Lean Finance and Group Finance Automation

Lean Finance and Group Finance Automation

Get Leaner Group Finance Processes Through Automation

Expectations of the finance function are at an all-time high. CFOs are under immense pressure to deliver critical business information and as a result, they are constantly on the lookout for more efficiency and process improvement to acquire more value-added activities and become a better adviser to their organisation.

Proper analysis of financial data is critical to adding new value to a business and CFOs are uniquely positioned to drive their businesses forward.

  • CFOs understand that data is the new currency
  • CFOs can offer essential insights to key decision-makers on how to improve operations and profits
  • CFOs are also increasingly value champions and transformation drivers

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Despite the changing demands of the modern CFOs most still spend too much time on budgeting, forecasting, and reporting and very little time on really analysing the numbers. To deliver better insights, they need to shift the weight of processing and spend less time on low-value tasks and more time on frequent profit simulations and analysis.

One of the most common solutions to this challenge is to invest in automation and while this delivers significant advantages it alone is not a silver bullet. To improve the output from finance you should also develop the underlying processes.

Lean is an alternative approach that changes the way the work is performed, and lean finance practices focus on standardising and streamlining processes and effect continuous improvement. It is essentially a tool for optimising procedures and underpinning sustainable competitive advantage. It enables finance to focus more on customer value and resource efficiency.

Lean was pioneered in the manufacturing industry, as intense competition demanded more efficiency in process and quality management. These practices moved from the factory floor to the office and are now a predominant process management methodology, transforming how finance functions are managed in leading global organisations.

The underlying concept is to eliminate low-value activity and leverage technology to target higher value-added activities. To determine what is or what isn’t low value, an initial review of roles, processes and procedures needs to happen because there is little benefit to wasting resources automating things that are not necessary or needed. Therefore, the initial phase of implementing a lean finance plan is a strategic review, where all procedures are evaluated.

 

Financial consolidation

What do we automate?

To spend less time on mundane processes we can look to automate, but first, we need to determine what the best targets for automation are and the scope of activity. Part of the review process is to look out for what is important, eliminate what we don’t need and automate the rest.

Organise projects into a phased approach with phase one being focused on producing the core financials, automating as much as we can. Phase two will focus on implementing or improving high-value tasks such as scenario and customer analysis.

There are five key focus points for automation:

  • Determine where you can get the most effective levels of automation within your group finance processes
  • Use technology wherever you can to improve things
  • Eliminate waste and low-value activities
  • Get the biggest value return in the shortest possible time
  • Seek incremental benefits from other areas on the value chain such as better profitability, better customer analysis

Implementation roadmap

Lean practices do not change the core accounting and finance service but just simplify the processes for executing these functions, allowing errors, redundancies, and waste to be more easily identified.

 

 

Implementation roadmap

 

Lean methodology application to finance can result in improvement across the department in transaction processing, month-end close, budgeting, forecasting and management reporting. Most organisations that have implemented lean finance see a reduction of margin of errors of around 30-50% and man-hour reductions in the range of 40%–60% which also improves employee involvement and morale.

 

lean finance

 

Image source: KPMG

Conclusion

Lean finance involves simplifying and integrating essential accounting processes to create a more efficient finance operation. Yet the impact of a lean approach goes beyond just improving workflows. It provides an operating methodology that propels process excellence and continuous improvement which also changes the way finance professionals view their work and manage their activities. It can transform finance into a high-performing, customer-focused department. If you would like help to implement lean into your finance function AIS Consulting can work with you to develop a strategy for implementation or provide a demonstration on how lean finance can bring efficiencies to your organisation.