Best Practice – a phrase used by consultants and people in business as fancy lingo.
Often though, this term is never understood or never clearly explained to organisations. It has been applied broadly and across all industries and departments, and because of its general usage and lack of definition, the term Best Practice has lost some of its shine and appeal.
Often, finance teams view Best Practice Metrics and Performance Indicators as mythical unicorns – something that could be strived for, but can never be achieved without reinventing every process, and undergoing a complex and expensive financial transformation.
However, finance has been achieving a form of Best Practice for longer than any other department in an organisation. It is something engrained into everyone in the accounting profession. Every student, accountant or financial manager, simply by adopting Generally Accepted Accounting Practice or complying with the regulatory requirements as defined by the International Financial Reporting Standards, have been achieving Best Practice for statutory reporting outputs.
Why then, when looking at the Best Practice do most organisations feel this is unachievable?
Well, to achieve Best Practice, this requires every element which forms part of Service Delivery to be efficient, effective and cohesive. Often, neglecting any element will cause bottlenecks and will hamper any attempt at reaching Best Practice. Does this mean every element needs to be redesigned and transformed? No.
However, if Best Practice is not currently being achieved, each element needs to be analysed and assessed to determine where the primary issues are.
Some of the elements are best assessed by the leaders of finance in the organisation - once the elements are clearly defined and understood – such as Talented People and Service Culture.
Others may be a little difficult to assess within the organisation.
This could be due to several factors
- World class benchmarks / Best practice standards may not be known to Finance, and to obtain that information would require a lengthy and expensive benchmarking exercise
- The leaders in finance may be a little too close to the Process and Governance related elements to conduct an unbiased assessment.
- Finance do not receive the necessary feedback from “customers” (report users within the organisation) to determine the quality of information produced
- Finance may not be capable of assessing the current implemented technology against Best Practice and technology leaders
- The management and maintenance of financial systems sits in a separate department (like IT), which may be siloed from finance
This is where external assistance should be brought in. Consultants who possess the knowledge and experience across various industries and deep finance domain experience can help organisations put their focus in the right place. This is an area where getting the right consultants that suit your business counts. Leading practices cannot be applied blindly – there needs to be a process to assess what will work best to get the best results...and with the lowest risk.
Why strive for World Class leading practices?
Many executives feel that aligning financial service delivery in accordance with Best Practice provides little tangible business benefit. A frequent comment made by executives is:
“Aligning the production process to best practice will provide savings in cost of sales but aligning Finance to Best Practice will cost a fortune and won’t help me save money on the costs of running the finance department.”
This requires a change of viewpoint on what the finance function should be. The mandate of finance needs to change from being pure reporting factories, to providing an experience around the reports they produce.
Once the reporting service delivery is aligned to best practice, productivity will be increased, and more time will become available. This will allow the finance function to shift their focus and spend more time on financial planning and analysis.
The analysis that finance will provide will seldom produce insight alone. Often, this will raise questions. The curiosity, questioning, and detailed analysis (for example, analysing revenue by product, by channel, and by department) that finance will prompt, will identify opportunities or potential areas of risk. This questioning and analysis is often forward looking as well, which will ensure the business is always alerted to strategic prospects and threats.
Kyle Solomi - Senior Finance Consultant