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CGMA: Elevating the Finance Function

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CGMA Presentation at AICPA 2013 CFO Conference

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CGMA: Elevating the Finance Function

  1. 1. CGMA: Elevating theFinance Function GameCFO 2013: The Essential CFOMaximizing opportunities in a rapidly changing environmentSession 202 - Friday May 17, 2013Kenneth Witt, CPA, CGMAAICPA#AICPA_CFO
  2. 2. American Institute of CPAsKenneth W. Witt - BioKenneth W. Witt, CPA, CGMA, serves as Technical Manager in the Business Industry andGovernment team at the American Institute of Certified Public. Ken is the staff liaison to theBusiness & Industry Executive Committee which provides insight and guidance onprofessional issues and trends relevant to AICPA’s members working in business andindustry. Ken also created and manages the AICPA Business & Industry Economic Outlooksurvey, and is involved in a variety of thought leadership and professional developmentactivities for AICPA members and the CGMA designation.Ken received his BBA in accounting from the University of Iowa and started his career withTouche Ross & Co. He has held management positions in audit and control for both publicand privately held companies. He has also consulted to businesses in a wide range ofindustries including manufacturing, distribution, technology, financial services, insurance andreal estate, as well as not-for-profit profit and public institutions.2
  3. 3. American Institute of CPAs
  4. 4. American Institute of CPAsObjectivesTodays session will help participants betterunderstand:• The evolving role of the finance function• What successful finance functions are doing toachieve greater efficiency and increase effectiveness• Barriers to improvement• How CGMA resources can help to “elevate the game”of your own finance function4
  5. 5. Rate your financefunctionOn a scale of 1-5How would you rate yourfinance function in terms of…#AICPA_CFO
  6. 6. American Institute of CPAsRate your finance function #1Data and Systems• Data standards, quality, consistency of data• Standardized chart of accounts and processes• Integrated systemsTransaction Processing• Cost efficient• Quality, continuous improvement6
  7. 7. American Institute of CPAsRate your finance function #2Reporting• Timely, efficient• Management information as well as external reportingInternal Control• Financial Reporting• Compliance• Operations7
  8. 8. American Institute of CPAsRate your finance function #3Staff Capabilities and Development• Technical Skills• Analytical skills and business understanding• Communication, management, leadership skillsOperational Analysis• Across all areas of business model – revenues, expenses,operations, HR, supply chain• Financial and non-financial drivers – market share, customervalue, etc8
  9. 9. American Institute of CPAsRate your finance function #4Decision Support• Forecasting – revenues, cash, operating costs etc.• Capital, other investment appraisal, new business, M&A, etc.Planning• Involvement and utilization of data analysis in processes- Strategic planning- Activity planning – strategic initiatives, performance targets- Financial planning – budgets, forecasts- Capital- Scenario planning and modeling9
  10. 10. American Institute of CPAsRate your finance function #5Leadership and Change• Strategy and performance management• Major decisions• Risk management• New business development• Change managementReputation• Reputation of CFO and senior management• Reputation of finance function as a whole10
  11. 11. American Institute of CPAsRate your finance function - scoringArea ScoreData and SystemsTransaction ProcessingReportingInternal ControlStaff Capabilities and DevelopmentOperational AnalysisDecision SupportPlanningLeadership and ChangeReputationTotal11
  12. 12. American Institute of CPAsRate your finance function - barriersTo what extent do the following serve as barriers tofinance function improvement in your organization?(scale of 1-5)Barriers ScoreTechnology LimitationsCapacity / BandwidthSkills and CapabilitiesOrganization MandateOtherTotal12
  13. 13. Discussion
  14. 14. The changing roleof finance
  15. 15. American Institute of CPAsTechnology drives disruptionThe position of a ‘Navigator’ is now redundant15
  16. 16. American Institute of CPAsThe Navigator….16
  17. 17. American Institute of CPAs…………………………………is redundanttoday17
  18. 18. American Institute of CPAs…replaced by technology18
  19. 19. American Institute of CPAsFinance function has delivered scalebenefitsSharedServiceCentersTechnologySCALEBENEFITSFocus on Process and Technology19
