Top Performers Spend 45% Less and Operate With 56% Fewer Staff

World-class finance organizations cut finance operations costs by 8% in 2006, following their 2004/2005 decrease of 5%. World-class finance organizations now see the cost of finance at 0.67% of revenue, 45% lower than typical companies, where costs are now at 1.22% of revenue. World-class finance organizations also rely on 56% fewer finance staff (46 per 1$ billion of revenue), compared to a staff of 104 per $1 billion for typical companies. These are some key insights from the 2006 Enterprise Book of Numbers™ research from The Hackett Group.

The cost of finance operations has resumed its 14-year downward trend, after spiking dramatically in 2004/2005 due in part to Sarbanes-Oxley compliance efforts, according to the report. Finance operations costs at typical companies increased 18% in 2004/2005, argely as a result of Sarbanes-Oxley compliance-related activities, but this year the costs decreased 3% at typical companies. 

Hackett's research identified five key factors that world-class finance organizations use to across finance and other key SG&A areas:

1. Complexity Reduction: Streamlined compliance processes and reduction in complexity in other areas. 

  • Leading companies spend 55% less than their typical peers on finance controls, and report 53% lower compliance costs. 
  • Leading companies have 40-60% fewer controls than typical companies in five key finance areas - general accounting, revenue cycle, cash disbursements, tax management, and treasury.
  • They have 45% fewer legal entities and 33% fewer tax domains. 
  • In budgeting, they rely on 33% fewer line items, and shift the focus from "beating the budget" to "beating the competition."

2. Strategic Alignment - World-class finance organizations emphasize the linkage of financial and strategic planning to day-to-day business operations. According to Hackett, world-class finance organizations are more than twice as likely as typical companies to have fully integrated planning and budgeting processes, and have stronger overall alignment between strategic objectives and the budget.

3. Technology Enablement - World-class finance organizations rely more heavily on technology than typical companies, and use it to automate transactional activities and drive down costs and staffing levels, while also improving information access. For example, managers at world-class finance organizations are more than two times as likely to be able to access reports online.

4. Business Process Sourcing - According to Hackett, world-class finance organizations spend a smaller percentage of their finance function costs on outsourcing than typical companies, in part due to their bright-line focus on process automation, standardization, and centralization to reduce cost. But they do rely on selective outsourcing, and in some cases outsource major components like accounts payable, after clearly defining a services globalization strategy that is integrated with their business strategy.

5. Cross-Functional Partnering - World-class finance organizations are much more successful at driving a cross-functional approach in key areas such as planning and performance management. As a result, managers at world-class companies are 29% more likely to report that the budgeting process is easy and convenient.

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