++Referenced from Big Fat Finance Blog++
Mary Driscoll December 20th, 2010

The never-ending pursuit of cost reduction in financial management operations is all well and good — but do not overlook the negative impacts of slow process cycle times.

APQC research conducted during the fourth quarter of 2010 points to renewed enthusiasm among CFOs and controllers for investing in financial process improvement, with another round of cost elimination being the primary goal. Particularly in the area of accounts payable, we see large organizations taking steps to reduce the total process cost by eliminating headcount. Along these lines, there has been a lot of interest in document imaging and management technology that aims to reduce the mountains of paper invoices that gum up payables processing. That, in turn, allows organizations to consolidate many of the positions previously needed to manually process all that paper.

But beyond cost efficiencies, there is the issue of slow cycle speed. This is where you tend to see the hard-to-quantify benefits of process streamlining and automation in stark relief. With the APQC metric below, taken from our Open Standards Benchmarking database, we can achieve a snapshot of performance variance in the times needed to close the books on a monthly basis.

At first glance, the difference may not seem all that profound. But consider the CFO and his/her team at the top-performing organization. Every single month, they get to take high-level pulse readings on operating performance and refresh financial forecasts one full week faster than the slowest team. What’s really important, of course, is what they do with that faster stream of data.

Many best-practice teams over time gain proficiency in modeling the potential impacts of changing trends in KPIs, and they get better at making course corrections when necessary. They reduce their chances of being caught by surprise at every turn, and they get smarter as they go along. Essentially, the time advantage becomes one key plank in an effective risk management platform. When something important and unexpected occurs, the best-practice team has a better chance of making smarter response decisions.

So, fast cycle time is just as vital as having a bare-bones cost structure. Undoubtedly, many of the top performers say it’s a strategic advantage.