Hackett: Companies Can Cut Finance Costs by 23 Percent By Using a Single ERP, Implementing Technology and Data StandardsBy movin
August 09 2005 - 12:30PM
Business Wire
Research Quantifies Impact of Complexity Reduction; World-Class
Finance Organizations Also Rely on Single Chart of Accounts, Half
the Bank Accounts, Fewer Budget Iterations By moving to a single
ERP system for finance and at the same time implementing consistent
data and technology standards, companies can cut the cost of
finance operations by 23 percent, according to Book of Numbers(C)
Research from The Hackett Group, a business process advisory firm
(NASDAQ:ANSR). But companies that take either of these approaches
independently may see little to no savings, or even a slight
increase in finance operations costs, Hackett found. World-class
finance organizations rely on both of these approaches, which help
them spend 31 percent less than their peers on finance, operate
with nearly half the staff, and also complete their financial
reporting cycle more quickly each month. In addition, they turn to
a wide range of other complexity reduction techniques that help
them generate even more cost savings. World-class finance
organizations, for example, rely on a single chart of accounts, use
half the bank accounts of typical companies, and do fewer budget
iterations. Hackett's new Book of Numbers research volume,
"Optimizing a Return on Business Complexity: Performance Metrics
and Practices of World-Class Companies", focuses exclusively on the
value of complexity reduction. The full research is available only
to members of Hackett's Executive Advisory Programs. The Hackett
Group is a world leader in best practice research, benchmarking,
and advisory services that empower executives to achieve
world-class enterprise performance. Hackett offers analysis and
insight backed by metrics derived from 3,300 benchmark studies over
13 years at nearly 2,000 of the world's leading companies,
including 93 percent of the Dow Jones Industrials. Value of
Complexity Reduction in Finance Hackett began its analysis by
looking at a range of areas to identify those with the greatest
ability to reduce business complexity. The research identified two
areas as among the most significant - the number of finance or ERP
systems and adherence to data and technology standards, including
the use of standard hardware and peripheral software tools for
finance and usage of common data definitions. The research showed
that individually, reducing complexity in these two areas had
little impact on cost. In fact, companies which had not moved to a
single common ERP system saw cost of finance rise slightly as they
implemented standards. But when companies focused on both together,
they saw significant cost reductions. The median cost of finance
for companies with common applications and high standards was .99
percent of revenue, 23 percent less than that of companies that did
not meet either or both of these criteria, where total cost of
finance operations was 1.28 percent of revenue. This amounts to
$2.9 million in annual savings for a $1 billion company. Savings
were equally distributed between finance labor and technology.
Hackett's research found that world-class companies clearly focus
on these two complexity elements. They are 61 percent more likely
than their peers to have a single ERP system, and rely on common
data definitions 20 percent more often. In addition, they cut costs
by another 21 percent, or $2.1 million/billion of annual revenue,
over companies that focus on just these two elements, in part
through their implementation of complexity reduction in many other
areas. World-class finance organizations rely on a centrally
maintained, uniform single chart of accounts 98 percent of the
time, while only 82 percent of all typical companies make the same
claim, according to Hackett. They use only 14.4 bank accounts per
billion dollars of revenue, less than half the number used by
typical companies. In this area, Hackett's research showed a clear
correlation across the board between a decrease in the number of
bank accounts per billion dollars of revenue and decreased treasury
management process costs. World-class finance organizations also do
an average of only 3 budget iterations, 25 percent fewer than
typical companies. NOTE TO JOURNALISTS: A chart illustrating select
findings described above is available on request, and will be
distributed via Business Wire. In the Word version of this
document, it appears here. "Reducing complexity and creating a
centralized system for finance can be exceptionally challenging.
But the potential rewards are significant. This is why world-class
finance organizations make it a priority," said The Hackett Group's
Finance Practice Leader Mark Krueger. "To make it happen, companies
need to begin by assessing the systems they're using. How many are
there? How standardized are they? Are differences being driven by
real business need, or by some combination of happenstance and
perhaps practices established before parts of the company were
joined in a merger? Careful planning and the consideration of
options such as outsourcing and shared services are also critical,
as is strong support from senior management. Finally, change
management is a critical element. To keep people from backsliding,
companies may need to go as far as shutting off old systems and
processes as soon as the new ones are working," said Mr. Krueger.
The Hackett Group's research into world-class performance is
compiled in its Book of Numbers series, which provides senior
executives fact-based performance metrics and insights based on
Hackett's extensive database of best practices and process metrics
in IT, finance, HR, procurement, and other areas. Hackett Book of
Numbers volumes are available to members of Hackett's Executive
Advisory Programs -- premium-value, membership-based programs
providing confidential advisor inquiry, best practices research,
and peer learning opportunities. More information on The Hackett
Group is available: by phone at 770-225-7300; by e-mail at
info@thehackettgroup.com; or on the Web at
http://www.thehackettgroup.com. About The Hackett Group The Hackett
Group, http://www.thehackettgroup.com, a business process advisory
firm and an Answerthink company, is a world leader in best practice
research, benchmarking and advisory services that empower
executives to achieve world-class enterprise performance. Only The
Hackett Group empirically defines world-class performance in sales,
general and administrative (SG&A) and supply chain activities
with analysis gained through 3,300 benchmark studies over 13 years
at nearly 2,000 of the world's leading companies. The foundation of
Hackett's benchmarks, transformation services, and membership-based
advisory programs is our proprietary database of
Hackett-Certified(SM) Practices, approaches which are proven to
correlate with superior performance metrics. This unparalleled
knowledge repository enables Hackett business advisors to provide
data, advice, and strategic insight with a level of integrity and
authority available nowhere else. As of this writing, Hackett
clients comprise 93 percent of the Dow Jones Industrials, 76
percent of the Fortune 100 and 90 percent of the Dow Jones Global
Titans Index. Hackett-Certified and Hackett World-Class Passport
are service marks of The Hackett Group. Certain statements in this
press release are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 and involve
known and unknown risks, uncertainties and other factors that may
cause the Company's actual results, performance or achievements to
be materially different from the results, performance or
achievements expressed or implied by the forward looking
statements. Factors that impact such forward looking statements
include the ability of the Company to attract additional business,
changes in expectations regarding the information technology
industry, the ability of the Company to attract skilled employees,
possible changes in collections of accounts receivable, risks of
competition, price and margin trends, changes in general economic
conditions and interest rates as well as other risks detailed in
the Company's reports filed with the Securities and Exchange
Commission.
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