The role of a CFO has been undergoing considerable change over the last few years as businesses try to weather the economic crisis. Suddenly, CFOs were expected to go beyond creating and managing budgets and driving the efficient use of finances. Now the C-suite expects them to anticipate change in economic conditions as well as permutations in their markets and within their industries. Over the last three years, CFOs are expected to operate in uncertainty.
There have been increased pressures internally, too. CFOs have become responsible for continuous improvement in financial processes with an eye on cutting costs, reducing risk exposure, creating inputs for enterprise strategy, staying flexible in terms of talent and reducing their own team size by outsourcing financial processes.
Put another way, CFOs have moved a long way since they were responsible for simply tightening the purse strings. The change over the last decade has been dramatic.
Today more and more CFOs are playing a key role in creating shared services across the organization and outsourcing functions that outsourcing partners can safely and completely manage.
Shared services game changers
The reality is that the business environment continues to be unpredictable and volatile. As a consequence, service delivery models for the finance function continue to evolve in an attempt to meet business needs and deliver best-in-class financial performance.
CFOs across businesses are realizing that shared services create two essential game changers:
- Shared services within and outside the organization can execute core finance functions more efficiently. These include accounts payable, accounts receivable, procure-to pay, order- to-cash, payroll management, etc that involve transaction and process efficiency. This is a well-established, old-school reason for creating shared services and for outsourcing processes that an organization is comfortable with (with an eye on reducing costs).
- Shared services (internal and external) can extract business intelligence from enterprise-wide transactions and knowledge-driven services, making the organization responsive and agile. This is value creation that the CFO’s office must now deliver. This is also the new-school reason for leveraging shared services internally and outsourcing processes that may require either professional competency or technology not available within the organization. Or, as is the case more often, organizations are not able to scale processes to keep pace with growth and therefore need to outsource them.
Companies build the foundation for such internal and external shared services on standardization of data, processes and applications. Standardization lays a strong and resilient foundation for automation and real-time analytics. Standardization supports interoperability and lubricates the gears of collaboration that lead to innovation.
The temptation is to build all these capabilities in-house (which is a logical start point). But it may not be a good proposition for a growing organization to keep scaling its processes and keep pace with technology that enables this.
So, the question to ask is: Can I create a hybrid shared service scenario that lets me outsource a portion of my finance processes and then gain flexibility with what and how much to outsource, based on my business needs?
Why CFOs should look at hybrid shared services model
There are several reasons why CFOs should look at a hybrid shared services model, built on a foundation of standardized data, processes and applications:
- A hybrid model helps retain critical functions related to decision-making, approvals, strategy and risk management (which are difficult to outsource as they are not entirely, and not always, rules based).
- Outsourcing models and partners have grown in maturity. Their global operations ensure investments in cutting edge tools, technologies and knowledge that result in dependable process management.
- The hybrid model permits the business to raise the bar and dramatically improve the maturity level of its own internal shared service. This helps lower time spent on managing mundane transactions and instead helps the finance organization focus on building sustainable enterprise intelligence and strategy.
- With the right outsourcing partner it is possible to access flexible and innovative technologies and skill sets without having to invest or getting straddled with outdated technologies within a few years.
- A hybrid model continues to deliver on the old-school promise of operational savings as the enterprise continues to outsource an increasing number of processes over time.
However, beware: financial outsourcing, regardless of the model, can be difficult to achieve. It calls for the creation of a strong governance model. Strong governance is the only way to confidently take finance functions outside the enterprise.
Is your organization ready for this hybrid shared services model?