This helps usin to start determining the overall good practice confguration or fnance service delivery.

3.2 tern proided serices: tod

The research survey looked into the extent to which the ollowing fnance services are provided externallytoday and plans or accessing this orm o provision in the uture:

finnce serices:

General fnancial accounting

Payroll and/or employee expenses processes

Treasury/cash/fnancial risk management

Purchase to pay processes

Financial/regulatory reporting

Sales order to cash processes

Budgeting/orecasting

Fixed (non-current) assets register

Inormation systems support

Management report preparation and analysis

Indirect tax compliance

Direct tax compliance

Tax planning

Project analysis (inc capital budget analysis)

Other services

Figure 3.1 shows the proportions o those using external provision or each o these services.

Amongst those using a SSC, the most common services involved extend to higher level work (e.g. riskmanagement, external reporting) alongside more routine services such as general fnance and accountingand payroll processing, which dominate.

The SSC provision is still dominated by more routine services such as general fnance and accounting(64.8%) and payroll processing (64.0%).


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fiure 3.1 finnce serices proided b nd outsourcin

It appears thereore there is a degree o stability in fnance service delivery by SSCs. They are ound to beeective or some services and somewhat less so or others especially tax but overall the take-up isquite widespread.

By contrast there is more variation in the fnance services that are outsourced. These are largely routinisedand process-based activities, the external provision oer organisations the greatest gains rom improvingprocess efciency and liberating fnance resources or other uses. This is also the case or highly specialisedareas such as tax and IS, where it is more efcient to access external expertise than maintain internalspecialist resource.

No fnance service is outsourced by the majority o organisations using this orm o external serviceprovision (Figure 3.2 ), but the two most requently provided fnance services are the same as or SSCs:payroll processing and general fnance/accounting activities.

It is notable that where there is external delivery o tax services, it is more likely to occur throughoutsourcing than a SSC. This reects:

the highly specialist nature o tax

the act that or many smaller organisations the costs o investing in specialist in-house tax specialists isnot worthwhile.

10% 20% 30% 40% 50% 60% 70%

Tax planning


Other services

Project analysis(inc capital budget analysis)

Sales to order cash processes

Management report preparationand analysis



Information systems support

General finance and accounting

Treasury/cash/financial risk management

Budgeting and forecasting

Payroll and/or employeeexpenses processes

Financial regulatory reporting


0%

Ke

SSC

Outsourcing

eier o nnce serices to te ornistion: te cnin serice deier i


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We see a distinct dierence in relation to the type o oshoring adopted between some fnance servicesthat are process-based such as the top two services or outsourcing, payroll processing and generalfnance/accounting and others, especially purchase to pay and sales order to cash processes.

These fgure much lower in the ranking or outsourcing when compared to how likely they are to betranserred to SSC provision.

Consultations indicate this reects a desire by the organisation to retain at least some control over the corecash-ow related processes within the group.

nk or nk or outsourcin

Purchase to pay 4 8

Sales order to cash 6 10

3.3 tern proided serices: uture potenti

Table 3.1 shows the most commonly cited services which are planned to be transerred to a SSC oroutsourced by organisations which do not currently use a SSC or outsourcing respectively.

be 3.1 op tree serices pnned to be deiered etern

red serice centre utsourcin

1. Payroll and/or employeeexpenses processes

57.8% 1. Tax planning 44.4%

2. Purchase to pay processes 52.6%

2. Payroll and/or employee

expenses processes 35.7%

3. General fnancial accounting 51.7% 3. Inormation systems support 35.7%

The prospects or the services which may be transerred to a SSC in uture, o those considering this option,are similar to those currently observed today (Figure 3.2).

Whilst no radical changes are anticipated, we do see purchase to pay processes moving up somewhatcompared to the current ranking.

Similarly outside the tax area, uture prospects or outsourcing ollow a similar pattern to the present, withan emphasis on payroll, general fnancial accounting and inormation support which appear in the topthree (Table 3.1).


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fiure 3.2 erices epected to be proided b nd outsourcin or tose not current usin

Over the past fve years the fnance services outsourced have been relatively constant although demandor specifc fnance services such as budgeting and orecasting has tended to increase more than demandor general fnancial accounting services.

Furthermore, there appears to be a move towards the use o outsourcers or management reporting andbudgeting/orecasting rather than simply or transaction processing.

Commentators and insight rom MNC organisations highlight this shit to higher level analytical servicesas the outsourcing relationships mature, efciencies have been leveraged and the SSC or outsourcingprovider builds on eectiveness o the relationship, knowledge o the business and trust.

The implication or outsourcers is that the sta employed to deliver these higher end services or theirclient base will increasingly need a better understanding o the qualities o useul managementinormation and its applications. This is clearly linked with the client community rating the fnancequalifcation o the outsourcing suppliers sta as important when selecting suppliers covered in section5. For outsourcers to become true business partners to their clients and acilitate the transer o theirinternal resource to creating value this move along the value chain will be critical. Without a suitably

qualifed delivery fnance team it is more unlikely that management will push along this value chain.

20 40 60

Tax planning


Other services

Project analysis(inc capital budget analysis)

Sales order to cash processes

Management report preparationand analysis



Information systems support

General finance and accounting

Treasury/cash/financial risk management

Budgeting and forecasting

Payroll and/or employeeexpenses processes

Financial regulatory reporting


0

Ke

SSC

Outsourcing



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3.4 pes o nnce serice deiered b intern proision

The research investigated the allocation o resources to dierent internally delivered fnance services usingtwo measures: the respondents work mix across the dierent service areas, and the FTEs (ull-timeequivalent personnel) allocated to those areas, as reported by senior personnel or their organisation.

