Global

Finance
360
FINANCE PROCESS
OPTIMIZATION
MAPPING THE JOURNEY TO HIGH
PERFORMANCE
Volumes have been written about process reengineering and the need to eliminate
non-value added activities from organizational behavior. Yet companies continue to
struggle with this issue for a variety of reasons, including mergers and acquisitions,
“Leading changes in technology platforms, global sourcing and simple personnel turnover.
companies
While there are a variety of models to reengineer and optimize processes, the Six
continuously Sigma model has proven its usefulness. Pioneered by Motorola, GE and other
leading organizations, the Six Sigma model provides a well-defined method for
pursue efficiency approaching the reengineering effort. There are five steps as defined below:

through Define
reengineering and
The Six Sigma model: Definition of a process is required to set process
optimization to
parameters and to understand which activities are part
1. Define of the process and should be measured and analyzed.
enhance service
2. Measure The first step is to define the customer or customers for
delivery and drive 3. Analyze a particular process and to document their
4. Improve requirements. The customer may be an external
out cost. The Six stakeholder, as in the case of customer invoicing,
5. Control
Sigma model is an however, it could also be an internal stakeholder. If
there are multiple customers, they should be ranked as
effective tool to primary or secondary stakeholders. After customers are stratified into primary and
secondary stakeholders, their specific requirements for the end-result of the process should
transform finance be documented. For example, an external customer expects an invoice as part of the
Order-to-Cash process; it’s critical to understand what attributes that invoice should have in
processes and order to satisfy the customer.
deliver the value
Once the customers for a process have been defined, ranked and their requirements
expected by a documented, it’s important to create a process map for the process as it currently exists.
The map should clearly define the input(s) and output(s) of the process. The map should
company’s then be developed to show the process activities as well as the “hand-offs” between
organizational roles and departments. Key information flows, including interfaces, reports
stakeholders.”
and queries should be noted on the process map.

Measure
Once a process has been accurately defined it can be measured. The team measuring this
process will collect a series of baseline metrics to gain an understanding around both the
effectiveness of delivering that process as well as its efficiency as measured by cost. As
we’ll see later, it’s important to collect baseline data in a manner consistent with chosen
benchmarks so that there is an “apples-to-apples” comparison.
One of the challenges in actually measuring the cost of a process is identifying the FTEs
involved in that process. Often there are personnel involved in a “shadow” organization who
are involved in some aspect of the process but are never properly identified. These are
people who don’t have a Finance title but are still involved at some level in the process. An
Global Finance 360 | Copyright 2010 | All Rights Reserved 1

