Reporting teams are expected to deliver granular reporting information quickly, and with zero defects. This insight is critical to allow reporting’s stakeholders to interpret, and make sense of, a fast-changing world. Ad hoc requests are common and expectations are high, putting a strain on already stretched teams.
Playing this role requires a transformation of how reporting is delivered. Reporting teams that have suboptimal operating models — fragmented processes, complexity and unclear governance, duplicative efforts, time-consuming manual workarounds — will likely not succeed. While operating model transformation represents a significant effort that will consume considerable leadership time, it is now a strategic priority.
In our research, three themes emerge:
1. Organizations are increasingly using more streamlined and centralized operating model arrangements for reporting, and a further wave of transformation is expected in the near future.
CFOs and senior finance leaders have been transforming the function’s operating model through arrangements such as shared services and outsourcing for many years now. By moving transactional finance processes into arrangements such as shared services, organizations have driven greater efficiency and effectiveness and freed their best people to focus on higher-value tasks. Today, however, organizations are looking to increase the functional scope of operating model change, transitioning additional activities into these arrangements.
More than 40% of organizations around the world say they are currently using either centers of excellence (CoEs) or onshore and near-shore shared services centers (SSCs) to support corporate reporting. Organizations are currently less likely to use more remote arrangements to support corporate reporting today.
While today the focus of operating model transformation in reporting is on arrangements with a degree of close control, this will likely change in the future, with a new wave of activity. Over the next two years, 55% of finance leaders around the world expect to make a significant or very significant increase in the use of outsourcing to support reporting. Group CFOs are particularly bullish about increasing the use of outsourcing and managed services.
2. Operating model change is seen as key to generating forward-looking insight, cutting through complexity and delivering a more responsive approach to reporting.
More than half of finance leaders worldwide — 56% — say that changing the corporate reporting operating model is key to providing forward-looking insight, rather than reporting the past.
Joon Arn Chiang, Asia-Pacific FAAS Leader, EY, points out that managing data in more centralized entities can allow organizations to ask different questions about how to get value from that information. “When data is centralized, you can ask ,‘How can we transform that raw data into valuable nuggets of insight that the business has never had before, because all the data was never housed under one roof?’ You can manipulate the data much more cost effectively and much more easily, because it’s all sitting in a common, consistent format in your shared services center.”
In addition, 56% say that transforming the corporate reporting operating model is essential to managing the increased complexity of today’s matrix organization.
3. Organizations are using operating model transformation as an opportunity to drive process excellence and harmonization, and warn against a pure “cost play” transformation.
Operating model transformation will often have a cost reduction element, as finance leaders seek the efficiencies of moving processes into arrangements such as offshore shared services. However, reporting’s stakeholders are not just looking for a team that is cost efficient.
Key stakeholders are expecting greater value: better data, sophisticated analysis, strategic business partnering, exemplary consistency and control. Operating model transformation becomes an opportunity to eliminate redundant processes, streamline critical processes, achieve global consistency and automate more transactional activities.
This is a view that resonates with Ron Kapusta, Chief Accounting Officer and Controller at Johnson & Johnson. “For a public company, external reporting is about your communications to the various stakeholders that either invest in your company, regulate your company or otherwise have a stake in your company,” he says. “Therefore, while the cost is important across our entire value chain in finance and accounting and the business in general, you’re not going to cut your way to greatness.”