The road to financial transformation

A step-by-step guide to assessing the four major business processes that fuel finance and accounting

The finance function has become increasingly complex, creating more opportunities for process inefficiencies. Forward-thinking leaders are assessing their organization’s finance function to proactively identify and understand weaknesses with the goal of transforming core finance processes to help their businesses succeed.

For most middle market companies, inefficient processes will manifest as long closes, a high volume of manual tasks, poor quality information, lack of insights and slow invoice processing.

If your company is experiencing these disruptions, take this self-assessment—covering the four core accounting and finance processes—to illuminate specific shortcomings within your organization. Using your assessment results, you can prioritize action items and seek process and technology solutions that will put you on a path to optimized, streamlined finance and accounting operations.

1. Source-to-report

This process encompasses accounts payable, accounts receivable and financial close, consolidation and reporting. A “no” answer to any of these questions suggests your organization struggles in these areas:

• Is your organization’s close process tight and efficient, with transparency into the close process status from a completion perspective?
• Are your company’s financial statements consistently accurate and high quality?
• Has your team moved away from heavy reliance on Excel and highly manual processes to perform core financial processes?
• Is your organization capitalizing on the integration, automation and self-service solutions that digital transformation creates?

Key source-to-report benchmarks:

• Timely processing, higher accuracy and a faster close
• Fewer manual entries and reconciliations
• Use of automation and point solutions

2. Source-to-pay

This process includes strategic sourcing or procurement and accounts payable. Strategic sourcing is achieving maximum value for your organization by leveraging strategic supplier relationships to meet supply chain demands. Accounts payable is streamlining the process of requisitions, invoices and payment processing.

A “no” answer to any of these questions about strategic sourcing or procurement suggests your organization struggles with vendor management and supply chain issues:

• Is your organization confident you’ve achieved all possible gains in contract management? Is your company realizing all possible cost savings?
• Has your company maximized efficiency in inventory management?
• Are your organization’s logistics and warehousing operations as tight as possible?

A “no” answer to any of these questions about accounts payable suggests your organization is challenged by invoice and payment processing:

• Has your team successfully eliminated most manual, time-intensive and repetitive tasks?
• Has your organization eliminated highly manual and paper-intensive invoicing processes?
• Does your organization leverage digital payment methods for paying invoices?
• Does your company employ an efficient service delivery model (i.e., outsourcing, onshore/offshore shared service, COE)?
• Is your team satisfied with your travel and expense management?

Key source-to-pay benchmarks:

• Less time spent managing contracts and suppliers
• Gained efficiency from electronic processing and digital payments
• Streamlined expense cycle

3. Lead-to-cash

This process covers customer experience and accounts receivable, which spans the full customer purchase journey from lead to transaction.

A “no” answer to any of these questions about customer experience and accounts receivable means your organization has room to improve in these areas:

• Is your organization delivering a stellar end-to-end customer experience?
• Does your team execute invoicing, collections and customer service smoothly and without hiccups?
• Has your team optimized revenue recognition, cash flow and visibility into working capital?

Key lead-to-cash benchmarks:

• Higher lead conversion and customer retention rates
• Lower days sales outstanding
• Electronic billing and payments
• Efficient collections and deductions management
• Automated credit modeling

4. Plan-to-act

This process involves financial planning and analysis (FP&A) and refers to your teams’ ability to perform forward-thinking strategic planning to meet current and future goals, objectives and your strategic organizational vision.

A “no” answer to any of these questions about strategic planning capabilities means your organization may be performing sub-optimally in this area:

• Is your team confident in their target setting and strategic planning abilities (i.e., long-range planning, annual operating plan, 5-year and 10-year plan)?
• Is your process for budgeting and forecasting streamlined, accurate and reliable? Does it leverage technology solutions to aid in compilation and analysis?
• Does your team have the time and expertise to produce sophisticated financial modeling and scenario planning?
• Is your team viewed as a strategic partner to the business and key internal stakeholders?

Key plan-to-act benchmarks:

• Shorter planning cycles
• Greater data visibility and real-time analysis
• Efficient budgeting and forecasting
• Increased collaboration across the organization

To create a high-performing finance function, it’s important to focus on value-driven processes that enable the enterprise to effectively execute its strategic vision. The finance function plays a critical role in integrating finance, accounting, operations, reporting, performance measurement and risk management.

The key is to identify those areas within corporate financial management where there is room for improvement. An objective third-party advisor could prove beneficial in this assessment, and further help uncover where integration and automation initiatives would produce the greatest impact. Achieving finance transformation can be daunting—both where to start and how to pursue solutions. If going it alone feels overwhelming, consider bringing on an advisor.