Process bottlenecks represents a key source of frustration for many finance leaders. They can result in missed deadlines, stressed and overworked staff and embarrassing errors.
Deloitte estimates that finance departments spend almost 50% of their time creating reports. Amongst this monumental data processing effort are low-visibility tasks that can become bottlenecks.
The role of finance and the CFO is evolving with greater emphasis on analysis and insights. To allow finance staff to grow and refocus their efforts in line with their new role, CFOs must address bottlenecks.
Read on to learn:
Imagine processes in the finance department as an iceberg. High visibility tasks, like preparing tax returns, sit above the surface. Tasks with a high visibility tend to be well understood and documented. They are also systemised (at least partially):
Below the surface lives a trove of processes that are less well known. These tasks, for creating reports and preparing data, are often:
The HR effort that companies pour into these below-the-surface tasks is huge. As much as 50% of finance staff's time.
Many of these tasks produce data for downstream processes. The problem is when these tasks become bottlenecks with cascading effects on finance.
Below-the-surface tasks that become bottlenecks can have reverberating effects on the finance department. Deadlines can be missed. Staff work over weekends to submit regulatory filings on time. Mistakes get made.
A recent article from CFO Magazine highlighted a good example of this:
A good model to understand the impact of bottlenecks is Theory of Constraints (TOC). Introduced in 1984, TOC is a popular management paradigm for addressing bottlenecks:
For many CFOs and finance leaders, below-the-surface processes become the bottlenecks. This in turn hampers the finance departments ability to meet business expectations.
The first step, therefore, is to identify the bottlenecks across finance.
Next, we will discuss the actions you can take to mitigate the risk of bottlenecks within finance.
Imagine you have a four-hour task that has become a bottleneck for month-end reporting. What can be worse? Having that four-hour task turn into eight-hours because of erroneous input data.
You need to ensure that:
We presented a webinar on data quality best practices. Some good practices to follow include:
Staff also need to be aware that their process is critical for downstream activities. As such, key staff need to be available to not only do the work but also review and approve outputs. The last thing you want is for a 0.5 day task to turn into a full day as you chase a manager for their approval.
Process downtime occurs for a variety of reasons. The most common reason is that key staff are off sick or on leave.
Finance leaders have a responsibility to minimise the downtime of bottleneck tasks. This includes ensuring that the bottleneck task is:
Another option - which may be a luxury for some companies - is to share and spread the bottleneck task after hours. This is a viable solution for teams that span timezones. For example, Sally works on preparing a report from 4 - 6pm. Her colleague in a later timezone then spends 2 hours completing the report. As a result, the team completes the report in time for downstream tasks the following morning.
After dealing with downtime and rework the next action should focus on efficiency. How do you reduce that four-hour bottleneck task into a two-hour task?
There are many ways to make a task more efficient. It could be as simple as reallocating the job to someone who works faster. In most cases, you will need to iterate through a series of improvements. For example you can:
It is important to view efficiency as a journey rather than an end-state. Rather than setting lofty and expensive goals, organisations must embrace continuous improvement:
To recap, there are three actions to take in relation to bottleneck tasks that plague finance:
Automation is a powerful tool for addressing all three actions. This is because automation:
Referencing the iceberg analogy, automation moves processes to the surface. Once automated, processes are visible. In turn, this helps finance leaders get a handle on critical bottlenecks. To address a problem, you first need to know that it exists.
CFOs and finance leaders are scrambling to meet the evolving needs of their CEO and business. Process bottlenecks, if left unattended, will limit the effectiveness of the finance organisation.
The processes across the finance organisation form an iceberg. Many processes reside below the surface. These processes are often undocumented, manual and rely on key staff to get work done. These below-the-surface tasks can easily become bottlenecks resulting in missed reporting deadlines.
Finance leaders must address and mitigate the issue of bottlenecks. To do this, companies must:
Automation is a powerful tool that can help finance leaders execute on actions 1-3 above.
To learn more about the challenges facing CFOs who want to automate, please download our free whitepaper.
The order to cash process is what keeps money flowing into your business. Check out these best practices and how you can utilize automation.
Considering tools for continuous improvement and looking to know what will work best? Look at this guide for how to make change happen.