The process approach is essential for the CFO both to improve the performance of his function and to contribute to the improvement of the company’s economic performance. Process analysis is now widely used in companies. A process is a set of independent activities linked to each other in order to provide a “deliverable” merchant or non-market (product, service, information, ..) to external customers or internal to the company. We distinguish business processes and support.
The Benefits of the Process Approach
The processes are by nature “transversal”, they connect actors from different departments and facilitate the decompartmentalization of the company. The process approach has arrived in companies through quality procedures (ISO standards) to identify risks and resolve non-quality issues. It is born from the observation that a non-quality detected in a service often finds its origin inside the company but in another service, the actors of different services not necessarily having the same language and the same priorities.
They can be described in more or less detail as needed, in a synthetic way to describe the company’s macro processes and in a much more detailed way when it is at the level of the process itself. Thus, the risk management process and the customer credit is part of the macro process of processing a sales order. The formalization of processes is a preliminary step to the implementation of information systems. The process approach puts the actors in a customer-to-supplier relationship in logic of witness passing. The process brings dialogue, and even conviviality, each actor gains a better understanding of his participation in the overall performance.
The upstream player is attentive to satisfy the downstream player (his client), bring him the expected deliverable in the required conditions and the deadlines.
Process management contributes to improving performance. The flattening of the processes makes it possible to identify the malfunctions in the witness passages, the useless or redundant activities and it is the prerequisite to their computerization. Powering up the organization speeds up the delivery of the expected deliverable
Improve Financial Processes
The CFO seeks to improve the processes of his function. Since quality procedures are more focused on business processes, they usually have a prior job of formalizing their own processes: accounting closure, management or financial reporting, budget, budget monitoring, dashboard publishing, cash flow forecasts, asset management foreign exchange risk, customer credit, etc. The financial processes are beyond the finance function and provide the opportunity to define reciprocal commitments with the operational staff.
Illustration: the credit-client charter defines the respective roles of the sales representatives and the actors of the credit function at each stage of the life of an order. The salesman undertakes to ask for an opinion on the solvency of a prospect from the first commercial contacts and not the day before the delivery, as to put the head of credit in front of the fait accompli. For its part, the credit manager undertakes to immediately request a commercial inquiry, to quickly define a credit limit and to actively seek a solution to avoid a harmful delay in the business relationship or a blocking of deliveries due to overruns.
The automation of financial processes is a source of savings; it frees time for financial actors for analytical tasks, more interesting and higher value added. Assigning a delay to each task puts the actors under tension and helps to reduce the overall process time, it facilitates the responsiveness of the operational staff by making information available more quickly.
Illustration: The implementation of group cash forecasting software makes it possible to automate this activity as part of cash pooling. Previously, the cash forecasts of each entity were transmitted on spreadsheet to the group finance director. The manual consolidation was for the latter a long and boring activity, also source of errors. Automation makes analysis easier by making data from different entities more consistent, and makes the CFO more responsive to funding decisions by providing information faster.
As the manager of the process, the CFO gives meaning to the actions of each of the players, highlights their contribution, ensures that deadlines are respected, and asks them for suggestions for improvement.
Contribute to the improvement of Business Processes
Often, the CFO also appropriates certain business processes to help improve the company’s economic performance. The strategic analysis identifies key processes, sources of competitive advantage on which to invest as a priority. The ABC method (activity based costing) assesses the cost of the different activities and therefore of a process as a whole. Even when the cost accounting system is not based on the ABC method, it is possible to evaluate the cost of an activity punctually to quantify the financial stakes of improving a process in terms of improving the result or profitability.