Companies are spending less on their finance departments than at any time since the recession, according to a new study by The Hackett Group. Firms are cutting finance headcount and expenses by streamlining units, the Wall Street Journal reported.
The Hackett Group findings are similar to those in the financial planning and analysis area, according to AFP’s recent FP&A guide on organizational structures. As companies grow larger and more complex, FP&A departments are evolving toward a hybrid model, including elements of standardization and a skill set hub in addition to proximity to operations. Because hybrid operating models for FP&A typically involve a bigger headcount, companies are increasingly trying to maximize the return on the model by creating true centers of excellence or shared service centers.
“Larger companies are moving FP&A into a SSC, or center of excellence, possibly offshore,” said Miles Ewing, principal with Deloitte’s consulting finance practice. According to Ewing, the activities that take place in the center of excellence include a lot of the budget review, variance analysis, and report creation. “Things that do not require an MBA,” he said. “Companies that have enough scale benefit from centralizing those activities.”
According to Scott Brennan, managing director, Finance & Enterprise Performance Strategy Group at Accenture: “The COE does a lot of the more routine activities that happen within FP&A, for example, data gathering, variance analysis, and routine reporting. However, in addition they support the business units. By moving the COE offshore, companies can do more with the same budget.
But the COE trend goes beyond process efficiency. “What we’re seeing is that finance is no longer solely focused on trying to reduce cost,” Brennan said. “There was a lot of cutting in the early 2000s, and while companies are trying to do more with less, today’s question is how to support the business’ growth objectives while containing cost.” He added that “sometimes for global businesses that means reconsidering where a function, such as business analysis, should be located to meet overarching business needs.”