The cost of a finance function as a percentage of revenue is a metric many of us can understand. APQC recently conducted a survey that revealed top performers in the finance function enjoy a total cost of finance that is less than 1% of revenue.
While this percentage may not be meaningful to some organizations, (or those who don’t work in the finance function) it’s interesting to note that more than a quarter of the CFO’s surveyed consider this metric to be an important benchmark for their finance operations.
The reason of course is pretty clear; If the finance function spends more time in transaction processing than in decision support, or control and management activities, then the value of the finance function is diminished.
While a low percentage among top tier performers is good, it’s important to remember that this is generally only achieved by economies of scale.
Manpower is finance’s biggest cost
Research reveals that manpower costs represent the largest cost in the finance function, ranging from 64% per APQC to as high as 78%.
Organizations in Europe spend less on personnel compared to their peers in the rest of world, but more on outsourcing, systems, and overhead costs in the finance function.
A similar study by Robert Half – Financial Executives Research Foundation, entitled Benchmarking the Accounting & Finance Function: 2014 found that accounting and finance managers in the United States work an average of 47 hours per week, while non-management staff work 42 hours per week. In Canada, managers typically work 46 hours weekly, while non management staff work 40 hours per week.
8% of finance and accounting staff members in the United States are temporary or project workers, compared to 5% in Canada. Over half of the U.S. companies and two-thirds of the Canadian companies surveyed still manually reconcile accounts, which strains staff and resources.
In the US, 29% of companies report that they use temporary or project professionals. This number continues to rise as companies increase in size, rising to 76% at firms with $5 billion revenues or higher.
With labor costs representing such a significant proportion of overall finances and the cost of finance being a key performance indicator, it becomes obvious for many CFOs that the best way to keep costs down, and still meet the demands of business in terms of transaction volumes and decision support has to be through improvement of the systems.
One way for finance leaders to constrain the cost of the finance function is to outsource transactional processes and utilize shared services.
Outsourcing simply shifts bad processes
Unfortunately when you outsource a faulty business process without process re-engineering or improving your systems, all you are effectively doing is moving the problem into the hands of a different team of resources. Ultimately the savings by outsourcing to labor with a lower cost per unit results in diminished business processes, increased data quality issues and degraded service levels.
One of the ways to alleviate this problem is to standardize and automate even the simplest processes. Winshuttle customers like the A.P. Moller–Maersk Group successfully reduce their document per cost, constrain their workforce size and improve their data quality by using Winshuttle to standardize data gathering in a structured and methodical way.
This approach not only enables them to manage their data more effectively, it also helps them to streamline processes, adhere to SLA’s and represent a higher value to the business.
Watch the interview below and read the case study to learn more about how your business can benefit from the advantages of Winshuttle’s software platform.
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