Half of companies have fully centralized finance processes

Technology advancements along with a growing need for consistent organization-wide processes are driving companies to adopt centralized operating models for their functional departments, including finance.

In a survey of 200 U.S. CFOs by Everest Group and supported by Conduent, a provider of digital finance, accounting, and procurement solutions, 49% of the respondents said all of their finance and accounting processes are managed by corporate finance.

About a third (35%) of the finance chiefs said they use a “hub-and-spoke” approach. A centralized team is responsible for developing and implementing standardized finance processes, policies and procedures, while business units or departments execute these processes according to their specific needs.

The rest of the CFOs (17%) reported that their finance operations are decentralized, managed by individual business units.

The drive to centralize processes has been ramping up in tandem with the increasingly powerful technologies companies are deploying.

“While numerous enterprises around the globe still rely on outdated legacy systems that are cumbersome and costly to replace, a growing number are focusing on augmenting their core IT infrastructure through tailored integrations that enable process automation, analytics, artificial intelligence and machine learning,” Conduent wrote in its report.

The report noted that a centralized model facilitates streamlined operations and process workflows, consistent policies and procedures, enhanced data accuracy and control, economies of scale and increased efficiency across the organization.

Conduent provides outsourced process solutions, and much of the survey focused on business process outsourcing. The surveyed CFOs identified management reporting and analysis, billing, accounts receivable, and capital budgeting as the outsourced finance areas with the greatest ROI.

In terms of CFOs’ objectives for finance-and-accounting outsourcing, they chose operational efficiency (due to productivity improvement, process standardization and efficiency, etc.) as the most important objective, followed by improving business metrics and customer satisfaction.

Those polled also identified the three most significant barriers to outsourcing finance processes: pricing model issues (such as a lack of gainsharing mechanisms), antiquated technology; and cultural inertia leading to resistance to change.

Conduent counseled that organizations that haven’t outsourced finance processes should look to procurement as a prime area to start with. “Even a small percentage in savings or recovering in procurement spend equates to a large dollar amount,” Conduent wrote.

Companies often perceive recommendations or efforts to modify existing setups as a threat to their operations, Conduent wrote.

“With legacy systems often deeply established and stop-gaps built into those systems, organizations may have significant wariness to new technology and approaches,” the report said. “This includes concerns about the potential for implementation errors, high costs or perceived risk in doing things differently.”