In recent years, finance has worked hard to drive cost, complexity, error, and risk out of its routine business processes. New technology systems for transaction processing and streamlined business processes have often formed the cornerstone of these improvement campaigns. Finance has made gradual, often sustained progress in improving its ability to execute routine transactions through technology and process improvements in recent years.
While more of this work remains to be done, CFO Research Services undertook this study to discover how companies have deployed the savings they’ve realized so far through their transaction-processing improvement efforts. Our survey of senior finance executives in North America reveals that the finance function has freed time and resources to pursue high-value activities like decision support and financial planning and analysis as a result of transaction-processing automation. We find that transaction-processing improvements are not only valuable because they help companies reduce cost, error, and risk—they’re valuable because they allow finance executives to turn their attention to the high-value activities that advance a critical organizational objective: promoting sustained, profitable growth.
Top-line findings
- Many companies have automated back-office transaction processing to a high degree—and most of them have realized the gains they expected from their automation efforts.
- Over the last three years, companies have most often reallocated the resources they’ve saved through transaction-processing improvements to high-value activities like financial planning and analysis and decision support.
- Correspondingly, finance has become more effective in the last three years at high-value, analytical activities such as financial planning and analysis and decision support—the same areas where companies have invested resources saved through transaction-processing improvements.
- Growth-oriented companies are much more likely than their cost-focused peers to reallocate transaction-processing savings to analytical finance activities.
- Where there is more investment, there is more improvement: growth-oriented companies are much more likely than their cost-focused peers to report that they’ve become more effective at analytical activities such as decision support and financial planning and analysis.
Investment in automation
Routine finance and accounting activities are automated to at least some degree in the vast majority of companies. Eighty-eight percent of respondents to our survey say that routine finance and accounting activities are either “primarily automated with some use of manual processes” (69 percent), or “highly automated and tightly integrated with other IT systems” (19 percent). (See Figure 3.)
Savings and improvement through automation
Have these investments in back-office improvement borne fruit? In general, yes: most companies have realized the improvements in head count, cost reduction, and operating performance that they expected from their back-office automation efforts. (See Figure 6, below.) These results reflect the discipline and care with which finance approaches these investments. These results may also reflect finance departments’ experience—after years of both pursuing IT projects and guiding IT investment decisions—in calibrating expectations to align with reasonably likely outcomes. Respondents were most likely to report pleasant surprises due to automation—that is, “greater than expected savings and improvement” from automation efforts—in their companies’ operating performance metrics. But these results may also belie the vast amount of time and effort that finance departments have poured into making automation efforts successful.
Where have the savings realized through back-office improvements ended up? A solid majority of respondents (79 percent) report that money saved through transaction-processing improvements over the last three years has usually been re-invested in the business, rather than returned to shareholders. Twenty-nine percent of all respondents say that these savings have usually been retained in finance, while 50 percent say that savings have usually been invested elsewhere in the business. (See Figure 7.)
Do these results mean that finance hasn’t directly benefited from its own improvement initiatives? Not necessarily. Because cash is fungible, savings in one area—like transaction processing—translate to greater available resources for the company to achieve all of its objectives. When companies save money, in other words, they create more options and sidestep some decisions they would otherwise be forced to make. Should the company pay a special dividend to its equity stakeholders? Or should it invest in a project, in finance or elsewhere? Increased savings mean an increased opportunity to do both.
