The Bottom Line Payoff
The process efforts at Rock-Tenn have reduced its closing time from 15 days to 10. But "the business didn't feel disadvantaged when we were closing in 15", Shutzberg says. The real benefit for Rock-Tenn (in addition to meeting Sarbanes-Oxley requirements), he says, was "in consolidating accounting by reducing headcount".
An efficient financial process typically lowers costs by eliminating the need for reconciliation across systems and processes, thus reducing demands on staff, and by eliminating duplication of effort across organizations. Common processes and systems allow for more automation and shift responsibility to a smaller set of managers.
At Accenture, sales, general and administrative expenses have dropped 1 percent a year as a share of revenue, says Tony Coughlan, controller and chief accounting officer — that's a $US166 million drop for Accenture in 2006, given its $US16.6 billion in revenue. In essence, Accenture's accounting costs have stayed flat as the business has grown, he notes. Coughlan attributes this payoff, in part, to reworked financial processes and a consolidated technology platform: "We've cut finance headcount even as we grew, and a significant driver was our ability to leverage the infrastructure better." IT costs relative to corporate revenue have also dropped by half, says Accenture CIO Frank Modruson. "And we have better technology than we did before," he notes.
Managing Smarter
Accenture wasn't just looking for cost reductions. When it converted from a private partnership to a publicly held company in 2001, "we were publishing our reports 40 days after closing, and the deadline then was 45 days", recalls Coughlan. "That didn't look as good as we wanted."
A big reason reporting took so long was that Accenture's decentralized organization — designed for a partnership — didn't support the visibility that investors and regulators demanded and that senior executives could use to be more nimble. "You end up with different versions of the truth. With different systems, you get timing differences that make it hard to cross-check your financial data," says Modruson. That slowed both the close and reporting processes and risked incomplete, conflicting information that could hobble the company.
Coughlan, Modruson and management reporting chief David Rowland tackled the problem on two fronts over a three-year effort that ended in September 2004. ("We had to join at the hip," recalls Modruson.) The first front was to rework a series of sequential processes into a single one, thereby reducing touchpoints. The second was to consolidate various financial systems into a single instance of SAP's ERP system, converting 450 systems into one ERP implementation. In addition to reducing expenses, these efforts lowered the reporting time from 40 to 22 days, letting Accenture's financial staff go on vacation for Christmas 2006 — a first, Coughlan notes. United Technologies Corporation (UTC), a $US48 billion diversified manufacturer, also gained a quality-of-life ROI from its financial integration efforts, notes CIO John Doucette. "People no longer work until 2am to meet reporting deadlines," Doucette says. "They go home on time."
But the critical business advantage UTC reaped from its faster close is actionable insight. "It's about getting information quickly, to be able to act on it," says Greg Hayes, UTC's VP for accounting and finance. For example, in the northern autumn of 2006, he noted a drop-off in air conditioning orders just as external data showed a decline in new-home construction across the United States. Armed with current sales shifts, UTC adjusted its orders so it wouldn't get stuck with inventory, and it adjusted factory schedules so it wouldn't produce as many air conditioners. "Knowing only the general trend wouldn't have shown us the specific implications for our business," says Hayes.
To achieve that degree of agility, UTC consolidated 250 instances of Hyperion financial reporting tools into one instance of Hyperion Financial Management (HFM) across its six subsidiaries, such as helicopter maker Sikorsky, aircraft engine maker Pratt & Whitney and air conditioning maker Carrier. By having a common reporting and analysis tool into which all subsidiaries feed consistent financial data, the company has achieved a five-day close, down from eight.
"If we had a single ERP system, I think we could close the books in one day," Hayes says. But he doesn't think it makes sense to impose the cost of conversion to a single ERP platform on six distinct subsidiaries given how fast the organization closes already.
As Pearson's and UTC's experiences show, a unified technology base can make an efficient process execute faster, but Hackett Group's Holland advises that CIOs first identify the right business processes for the ERP or other systems to execute.
In fact, that's Pearson's strategy, says Gorvett. With a consistent financial process in place that delivers what's needed, the company is now able to focus on consolidating its ERP platforms. And while UTC doesn't expect to see a single instance of ERP across all six subsidiaries, it is moving to consolidate each unit on just one ERP system.
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