MIAMI & LONDON--(BUSINESS WIRE)--Typical finance organizations can substantially narrow the gap between their cost levels and that of top performers, and top performers can become even better by leveraging digital transformation, according to new world-class finance research from The Hackett Group, Inc. (NASDAQ: HCKT).
A public version of the research, “Raising the World-Class Bar in Finance Through Digital Transformation,” is available on a complimentary basis, with registration, at this link: https://www.thehackettgroup.com/research/2017/wcpafn17/. World-class finance organizations are those that achieve top-quartile performance in both efficiency and effectiveness across an array of weighted metrics in The Hackett Group’s comprehensive finance benchmark.
According to The Hackett Group’s research, typical finance organizations can cut process costs by 35 percent by adopting digital technologies, nearly matching the level seen today by world-class organizations. World-class finance organizations run their shops at 45 percent less overall cost as a percentage of revenue than peer organizations.
While cost per revenue for world-class finance functions has been flat for the last several years, the research found that world-class performers continue to improve by investing in key areas such as technology rationalization, advanced analytics, process optimization and application modernization.
To break the cost barrier, world-class finance organizations need to turn to digital transformation, The Hackett Group’s research finds. World-class finance organizations can use digital tools to cut process costs by an additional 20 percent while substantially increasing effectiveness. For example, adopting digital tools can increase the amount of time top performers spend on analytics to 75 percent, reduce billing errors to 1 percent and increase invoices paid within terms to 95 percent.
Already, technology is making a big difference in the efficiency and effectiveness of world-class finance organizations, enabling them to add greater value to the enterprise. Technology-enabled world- class finance organizations see up to 66 percent lower error rates. They also facilitate more analysis and smarter decisions by spending 24 percent less time collecting and compiling data.
Technology advancements are also enabling top performers to better support their companies with more advanced analytics. They are 41 percent more likely to include both financial and non-financial key performance indicators in their analysis, and are 85 percent more likely to rely on a mature performance scorecard to measure finance performance.
Although world-class finance organizations owe a great deal of their success to technology, they expect to spend 61 percent less on it in 2017 than typical finance organizations, relying on deliberate planning, sound governance, systems rationalization and new tools to reshape their service delivery model and keep a lid on costs. But The Hackett Group’s research indicates that world-class finance organizations are planning to increase their spending on technology over the next few years, to address digital transformation.
“Finance has largely reached an inflection point, where legacy approaches to automation and transformation are simply not yielding additional performance improvements,” said Nilly Essaides, senior EPM & finance research director at The Hackett Group “The good news is that digital transformation technologies, including robotic process automation, big data, advanced analytics and cloud-based applications offer exceptional improvement opportunities for both world-class and typical companies.”
“Typical finance organizations can virtually match world-class process costs using digital transformation, and world-class finance organizations can use digital transformation to break through the cost-reduction plateau where they’ve been trapped for several years,” said Ms. Essaides.
The Hackett Group’s research details six areas where finance organizations can harness digital technologies to improve efficiency and effectiveness. Digital customer engagement tools can be used to get closer to internal and external stakeholders -- for example by setting up portals to interact with vendors or customizing reports for internal end users. Robotic process automation can enable software to perform rule-based activities previously handled by people. The savings of opportunity of such individual activities can amount to up to 90 percent. Depending on how many activities in a process are automatable with RPA, total process cost savings typically range between 20 and 40 percent.
Advanced analytics can enable the finance function to use big data and more powerful analytical models and tools to drive greater insight and improved decision making. For example, predictive analytics can help finance pull external data on particular companies, plus project economic data on particular geographies and combine it with customer payment history to make credit decisions. Or algorithms can be used to enhance forecasting by examining social media posts about potential trouble spots and analyzing the intensity of discussion based on specific key words collected in big data repositories.
Modern digital architecture includes ongoing rationalization of the legacy finance application portfolio, adopting cloud-based based alternatives for new functionality or migration of existing financial application, mobile enablement, modularization and (big data) analytics support. Digital workforce enablement can help enhance productivity, streamline the creation and capture of knowledge, and improve the value contribution of individual workers and their virtual teams. One pharmaceutical finance organization, for example, relies on Yammer, an intracompany social media platform, to connect employees, crowdsource answers, speed up the development of new ideas and appeal to younger employees. Finally, cognitive computing -- self-learning systems that use data mining, pattern recognition and natural language processing to mimic the way the human brain works -- can augment the ability of finance staff to run models, make predictions and analyze large data sets.
“We’ve seen many clients generate dramatic improvements in finance using these tools, individually or in combination,” said Richard Cardillo, The Hackett Group principal and finance transformation practice leader. “Finance organizations must continue to invest in digital technologies to significantly accelerate the transformation of their service delivery model through improving capability across organization design, process standardization, working more effectively with third-party providers and reinventing their talent model through deploying a digital-ready workforce.”
Jim O’Connor, finance advisory practice leader and principal, added that “Finance cannot ignore the digital promise or it risks compromising its ability to compete in the fast-changing business environment. By adopting digital technologies, finance can substantially reduce cost and boost effectiveness resulting in greater enterprise agility and the ability to keep pace with external change.”
The Hackett Group’s world-class finance research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of large global companies. Download a public version on a complimentary basis, with registration, at this link: https://www.thehackettgroup.com/research/2017/wcpafn17/.
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies, offering digital transformation and enterprise application approaches including robotic process automation and cloud computing. Services include business transformation, enterprise performance management, working capital management and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement and information technology, including its award-winning Oracle EPM and SAP practices.
The Hackett Group has completed more than 13,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 87% of the Fortune 100, 87% of the DAX 30 and 58% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm's benchmarking metrics, best practices repository and best practice configuration guides and process flows, which enable The Hackett Group’s clients and partners to achieve world-class performance.