  20. 20. #AICPA_BanksThere is potential to deliver greater businessbenefitsINCREASEDANALYSISBUSINESSSUPPORTREALBUSINESSBENEFITSFocus on People and Organization20
  21. 21. American Institute of CPAsIn business, analytics many times provide a rearview imageDashboards are backward looking and obstructa clear view of the road ahead21
  22. 22. American Institute of CPAsHow a management accountant delivers22
  23. 23. CGMA Researchand Reports23
  24. 24. American Institute of CPAsNew Skills and Fast Track Reports24
  25. 25. American Institute of CPAsBath ResearchCIMA Centre of Excellence at the University of BathSchool of ManagementMore than 2,000 professionals surveyed• Broad range of industries• 1354 in finance function• 871 senior executives – non-financeBusiness demands and finance functionresponsibilitiesComparative analysis• Finance perceptions as providers vs. perceptions of internalcustomersSupplemental interviews25
  26. 26. American Institute of CPAsTop findingsBusiness needs for basic accounting informationbeing well met.However, there is an unmet need for betterinformationMandate exists for greater contribution from financeHowever, workloads limit capacity, and higher levelskills are needed26
  27. 27. American Institute of CPAsPerformance27
  28. 28. American Institute of CPAsAnd RewardThose who undertake management supportactivities are:• 67.1% better remunerated• 66.8% promoted faster• 53.3% more difficult to retain28
  29. 29. The finance functionjourney
  30. 30. American Institute of CPAsGetting a seat at the tableProviding reliable management informationis the basis for accountant’s place at thetable when it comes to performancemanagement and strategic decisions.CGMA Report -New Skills, Existing Talents30
  31. 31. American Institute of CPAsStep 1 - Increasing EfficienciesLeverage technology to reduce costs and free upresourcesStandardize systems and automate processesShared services – in-house or outsource• 49% of companies > 250 employees use shared services• Don’t outsource bad processes• Look for opportunities to task shared service centers with highervalue workFocus on quality and process improvement• Lean / Kaizen• Six Sigma31
  32. 32. American Institute of CPAsStep 2 – Focus on Non-financial value68% of business value is non-financial51% of CEOs said theirorganizations measured non-financial value wellFocus on drivers of:CostRiskValue32
  33. 33. American Institute of CPAsStep 3 – Provide support for operationsThe results do show, however*, that higherperforming organizations, on average placemore responsibility on finance to supportthese decisions.CGMA Report -New Skills, Existing Talents* Correlation evidence - causality is not clear from availabledata33
  34. 34. American Institute of CPAsOperational activities / decisionsSupporting risk and complexity managementContributing actively to operational / performancemanagement decisionsOffering advice and support to decision-makingthroughout the organizationActively developing financial awareness andexpertise where needed in the organizationContributing actively to business portfolio decisions34
  35. 35. Be proactiveProvide forward-lookinginformationHarness the potential ofbusiness intelligence(BI)Embrace greaterresponsibilities in “bigdata”Step 4 – Provide Insight and Foresight35
  36. 36. Step 5 – Influencing Strategy and OperationsAs organizations become bigger and morecomplex, management capabilities need toimprove in stride to ensure performancestandards are maintained and managed inthe best interests of the company.CGMA Report -New Skills, Existing Talents36
  37. 37. Driving cost reduction strategies within finance andthroughout the organizationSetting challenging objectives to ensure thebusiness is run in the long-term interests of itsownersDeveloping and implementing strategyInitiating and leading innovation and changeHelping to ensure remuneration policy supportslong-term value creationLeading the identification and assessment of newbusiness opportunitiesSix Key Strategic Activities37
  38. 38. American Institute of CPAsFacing constraints, finding solutionsMain constraints to finance function and financeprofessionals taking on a broader role:Capacity – current workloadMandate – sometimes not clearSkills Needed• Commercial awareness• Analysis tools• Management skills• Influencing skills38
  39. 39. American Institute of CPAsHow accountants say they should spendtheir time39
  40. 40. American Institute of CPAsAction Plan40
  41. 41. Additional CGMAResources
  42. 42. 424242
  43. 43. Thank you