With the growth of organisations, spread across markets, geographies and business lines, finance teams may end up with different methods to conduct day-to-day activities. Using separate systems, formats, approvals, and accounting methods may hinder management from gaining consistent financial information. Standardising finance operations can help to establish more uniformity in the process and enhance visibility, control, and scalability of processes throughout the organisation.
Why it is so important to have Finance Standardisation?
There are different requirements for business units, but there are some basic principles of core finance activities that are similar. If there is a separate process for each unit, then organisations can encounter duplicated work, inconsistent data, and challenges when consolidating.
Common challenges include:
- Differences in accounting and reporting practices.
- Manual data input multiple times.
- Inconsistent approval workflows.
- Inadequate month-end closing processes.
- Difficult to identify the issues and coordinate solutions between business units.
- Lack of ability to compare financial performance.
A standardised framework can help to set common processes and provide reasonable flexibility for legitimate local or business needs.
Determine processes to be standardised
It’s not necessary to redesign all finance activities at once. A good starting point is the selection of processes, which are repetitive and have a high volume of data and can be applied to common procedures.
These may include:
- General ledger activities
- Expense management
- Reconciliations with banks and accounts
- Financial reporting
- Master data management
- Month-end and year-end close
The documentation of these processes can show variations between business units and can assist management in identifying those that are needed and those that are just different.
Developing Common Finance Standards
There should be documented procedures, responsibilities, controls, and expectations of services in order to standardisation. Finance teams can define common policies for transaction processing, approvals, documentation, recon, reporting deadlines and escalation.
Standard reporting and a common chart of accounts can also help to ensure more consistent reporting experience as well. Implementing, however, should take into consideration any statutory, regulatory and tax requirements that may vary from jurisdiction to jurisdiction.
Global Finance Shared Services and its Impact
Global finance shared services can offer a cohesive structure for delivering the same finance activities from a single location to a number of business units. Organisations can minimize duplication and establish teams of experts to handle common finance tasks by streamlining appropriate processes.
Shared services can help with:
- Centralised transaction processing
- Consistent process documentation
- Common technology platforms
- Standard service-level expectations
- Centralised performance monitoring
- Improvements in use of finance resources.
There must also be clear responsibilities defined between the shared services function and business units in the model.
Technology and Process Visibility
Technology can complement the standardization with the same workflow and minimize manual effort. Some systems like ERP, workflow, reconciliation and reporting dashboards can offer more visibility into finance activities.
Technology cannot solve inconsistent processes, however. For activities to be automated, organisations should first determine their desired process, controls and data needs.
Ensuring Change Across Business Units
The impact on existing working practice may be an important aspect of implementation as this will create a need for change management. Training, communication and effective transition plans may be required for business units.
In addition, management can set performance targets like:
- Processing turnaround time
- Invoice exception rates
- Reconciliation completion
- Month-end close timelines
- Service-level compliance
- Transaction accuracy
These actions will assist in understanding the impact of standardisation in terms of the operational improvement desired.
Creating a consistent finance function
Standardizing finance operations is not just about ensuring that all of the business units operate the same way. It’s a matter of establishing shared principles, processes, controls and reporting mechanisms, while maintaining flexibility when there are real business or regulatory differences.
Global finance shared services can help achieve a consistent finance environment by employing the right process design, technology, governance, and changing management. This can provide organisations with greater financial visibility, better controls, decreased duplication of effort and the ability to build a foundation for future growth.
FAQs
Q: What is finance operations standardisation?
Finance operations standardisation involves establishing common accounting procedures, controls and reporting practices across business units.
Q: What are global finance shared services?
Global finance shared services centralise common finance activities across business units to improve consistency, efficiency and process visibility.
Q: How do global finance shared services improve financial operations?
Shared services reduce process duplication, centralise transaction processing, standardise documentation and support consistent financial reporting.
