Those firms working within the services sector can encompass a broad range of industries, parties and interests, usually in a highly competitive market looking to optimise projects and people skillsets, while seeking growth amidst increasingly complex regulatory and financial challenges. Winning new business, delivering profitable customer engagements, managing financing, hiring and maximising utilisation of the best talent are continual trials. In this environment detailed and flexible budgeting, forecasting and reporting becomes a critical backbone for profitable growth.
Our new whitepaper explores how opportunities for transformation exist within these firms, particularly within the office of Finance as despite the influx of disruptive technologies, many services based firms tend to rely on traditional methods for budgeting and forecasting, close and financial reporting, including ERP add-ons, old school technologies and Excel. There are a few strategies these organisations can take to improve Corporate Performance Management (CPM) and succeed in this changing landscape.
Integrated Planning To Better Optimse People & Projects
Service intensive firms need to take a fully unified approach to workforce, project, capital and financial planning. The office of finance needs to plan and monitor how each project, investment and resource affects cash flow, expenses and bottom-line profitability. Yet, for most services-based firms, operational budgeting and planning activities are highly inefficient for a number of reasons:
- It’s difficult to forecast revenue due to the unpredictable nature of projects.
- Demand and boom cycles and their impacts on resources need to be modelled and often many budget versions are required during the financial year as changes are being made, then this needs to bridge back to the original budget.
- Budgeting is often a distributed process with many contributors, multiple systems and a reliance on error-prone Excel standalone spreadsheets.
- There can be large capital expenses especially in the construction and property sectors, large projects typically span financial years and identifying those percentage complete notoriously difficult to do.
- Services-based organisations can restructure frequently, while business manager responsibilities often cross regions or business lines making it difficult to manage without proper system workflow and security levels in enterprise planning.
Firms within this sector should look to develop an integrated CPM framework, using a modern system like Host Analytics, that creates a standardised, highly automated budgeting and planning process (supporting multiple planning approaches and all manner of time horizons) across the entire value chain. This should significantly improve decision making.
Agility In Performance Reporting & Close
Services-based firms are no different to others in that there is a constant struggle to reconcile financial results at the end of each period bringing together data from multiple sources, which can be across multiple geographies and currencies. The difficulties experienced in the year-end close and reporting cycle are often perpetuated by constrained and complex monthly and quarterly closings. Reporting often doesn’t hit desks until week 3 or 4 of the month, eliminations and adjustments are never-ending and the year-end close process can take weeks even months in some instances - this is a drain on the finance team and the business as a whole.
This stresses the importance of one factor - an agile and flexible reporting and financial consolidation platform. One that caters to all stakeholder needs in a way that can be easily managed by the office of finance, without heavily relying on IT, and all underpinned by a single source of the truth.
Worker Smarter With Host Analytics Cloud-CPM Software
Hackett Group, in a recent survey of CFOs, found that companies with superior CPM capabilities are more likely to outperform their industry peers on company financial metrics. Examples include reporting and planning more effectively and forecasting more accurately. The research also found that by placing CPM in the hands of finance departments, companies can adapt their forecasting and planning strategies on the fly, which means they can align initiatives and close gaps quickly, improving enterprise agility.
For this reason, there is a growing trend towards cloud-based CPM systems like Host Analytics that can replace overly complex manual financial processes with automated consolidation of disparate data and provide an integrated view of operational, strategic and financial planning and reporting, at a much lower total cost of ownership. This is aimed at empowering the office of finance, attracting new talent, eliminating duplication, automating and standardising processes and improving service levels and response times - in essence, working smarter.
As services based firms look to optimise resources, projects and profitability, the office of Finance has a unique opportunity to lead in the respect of modernising financial operations and performance management in eliminating error-prone, manual and overly complex systems. Host Analytics can assist services based firms to:
- Provide a single, integrated multidimensional database and enterprise-class CPM system that finance can manage, quickly adapted to reflect business changes and boasting a low TCO for rapid planning, reporting and decision making
- Automate the collection of disparate financial and operational data
- Improve productivity in enterprise planning, budgeting, forecasting, close, data management and reporting procedures
- Facilitate more regular and granular planning across multiple dimensions with driver-based approaches to capture interdependencies such as those between bill rates, resources, projects and other costs. Facilitating the move to more regular forecasting without manual burden and helping users quickly understand actual results versus budget comparisons, cost, revenue, cash flow and margin impacts
- Deliver detailed workforce planning tied to the financial plan, aligning resources and projects to efficiently manage demand and understand capacity constraints
- Model the impact of fluctuations in demand, evolving contracts and other changes to maintain a firm grip on the future trajectory of the business with unlimited what-if scenarios and sensitivity analysis linked to the financial planning process understanding impacts on P&L, balance sheet and cash flow statements
- Produce board and management reporting packs and move to integrated and transparent reporting and disclosure processes, including drill down to underlying transaction detail, evaluating performance against various dimensions and roll-ups
- Better understand the impact of capital investments, assets and their return
- Manage and automate ownership structures, multiple currencies, performing conversions, allocations and eliminations
For more information about how to improve enterprise budgeting, planning, close and reporting within services-based firms, download the whitepaper: Modernising Corporate Performance Management In Services-Based Firms below.