In both cases, the same set o service areas was used. As we detailed earlier, these were broad categoriesdefned on the basis o results rom previous research as representing groups o activities in terms o theirimportance and time spent on:

Accounting operations and internal fnancial reporting.

Statutory reporting and specialist activities.

Management accounting inormation and analysis.

Management support and perormance management.

Accounting and management inormation systems.

Other.

In addition, respondents were asked about the general category in which they saw their own duties asprimarily ocusing:

general fnance/accounting

specialist activities (internal audit, tax, treasury etc.)

fnance/accounting supporting operating units

other unctions/units.

The latter two categories are thus distinctive in being business-oriented or business-ocused.

3.5 e indiidu perspectie te ocus on te business

Finance proessionals in the fnance unction are much more likely to see their main duties as being infnance/accounting (generally or in supporting operations) than those who are decentralised (Figure 3.3).

However, the majority o these proessionals (61.9%) still see their duties as business-oriented.

Those fnance proessionals who are partially or ully decentralised, out o the unction, predominantlysee their duties as mainly relating to other unctions or units rather than fnance, as would be expected.

Just over 78% o this group see their duties as being ocused on the business.

As we would expect, centralised fnance proessionals are much more likely to have duties involving

general or specialist fnance/accounting or fnance/accounting supporting operations (34.1% and 25.2%)than those who are partially or ully decentralised, where we see the ront ofce duty o actually beingpart o other units operations predominates (Figure 3.3).


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fiure 3.3 finnce proession duties nd te deree o centristion

34.1%

25.2%

4.0%

36.7%

16.1%

13.4%

6.5%

64.1%

11

.4%

7.7%

8.8%

72.2%

Panel C decentralisedPanel B partially

decentralisedPanel A centralised

Proportion of other functions/units in finance function

25%10%5% 15% 20%0

Other

Purchasing/procurement

Human resources

Information technology

Sales/marketing

Project management

General management

Head office/central administration

Operations

Planning/strategy 21.6%

18.5%

11.5%

10.3%

10.3%

9.5%

8.5%

5.7%

2.2%

2.0%

Duties otherfunctions/units

Ke

General fnance/accounting

Specialist fnance/accounting

Finance/accountingsupporting operatingunits

Other unctions/units

As expected partially and ully decentralised fnance proessionals predominantly see their duties as rontofce

77.5% o partially decentralised sta see their duties as business acing.

79.9% o ully decentralised fnance sta.

It is notable that the majority o those in the fnance unction (61.9%, Figure 3.3, Panel A) also see theirduties as primarily being business ocused. In particular, a higher proportion o centralised fnanceproessionals state their main duties to be relating to other unctions/units than to general or specialistfnance/accounting and supporting operating units.

Analysing the nature o the duties that the fnance unction conducts or other unctions/units reveals thatthe fnance proessional covers many other organisational activities even though the individual works inthe fnance unction rather than as part o the business (Figure 3.4).

These include specifc activities o regulatory reporting and mixed fnancial and non-fnancial duties, aswell as general responsibilities. The most signifcant o these activities is planning/strategy and operations,which together account or 40.1% o the total time spent by centralised fnance proessionals on otherunctions/units.

fiure 3.4 ture o nnce unction duties retin to ter unctions/units



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35

5%

Mean

proportion

of time

15%

10%

25%

20%

0

Current time

accounting

operations

and internalfinancial

reporting

Current time

statutory

reporting and

specialistactivities

Current time

management

accounting

informationand analysis

Current time

management

support and

performancemanagement

Current time

accounting

and management

informationsystems

Current time

other

21.2%

12.1%

23.7%

19.0%

11.6%12.5%

Finance proessionals within the organisation report that the three accounting-based fnance services operations, specialist services and management accounting are the principal ones in which they areinvolved (Figure 3.5), but no service is immaterial. While accounting-based activities remain at the core,management support activities occupy a signifcant 19% o eort.

fiure 3.5 ie on dierent nnce serice res

The degree o centralisation aects how ar the three accounting-based service areas predominate (Figure3.5). In other analysis we see that fnance unction proessionals spend a greater proportion o their time(58.7%) on accounting operations and management accounting than do those who are in any waydecentralised (partially 52% and ully 43.1%). But while decentralised proessionals still report appreciableproportions o time being spent delivering these fnance services, they do not necessarily spend a greaterproportion o their time on management support services.

Service areas covered by the other category in Figure 3.5 are mainly sta management, training othersand administration. Those who are at all decentralised rom the fnance unction report higher ocus inother activities that are not specifc to fnance. This can include project management, contract

administration, business analysis and planning where they are actively working on the business or unit theywork in or report to.

At frst it may be surprising that the proportion o time spent on management support activities does notincrease substantially with increasing decentralisation, since the closer connection with the business thatdecentralisation entails might be expected to involve greater support activity. In act instead o beingengaged in management support activity, some o those outside the fnance unction spend a very highproportion o their time undertaking these direct business activities rather than simply supporting them.

3.6 e indiidu perspectie ocus on te business in re ornistions

In larger organi

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