#finance functions

The cornerstone of a well-set finance function within the future is a coordinated approach across all the existing elements

In the current business landscape, business stakeholders are facing an increasing demand of finance functions as a result of dynamically blooming market conditions, enhanced standards of reporting, increased linkages with overseas environments, rapid technological changes, etc. CFOs of many firms have been putting a considerable measure of thought into reconstructing their finance functions, which include analysing the existing structure and redesigning it to make them more agile and effective in managing costs and risks. Over the years, the decentralized structures have become quite inefficient for cost, control, scale and risk perspective especially for companies with multiple business units at different locations. A recent study demonstrates that 75% of Fortune 500 firms have adopted some type of centralization and shared services. A pitch for shared services or centralized transaction processes is still viewed as a solution to lower costs by many. However, these views are no longer considered approachable, especially in the present market condition which necessitates enhanced controls, regular reporting and certification on internal controls. In many cases, the regulatory environment has made it necessary for firms to acquire certification by the board of directors and auditors affirming that the firm has an effective system of internal controls. A case in point is the current prerequisite of Indian Companies Act, 2013, which commands executives of the organizations as well as the auditors to certify that the firm has an adequate set up of IFC (Internal Financial Controls) framework and that these are operating effectively. For example, in a company with multiple business segments and units with decentralized finance processing and teams, processing could be an altogether different experience especially with their rampant violations and policies merely existing on paper. In many cases, the decentralized teams may delay or not implement the policies entirely under the influence of the local senior management. This might result to several possible leakages, the processes not functioning at optimum levels, and inefficient controls. It would require a colossal effort to do any required certification in such an entity. In addition, the managers frequently face the challenge of choosing between external centralization, internal centralization or outsourcing. The above example clearly conveys few risks posed by decentralized transaction processing. But, this is not recommended in all cases, especially in current dynamic and rapidly evolving business conditions.Constructing a framework and an efficient team internally could be extremely time-consuming. Also, merely getting people, and creating a facility is not going to get the job done as there are various integral aspects of training, setting processes and cultural assimilation which is a long process and will surely delay the desired results. Whereas, using the expertise of an external company will surely speed up the entire process, especially in the current dynamic business environment. Organizations have a finite bandwidth; they need to prioritise the use of the same for attaining its core objectives and should consider the available external options to outsource the process.

Daniel Mason, Prophix UK MD and survey sponsor, comments:  “This survey ties in with what we see generally in the market place today, there is a recognition that the office of finance needs to change, to modernise its approach and extend its reach across the business, and there is a genuine desire to do so.  However, execution can often lag some way behind.  The good news is that we are definitely seeing signs that momentum is building.” “Many of our customers are taking advantage of the benefits that Corporate Performance Management technology can bring to automate the collection and reporting of data, truly enabling their teams to focus more on the analysis of data and ensuring it is used to positively influence business decision making.   Many are also proactively partnering with other areas of the business to forge stronger and more meaningful links – the net result is finance team that becomes a source of competitive advantage helping shape the future of their organisations rather than merely reporting on its past. An infographic released this week depicts some of the highlights of the research and will form the foundation of discussion in the FSN Modern Finance Forum in Linkedin during the next few months.  The full research entitled The Future of the Finance Function Survey 2016 will be released at a reception and dinner at the Dorchester Hotel on 2nd June 762 senior finance professionals responded to the survey covering 23 countries and 13 industry sectors.  Just over half of the respondents were from organisations with more than 1,000 employees. About FSN Publishing FSN provides finance professionals around the globe with independent news, vital analysis and deep insight about key developments in the world of business and accounting systems.  We debunk the technical jargon of the IT world and present leading-edge issues in a way that is accessible and relevant to business decision makers. With more than 1.5 million page impressions per year, FSN is a major influence in the business systems market and the largest business of its kind in Europe.