About Global Finance 360
Global Finance 360 covers the
world of corporate finance and
accounting and how these
activities are impacted by
globalization. Focus areas
include Finance Delivery
Strategy, Shared Services,
Business Process Outsourcing,
Process Improvement and
Organizational Design.
Global Finance 360 is run by
Steve Lynch. Mr. Lynch is a
Principal in the Finance
Transformation practice of a
global consulting company. He
is responsible for the marketing,
sales and delivery of Finance
Transformation services in North
America and serves as a key
liaison for his company’s global
Finance practice. He brings
more than 15 years of
experience advising global
companies on their service
delivery strategies and has
served over 60 clients in a
variety of industries including
consumer product and industrial
manufacturing, aerospace &
defense, transportation,
technology, entertainment and
financial services. He has also
served as a Controller in private
industry and as an auditor in
public accounting.
Mr. Lynch is an active content
contributor on the topics of
Finance Transformation and
globalization and has presented
at various forums including the
IQPC Shared Services &
Outsourcing conference. He can
be found on the web at
www.globalfinance360.com.
Contact Information:
Steve Lynch
Toll-free: +1.800.216.2512
Office: +1.719.481.2599
1042 W. Baptist Road
Suite 194
Colorado Springs, CO 80921
slynch@globalfinance360.com
www.globalfinance360.com
example would be a person in a manufacturing facility who has an Operations title but is
involved in receiving and entering vendor invoices into the Accounts Payable system. Any
effort to accurately calculate the cost of a process must incorporate this shadow
organization.
Another challenge related to measurement is actually capturing the metrics. Often a
company will state that they are measuring a process for a specific metric, say vendor
invoices processed per FTE per annum. The challenge is to capture these metrics through
an automated routine rather than gathering them manually, which in itself adds inefficiency
to the organization. Once the performance metrics have been defined, it’s often possible to
reconfigure an ERP system or produce a specific report that will deliver these metrics
without manual effort.
Analyze
Now that a company has accurate baseline performance and cost data, it’s possible to
analyze the process to determine how well or poorly it’s performing. The baseline data
should be compared to relevant benchmark data to identify performance gaps. This
benchmark data is available from a variety of sources including industry organizations and
consulting firms.
The analysis should focus on the two key dimensions of process performance: effectiveness
and efficiency. The effectiveness metrics will tell the organization how well it’s meeting the
customers’ requirements. Many of the effectiveness benchmarks will focus on quality, such
as the percentage of customer invoices that contain a defect.
The efficiency metrics will tell an organization how successful it’s performing the process
and will use measures such as cost and cycle time. It’s possible for a metric to be both an
effectiveness and efficiency measure, such as the time to deliver management reports to
internal stakeholders, since one of the likely requirements of these stakeholders is the
timely receipt of financial information.
Based on the analysis, a portfolio of improvement opportunities will rise to the surface. In
deciding how to prioritize the portfolio of initiatives, several factors should be considered:
1. Processes that are Critical-to-Quality (CTQ) – This is an important concept in
process improvement and focuses on those processes which key stakeholder
groups such as customers or regulators. Even if another process shows a greater
cost savings through potential improvement, a company may decide to tackle the
CTQ initiatives first.
2. Processes that are ineffective. These processes are not necessarily critical to
quality, yet they can impede the operations of a business. For example, if
management information is so poor that it inhibits decision making capabilities, it
may make sense to drive through this initiative to bring performance levels to an
acceptable quality.
3. Processes that are inefficient. A process may cost far more than similar processes
of high-performing companies, or they may have significantly longer cycle times. In
either event, these processes are ripe for transformation to improve efficiency.
All of the decisions made in the prioritization of initiatives should be captured in a business
case that lays out the required investments and the anticipated benefits. The data collected
around the current performance of each process and the gap to high-performing
organizations will be essential to developing a fact-based business case for each initiative.
In addition to these factors, there can be a number of other factors, many intangible, that
drive the prioritization of initiatives. The business case should also identify any key
dependencies that must be completed prior to the beginning of a specific initiative.
Global Finance 360 | Copyright 2010 | All Rights Reserved 2
 Improve
About Global Finance 360
Improvement can take many forms depending on the deficiencies revealed in the analysis.
Global Finance 360 covers the
It’s important to leverage the understanding of root causes identified previously as well as
world of corporate finance and
accounting and how these
the bottlenecks in the existing process. Based on the company’s understanding of these
activities are impacted by issues, a newly reengineered process can be developed that incorporates key learnings as
globalization. Focus areas well as leading practices from other organizations. As part of this reengineering effort, the
include Finance Delivery project team should focus on the following six domains of change:
Strategy, Shared Services,
1. Business process – Addresses what the enterprise does, how it does it, what rules it
Business Process Outsourcing,
Process Improvement and
follows and what results it obtains,
Organizational Design.
2. Applications – Encompasses the capabilities, structure and user interface of
Global Finance 360 is run by software provided to the business users
Steve Lynch. Mr. Lynch is a
Principal in the Finance 3. Technology – Identifies the hardware, system software and communications
Transformation practice of a components used to support the entire enterprise,
global consulting company. He
is responsible for the marketing, 4. Data – Addresses the content, structure, relationships and business data
sales and delivery of Finance surrounding information the enterprise retains permanently,
Transformation services in North
America and serves as a key 5. Organization – Focuses on the people within the enterprise: their culture,
liaison for his company’s global capabilities, roles, team structures and organizational units
Finance practice. He brings
more than 15 years of 6. Locations – Specifies where the enterprise does business, both in terms of
experience advising global geographic location types and in terms of specific physical facilities at specific
companies on their service locations.
delivery strategies and has
served over 60 clients in a The key deliverables from the Improve step are the future state process flows that define
variety of industries including
the new activities and the organizational units that perform those activities as well as any
consumer product and industrial
accompanying narrative that further explains the six domains of change noted above.
manufacturing, aerospace &
defense, transportation,
technology, entertainment and Control
financial services. He has also A significant challenge in many organizations is sustaining the change created in the
served as a Controller in private
previous steps. For lasting change to occur, the new processes need to be embedded in
industry and as an auditor in
the culture of the organization. One key aspect of this cultural change is the continued
public accounting.
focus on maintaining and enhancing the reengineered processes.
Mr. Lynch is an active content
contributor on the topics of To effectively monitor the new processes, a series of performance metrics should be
Finance Transformation and codified into a measurement dashboard. The dashboard will contain a series of metrics that
globalization and has presented focus on the effectiveness and efficiency of the new processes. It’s logical to use some of
at various forums including the the same metrics that were defined and measured in the Measurement step. Quality, cost
IQPC Shared Services & and cycle time metrics are typical metrics that would be monitored on an ongoing basis.
Outsourcing conference. He can
be found on the web at It isn’t enough to simply calculate these performance metrics, there must be a governance
www.globalfinance360.com. body in place that is responsible for reviewing these metrics regularly and acting on any
information that shows the performance to be deficient.
Contact Information:
Conclusion
Steve Lynch
Reengineering and optimizing processes are essential to an organization intent on
Toll-free: +1.800.216.2512
remaining competitive. This five-step model based on Six Sigma principles can be an
Office: +1.719.481.2599 effective tool for driving this change. This should be a continuous effort to enhance
performance levels and drive cost out of the organization.
1042 W. Baptist Road
Suite 194
Colorado Springs, CO 80921

slynch@globalfinance360.com

www.globalfinance360.com

Global Finance 360 | Copyright 2010 | All Rights Reserved 3