Cutting the Cost of Finance…. Be Judicious!

I’ve conducted over 20 cost of finance assessments in the last 7 years and the one thing that continues to make me cringe is the fact that the cost of finance metric of the top 25% of survey companies appears to be less than 1% of revenues.  There are too many  factors that impact the decision as to what the target is for a finance department to hit and provide the right level of service to business.  Some of these are mentioned in an article in the CFO magazine recently “Five Reasons Why your Finance Transformation Efforts Fail”

1.  Too much focus on a guideline metric “total cost of finance.” Real effort should be on rightsizing the service delivery and service type model for finance

2. Concentrating too much on customer satisfaction. Seems counter intuitive, but unchecked demand fulfillment fitters away valuable time…

3. Transformation is not a one time thing.  There must be a ramp down of costs based on milestones reached where business is taking on some of the initial tasks of analysis and scenario planning (self help)

4. Dont create shadow finance costs.  Finance to lead end to end process management and training of non-or-quasi finance types in the business

5. You cannot pull off a finance transformation on your own…easily.  A good adviser (opposed to a consultant) is worth his/her weight in some precious metal !

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