Over the years, Finance organizations have contributed significantly to improve operational performance, drive cost reduction, identify new revenue opportunities and forecast future performance. This has necessitated transformation and in the process the free up of resources from traditional accounting transactions to shoring up resources for decision support systems.

The IBM 2010 Global CFO study with over 1,900 participating CFOs and senior finance professionals, support the fact that by adopting Service Delivery Models (SDMs) we can drive better value, scalability, efficiency and controls. Benchmarking data shows that finance organizations that have adopted SDMs  – meaning shared services, outsourcing or a hybrid combination experienced material improvements in efficiency and reduction of 50% or more in costs associated with performing finance an accounting operations.

Its not that every organization aspires to be “world class”  but for those who do, IBM examined the top quintile performers in SDM peer groups and found that they are 200% more likely to achieve  “world class” performance, compared to those without shared service or outsourcing model.

However, adopting outsourcing or shared services or any sort of hybrid model itself, does not guarantee improvements. SDMs are infact optimized when deployed in conjunction with several other enablers e.g. culture and discipline across organization and common technology platforms.  A service delivery model itself is not the whole solution.

For the benefit of this discussion, let me reveal some interesting facts:

1. The SDM peer group demonstrated an overall 63% decrease in personnel cost. This suggests that broader benefits from standard processes and procedures, data and operating model, do generate tangible efficiency improvements.
2. A long-standing objective of many finance organizations is to reduce the overall accounting period close cycle. The SDM peer group demonstrated, speeding up the annual close by 41%. Examining the overall cycle time from starting the annual close to earnings release, the SDM peer group runs about 28 days as against 47.5 days against non-SDM peer groups.
3. There may be several reasons why an enterprise may want to enhance financial close cycle. One may be to increase time spend on financial review, performance analysis, preparation of management discussions and analysis for earnings release. The other may be to release earnings ahead of others. The SDM peer group is consistently demonstrating that time spent on transaction side is lowering and the time spent on reporting, analysis and preparation for earnings release is increasing substantially.
4. Revenue accounting was examined across two key stages of cycle – managing sales order and managing and processing collections.  The SDM peer group has 76% fewer people in managing sales orders and in managing and processing collections, the SDM peer group demonstrated 56% fewer people.
5. Analysis of account payable showed similar results. The SDM peer group’s cost of account payables is 33% lower and shows a 43% improvement in transaction processing efficiency.
6. In payroll processing, the SDM peer group shows a 45% improvement overall as measured by the ratio of payroll employees to the number of employees paid.. For reporting time, the SDM peer group’s total process costs are 29% lower and personnel costs are 84% lower. For managing pay, the total process costs are 43% lower and personnel cost component is 38% lower. On the quality side, the SDM peer group has a 47% lower occurrence  with  the number of voided payments.

The findings provide quantitative validations supporting the value of deploying service delivery models across most General Accounting and Finance Operations functions. These examples demonstrate significant savings which provides opportunity to invest in other finance transformations – such as those focused on analytics and enterprise support that can make finance a better and stronger business partner.

Excerpts, comments and quotes from “IBM benchmarks demonstrates the effectiveness of service delivery models for finance and operations functions” Copyright IBM Corporation 2011.