UK: Globalising Finance? Not So fast

Last Updated: 4 December 2009
Article by Deloitte LLP

Most Read Contributor in UK, August 2017

Over there?

Executives in large companies today are taking a fresh look at global finance operations. As well they should. Some companies that have not moved any of their finance activities offshore probably should. Others may be better served by steering clear.

Meanwhile, early adopters of finance offshoring are pushing to expand their finance globalisation efforts as they look for every efficiency they can find. These finance organisations are shifting more and more activities offshore to countries ranging from India to China and Poland and Chile, and are establishing consistent and integrated systems and processes across the global enterprise.

Which raises these questions: How much is enough? What's the smart move in today's uncertain environment? If you're already operating a global finance function, should you stay where you are, expand, or pull back? And if you're not, is this the time to start?

To identify the different sides of the issue, we talked with CFOs and finance leaders in 51 organisations in 15 countries. Taken together, they represent 10 percent of Fortune 500 revenues. This briefing summarises the results of those interviews.

In brief

Given the drumbeat for offshoring among analysts and advisors, you'd think companies would be feverishly planning to globalise their finance operations.

That's not happening.

Yes, some companies are pushing globalisation for all the value they can get. However, these are the exceptions—only about 20 percent of those we interviewed.

Most companies are approaching finance globalisation without clear plans or timetables. They have moved some transactional functions offshore—and are satisfied with the modest benefits they've received. But that's as far as they've gone.

Bottom line? The transformation to a global operating model for finance is still in its infancy—and it lacks momentum. Although 80 percent of our respondents believe finance globalisation is important for superior performance, most are still in the earliest stages of the process.

CFOs do it better

Globalisation projects led by CFOs themselves deliver more savings than those led by CEOs, COOs or anyone else. That's probably because CFOled programmes tend to come with a roadmap for future improvement. CFOs also appear to focus on more types of shared services and outsourcing opportunities. And they put them together into a more tightly integrated programme.

So, if your company is looking at adopting deep globalisation for its finance operations, the most important thing to keep in mind is simple: CFOs should run the show.

What is more important than where

In the past, many finance organisations focused on a handful of proven locations for offshoring— such as Manila, Krakow and Budapest. However, as the practice has grown in popularity, these high-profile locations have become crowded and less economical.

Finance today has more location options than ever. Almost all of those options are meeting or exceeding CFO expectations. Which means you're free to think about capabilities and risks, not physical location.

Opportunities for action

Transactional

  • Accounts payable
  • Accounts receivable
  • Travel & entertainment
  • Payroll

Reporting

Management reporting

External reporting

Accounting

Fixed assets

General accounting

Cost accounting

The great divide

Most companies we interviewed focus on globalising individual processes rather than sets of related processes. For example, many have globalised activities such as purchase-to-pay, order-to-cash, and fixed-asset accounting. As a result, they're capturing savings generated by streamlined, end-toend transaction processes.

But when these processes aren't completed in other parts of the account-to-report work stream such as general ledger accounting, cost accounting, management reporting or external reporting, companies are leaving a lot on the table. This misses opportunities for further improvements in terms of quick, efficient reporting and higher control effectiveness.

This piecemeal approach can result in less than optimal performance while companies with deeper, more integrated globalisation programmes achieve significantly better results:

  • The leading performers in our study are able to close their books in as little as four working days, compared with more than 25 days for the lagging organisations.
  • Operating costs for the most efficient finance organisations are one-half percent of revenue, compared with 3.5 percent for the least efficient organisations.
  • On average, companies that match the efficiency of our leaders could save approximately $5 million in finance costs for every $1 billion in revenue. Companies engaged in deep globalisation have invested in figuring out how to efficiently integrate finance functions across geographical boundaries. They report significantly higher satisfaction with their investments than those who have cherry-picked one or two offshoring opportunities.

That said, 60 percent of those we interviewed are still in the earliest stages of globalisation, focusing on a handful of targeted operational activities. We call this the selective stage. But the holy grail is the integrated stage, in which outsourced processes dovetail with activities throughout the account-to-report workstream. Outsourcing service providers and continuous improvement initiatives can be a crucial link for companies looking to make this transition.

Talent isn't the driver

Finance organisations that do global sourcing tend to view offshore talent as a low-value commodity. That's not likely to change anytime soon. The crush of the downturn has made talent a buyer's market— even when it comes to highly capable professionals.

That said, globalised finance organisations tend to focus more time and resources on activities such as decision support, management reporting and in-depth analysis— activities that help businesses create value. That takes a special kind of talent—and it's available all around the world.

Among our study participants, leading organisations have more than 70 percent of their full-time equivalents engaged in these valueadding activities, compared with only 8 percent for more traditional finance organisations.

Final thought: Given the importance of international experience in career development for finance professionals today, companies should pay special attention to opportunities to develop, deploy and connect their people in collaboration with outsourcing suppliers.

The road ahead

CFOs are uniformly cautious about outsourcing. They worry about reduced service quality, cost overruns, vendor risks and employee morale.

But among companies with practical experience, most fears weren't realised. Their experiences generally met or exceeded their expectations.

Efforts in the areas of innovation and continuous improvement are frequently disappointing, perhaps because outsourcing providers typically have little incentive to invest once a contract is signed. The lesson? What you start with is what you get—so make sure it's right from the beginning.

If you're going to do it, do it right

Globalising finance can significantly reduce operating costs. It also enables finance resources to focus more time and attention on activities that create greater value for the business, such as strategy, decision support, analysis and management reporting.

Companies that have effectively globalised finance have four common elements in their programmes:

  • Global processes and systems. They improve and standardise their global processes through redesign and automation, usually supported by global IT platforms.
  • Global talent. They tap into the global talent pool, both for commodity services as well as for leadership and management.
  • Global operating model. They use a global finance delivery model that provides an optimal mix of services based on cost, location, in-house staffing and outsourcing.
  • CFO leadership. Programmes led by CFOs deliver significantly more value than those led by others. Most executives we interviewed said globalisation is part of the future of their finance operations. In fact, 80 percent said that transforming finance into a global function is important to improving performance.

But the same percentage seem to be taking their time through the early stages. The vast majority of companies we interviewed have moved less than half of their finance activities to outsourcing or offshoring. And most are in no hurry to do more.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.