Can a comprehensive analysis of financial administration help in managing an organization and saving on costs? If the answer is yes, how can this be achieved? These are the questions I intend to answer in a series of blog posts dealing with financial administration from various angles, as a function that can provide even more added value than today. My posts will focus on the processes listed below, and highlight issues that can help you to improve your company’s financial administration and operations and to view your operations as processes:
- Order to cash
- Purchase to payment
- Registration to reporting/analysis
As the titles suggest, these processes rarely start and end in financial administration, which is why collaboration is needed throughout an organization. IT also plays a major role as an enabler. My future blog articles will also discuss these topics from various perspectives.
1 Do you spend your time on secondary tasks?
In many mid-sized and even large enterprises, the financial administration function spends most of its time working on routine tasks and error correction, when time should be spent on refining the relevant data and thoroughly analyzing financial figures. This would lead to more rational decisions based on appropriately collected and valid information.
However, information is often used superficially or not at all. The number one reason for this is time wasted on routine work. Errors are detected at the start of the invoicing process, the owner of a purchase invoice is unknown, or no one knows whether a purchase has even been approved. In the worst case, export files are fixed manually and the few reports submitted to the management team are created in Excel. There is no time for strategic work and, then again, trust in the figures is so low that financial administration has almost zero credibility.
Fortunately, the above scenario tends to be rare nowadays. Many processes work well in financial departments. But there are always things to improve. Going through the current situation carefully and thoroughly, and drawing up a road map of where you want to go, would be useful for many companies. A well-prepared analysis and road map provide at least the following two benefits:
- Spotting the current bottlenecks and identifying the required investments of time and/or money.
- The second, even more valuable, point is identifying the road to the future and financial control likely to increase business value. A high-quality analysis also includes the updating of current process descriptions, or creating such descriptions if they do not exist.
For me, the following areas are the most important when analyzing financial administration:
- Describing the current status as a set of processes.
- Identifying how much time is spent on various parts of a process and linking this to the process description.
- Calculating and allocating total costs.
- Highlighting sore spots.
2 Crossing the finish line
When the above steps have been completed, we can move on to the next, even more fruitful stage. This involves planning and redesigning processes in order to meet business needs. Such a stage is all too often set aside for better times, or the final report prepared by the company is left to gather dust. There are usually two main reasons for this: 1. The final report does not present clear proposals for improvement and the report has not yet been converted into a set of “to-dos.” 2. Insufficient time.
With respect to the first reason, it is important to demand a concrete list of proposals for improvement in order to avoid an overly general final report, especially when the analysis is conducted alongside a partner. Problem-solving skills and an understanding of the aims involved are also needed. The schedule should be a little too tight rather than too loose, and the parties should commit themselves to it.
The second reason, time, is an even more common problem. Development of financial administration is often subject to the same issues as development activities in general. Resources are needed at the outset and little money is available. A good solution would involve engaging partners that can and should be given responsibility for performing the required tasks. A well-prepared plan also defines the payback time for the initial investment, making it easier to value and prioritize tasks.
A clearly planned initial analysis contains all the above-mentioned elements. When the view ahead is clear, it is possible to move forward. Should your organization analyze the current state of your financial administration and how it might be improved? This is a subject that I would be delighted to continue discussing with you.
The author works for Enfo in Financial Process Services in the areas of management consulting and project operations. With seven years of service at Enfo, Ville has expertise in financial administration consulting for a number of industries, and an in-depth understanding of information systems related to financial processes.