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An optimum target operating model for finance on every CFOs wish list

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Shantanu Ghosh

Global Business Leader Enterprise Services & Consulting

March 14, 2014 - How can many CFOs claim to run finance organizations at optimum efficiency? A complex business environment with regulatory changes, global and cross-functional business requirements, improved risk management and controls, integrity of financial reporting, shifting market expectations are only some of the challenges, and only the tip of the proverbial iceberg, where finance operations are concerned.

This is why defining a successful target operating model is the first step for a successful finance organization. Our experience of more than a decade in transforming finance operations for global enterprises has helped us identify the ten critical levers of effectiveness that span the four broad categories of Finance and Accounting (F&A) operations: the corporate office, planning and managing the business, operations and specialty services.

These levers are:

  • Strategic alignment of finance operations to the companies’ strategic objectives. CFOs need to channelize their investments and turn their attention toward CEO priorities.
  • A governance model that drives accountability for objective standardization goals as well as for experiential effectiveness and people management goals for each function.
  • A target organization model that fosters end-to-end global integration across different functions. A Global Business Services (GBS) program can accommodate regional operations while centralizing other critical functions and leveraging external services.
  • A target process model that can address the full cycle of operations. Gaps and silos are eliminated by standardizing processes and understanding process linkages across the enterprise.
  • Global leverage, because a high-performing finance operating model must harness global capabilities and expertise. Experienced practitioners determine which activities can be performed in-house vs. outsourced.
  • People because teams play a critical role in the setup and success of an operating model organizations of all sizes. In addition to hiring and training, companies also leverage their outsourcing partners for industry insights, new innovative ideas, and benchmarking best practices.
  • Technology and the windows it opens up. Companies now consider how to best "sweat IT assets" before investing in new upgrades. Enhancements to existing ERP environment and cloud-based applications built specifically for the finance function are increasingly viable alternatives when faced with a technology investment.
  • Global master data standards. As the role of the CFO expands, companies are evolving their Master Data Management (MDM) to lower risk, boost profitability, improve customer satisfaction, and build competitive differentiation. An "industrialized" MDM enables a more agile enterprise.
  • Controls since large global corporations need to foster a culture where controls are viewed as risk mitigators, and therefore enablers of value preservation. Mitigating risk without decreasing productivity requires CFOs to strike a fine balance between stifling process agility and lax supervision.
  • Change management and the ability to deftly manage major initiatives. This requires developing mechanisms that foster easy interaction, smooth implementation, and talent retention.

If you want to know about each of these levers, read "The 10 keys to optimizing a finance operating model." And you will know that an advanced operations is a must-have for CFOs across the world.