During the last up-cycle, many companies chose to grow quickly through mergers and acquisitions.  This time-honored growth mode has the advantage of being fast, and the disadvantage of leaving acquirers with hundreds of disparate entities and systems.

Now that the world has not come to an end, smart companies will think about standardizing and centralizing the accounting and finance functions across their company, so they can reap the economies of scale that were intended in their acquisitions, and so they can have better cash efficiency.

At the very least, companies eventually have to:

• Standardize the close process
• Standardize cost accounting
• Standardize inventory accounting
• Centralize credit management
• Centralize core accounting functions (field accounting, accounts payable, treasury, FP&A) across the entity

Standardizing these processes will give executives better business intelligence, so they can make better, fact-based decisions. But finance transformation projects are not easy, and quite frankly, they often fail.

Time and again, we see the same basic change management and program management traps when companies try to make enterprise-wide changes to their finance function. Here’s a way around some of those land mines:

• 1.  Appoint an internal executive-level transformation leader who is focused exclusively on the transformation. This job can’t be done by someone with another job, and it can’t be done by a committee: there’s seldom complete consensus around change, and someone has to bite the bullet, make the decisions, and be willing to take the heat.


• 2.  Then give that person a dedicated transformation team. Not a team of people who also have day jobs running A/P or Finance.  While the transformation of accounts payable is being designed, someone must still keep A/P functioning—and that’s a different skill set. The transformation leader is program-focused, design and process-oriented and more strategic. The ops person is a day-to-day production facility leader, managing an ongoing process for efficiency and continuous improvement.


• 3.  Don’t outsource your transformation to consultants. Sure, you want to augment your staff with subject matter experts from the outside, especially to help design your strategy, and maybe even to implement it.  But you must have internal leadership and a two-in-the-box approach where every consultant is paired with an internal transformation team member.  Otherwise, the change won’t stick.


• 4.  Once you have your team, move on to your data. Everybody wants to jump right into what reports they need to better manage the business, and from there, most clients will move onto centralizing and standardizing IT systems to get those reports.  But before you do any of this, you need to spend a fair amount of time wallowing in your data.  Is it consistent?  Do you have good governance?  Can you trust the raw data coming into your systems? We can tell you that answer in 99 out of 100 cases is no.  And if you have just consolidated a few plants, or purchased a new company, the answer is unequivocally no.  If you can’t tell how many units of product have been sold across your company in fewer than 30 days, your data is not consistent.  If you have plants that are not included in your product count because they’re on old reporting systems, then your data is not consistent.  If gross sales, net sales, and unit volume are not reported the same way from store to store and plant to plant, then your data is not consistent.  You must start with quality data, and call things by their right names, to get quality reports.  Then, once you solve the data integrity problem, you can say “how do we want to use this data?”


• 5.  Involve IT, but remember, this is a Finance-led transformation. You do want to get your CIO and his/her team on board, but you don’t want to put them in the lead. Your IT group has to be committed and accountable, but they can’t be in the lead.  You need finance subject matter experts leading the change. A senior IT leader should be accountable for any IT systems transformation required, but that person’s not the CIO, because he or she is too busy to be effective.

Finance transformation can be a two or ten year process, with several dozen complex projects going on at once.  And, truth be told, a finance transformation is never truly finished; it is really always ongoing, as you segue from actual transformation into continuous process improvement.

Getting ready to start, or continue, a finance transformation project?  We can help.  Contact us at .(JavaScript must be enabled to view this email address).