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Balance Sheets Best Practice

Advantages of Finance Best Practice Networks

by Hans-Dieter Scheuermann

Executive Summary

The article describes the needs of complex finance transformations projects and how finance best practice networks can help an organization find the best practices that fit its specific requirements.

  • Most business transformation projects require that the finance function is prepared to enable and accompany change.

  • Governance and stewardship is one role. Finance excellence in operations and business partnering is the second one.

  • Finance best practice networks are the platform to exchange experiences: Examples from Roche, BHP Billiton, Nestlé, BP, and Philips illustrate such projects.

Introduction

The Best Practice Network for Finance and HR is a network for senior executives and best practice leaders at the senior executive level—spanning nations and industries. The goal is to facilitate networking, and allow the business leaders of large customers to exchange experiences and their use of best practices. The Best Practice Network for Finance and HR injects ideas and concepts into a cross-company network of professionals to identify best practices, disseminate information members can learn from, test new ideas, and develop practical solutions that work in specific company environments.

By tapping into the vast amount of experiences out there, and a new willingness to share and connect, companies stand to gain. Why not learn from an insurance company how best to prepare for risk, and why not talk to an oil company to learn how to handle the current trend to be green?

Finance Transformation Projects

Many companies currently undergo big projects such as a finance transformation, responding to the needs of corporate governance, and, at the same time, optimizing the organization of their finance functions. Finance transformation projects typically follow four main areas for improvement: Processes, organization, information systems, and people. From the viewpoint of an IT (information technology) company, it is of utmost importance that the goal, the process, and the organizational structure are clearly laid out, agreed on, and planned, before they are set in stone by the implementation of an IT system. What is required is a multi-step process towards management of information management—according to Peter Drucker “focusing on the ‘I’ in ‘IT,’ not on technology first.” First, it is important to understand the critical business and chief financial officer (CFO) issues, and their mission. The second step is to design or redesign the finance and/or business architecture, and its processes. The final step, only after completion of the first two, is to design or re-engineer the IS architecture and solutions. Only by integrating all three views, can IT/IS (information system) create maximum value, enabling the possibility for optimal trade-off decisions.

The structure and goals of finance transformation projects reflect what the production and supply-chain side of companies have already addressed under the umbrella of “lean manufacturing”–the acceleration, automation, and simplification of processes; the reduction of working capital; the implementation of centers of expertise; the saving on labor costs; etc. It is possible to create more value with less work, by dispensing with wasteful activities, and applying best practices. On the financial side, companies look at shared services, simplify the charts of accounts, optimize their financial supply chain, put their management reporting on a diet, and implement employee and manager self-services. Reporting does happen in a “pull mode” by the business user instead of being “pushed” on a periodic schedule.

As financial transformation most often leads to automation and efficiency gains as well, financial capacity is freed to support the business in a different way from before. Where better analytics and real-time business insight become available in an ever-more complex world, the finance function can and must develop from a bean-counting report provider into a trusted, well-equipped, knowledgeable, and respected business partner. “If we are honest, most finance professionals are still at the backend of the pipeline, still analyzing what others have done. The challenge in the future will be to help to develop the pipeline rather than reporting on the pipeline and on the ideas of others,” says Paul Koppelman, CFO of BHP Billiton Marketing, in his presentation at the European CFO Roundtable on July 9–10, 2007, in Hamburg, Germany.

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