PwC:s 2019-2020 Finance Benchmarking Report

PwC:s 2019-2020Financebenchmarking reportStockholm, March 17 2020

Key points from PwC:s2019-2020 Financebenchmarking report2

This year’sbenchmarkingreport focuses onthe new demandsbeing placed ontoday’s financeleadersPwCPwCThe report breaks down the challenges facing our financeleaders into three key themes:1People2Process3Performance3

Three key points are helpful to know, regardless of where youstart a functional transformation1 People5 of 6Steps to improve Financeeffectiveness are about people5 of 6 steps to improve the financefunction are about helping peopledigitally upskill and collaborate better:1. Improve communication protocols2. Improve collaboration3. Improve interactions andrelationships4. Upgrade skills5. Clarify roles and decision rights6. Improve technologyPwC2 Process30-40%3 Performance75%Many of our clients know the potentialfor process automation in thefinance function.Imagine what that means for acompetitive advantage. It’s a big call toaction for functions who are notmaking the shift for how staff time isspent.Of time can be reduced withfinance automation andbehaviour changeThey’re taking on core systemstransformations, includingconsolidations or a change toSAP4Hana. Our benchmarks indicatethat 30-40% of existing time spent onprocesses can be reduced with financeautomation.Of business analysts’ time in topperforming finance functions isspent on developing insightCompared to 47% of top financefunctions devoting their time to data 5years ago.4

Is your finance function cost efficient?Today’s finance budgets are shifting, but they are not necessarily shrinking. Top-performing financefunctions are keeping automation high on their agendas, but it’s just the start of a bigger push forperformance.Efficiency and cost reduction in thefinance function have been a majorfocus in recent years, but financeleaders are reinvesting those gainsto improve the insights they provideto the business units and companyleaders they support.Cost of finance by company revenueMedianTop quartile20130.89%0.53%20180.85%PwC0.55%5

Companies with larger revenues typically have lower-costfinance functionsCost of finance as % of company revenue (2017-2018)MedianTopQuartileRevenueLarger companies take advantage of economies of scale and operating model design to deliver efficient finance activities.PwC6

Large companies have no excuse when operating in a moregeographically complex environmentCost of finance by revenue and number of operating countries (2017-2018)Revenue 3bnRevenue 3bnNumberofoperatingcountriesPwC7

Gauge where you stand against your industry peersCost of finance as % of company revenue %0.65%0.63%0.84%1.17%Top quartileMedian cost of financeSource: PwCPwC8

Key takeaways from our report: PeopleThink pro-finance and pro-peopleat the same timeUse personas to imagine newroles for financeTake down productivity andcollaboration barriersAssess where people’s skills are todayfor the specific outcomes in yourfinance transformation.A persona is a fictional representationof who will play a role. Thinking inthis way helps you design yourfuture-state organisation.Use workflow automation tools, digitalsocial hubs and chat tools tomodernise the workplace.Think rotational programs, shadowingand learning that allow people todemonstrate underutilised skills.PwCPwCDo you need ‘problem solvers’ withbusiness acumen? ‘Value drivers’ thatcan look at trade-offs across a widerange of scenarios? ‘Dreamers’ whocan visualise stories, innovateand experiment?But it’s also important to breakorganisational silos and recognise howspans and layers, work habits orcultural traits hold people back fromtrusting each other and collaborating.9

Key takeaways from our report: ProcessStage improvements carefully toincrease finance’s contributionsto the businessMatch finance roles to outcomesCheck taxes and compliancebefore you commitMove forward in line with thecapabilities most needed for thebusiness and stage differenttechnology solutions and role changescarefully. Elsevier, a global informationanalytics business, conducts periodicbenchmarking analyses to identify theprocess redesigns that would yield thegreatest returns and moves forwardsequentially.Transformation efforts are less likely tosucceed when there’s not a clearunderstanding of the target operatingmodel and specific businessoutcomes. Change roles to get theright role-to-outcome match. Today’sglobal process owner role, forexample, helps standardise end-to-endprocesses for automation.Process simplification and automationcan have trade-offs. Thinking ofautomating shared-service processesand moving them offshore? Rememberchanging where work gets done maysubject you to different regulatoryconsiderations or it may alter yourtotal tax costs or legal entity structureand collaborating.PwCPwC10

Key takeaways from our report: PerformanceSelect finance performance-pilotsto hook early adoptersSelf-service financial data mustequal better serviceStart with specific use cases that havea good chance of adoption in theorganisation and pilot them. Home inon the types of data you need. Forexample, in an existing revenue model,you could start layering in unstructureddata coming from social mediaplatforms to track customer sentiment.Self-service dashboards drive nimbledecision-making, but business teamsstill need support from finance to drawconclusions or validate decisions.Keep collaboration strong with regulartouchpoints so that both finance andbusiness teams have the sameinterpretation of the data and the samebasis for measuring performance.PwCPwC11

Point of view on thefuture of Finance12

A series of mega-trends are impacting business PwC13

and changing customer expectations and moderntechnologies are impacting how we work in Finance14PwC14

Future Finance organisations will be differentImproved efficiency willcreate additional capacity and Finance will pivotto a greater advisory role15PwC15

These trends are impacting the whole Finance Operating ModelVision &StrategySets out the Vision for Finance, thetransformation roadmap, benefits caseand design principlesSets out the technology architectureand key systems used, ‘fit tostandard’ alignment, and integrationroadmap as necessaryDefines the performancemanagement strategy, KPIframework, and reportingarrangements and capabilitiesDefines the Finance data modeland master data management strategyPwCPeople &TalentSets out the Finance job families,competency framework, learningjourney & career path frameworkOrganisationOrganisation& Location& rformanceManagementData &Master DataGovernanceProcess,Automation& ControlsSets out the Finance OrganisationStructure and Location Model withroles and responsibilitiesDefines the finance services,where they will be delivered from, andhow they will be delivered to thecustomers of financeDefines the process taxonomy,process designs, RACI matrices,risk & controls frameworks, and howautomation will be used16

How can Finance respondand transform?The Future of FinancePwC – The Future of Finance1717

The modernFinance agenda Simplifying and standardising processes withnext generation cloud ERPsProcess Achieving end to end process automation andself service delivery Embedding predictive and automated controlsYou can start ondifferent pathways butto transform thesemust come together. Creating a connected data, insight and analytics capabilityenabled by a digital corePerformanceLearning and data science capability Real time insight and self service supported by NLPPeoplePwC Predictive and forward looking insights supported by Machine Investing in an upskilled workforce that’s digitally savvySupplementing new human and machine based rolesCreating a modern and collaborative environmentUsing a highly efficient delivery model18

Lead with Process40%62%of Finance effort could beof Finance executives arerealigned to more value-making significantdriven activities throughinvestments in AIuse of automation [1]over the next three years.[2]46%80%Amount of time thatImprovement inautomation can reduce incompleting key datagathering processes. [3][1] Finance Effectiveness Benchmark Study 2017[2] PwC:s 2017 Global Digital IQ Survey[3] Finance Effectiveness Benchmark Report 2017PwCPwCproductivity of individualprocesses as a result ofSmall Automation. [4]“We often hear from ourclients a desire to constantlyimprove processes“Can we evolve the scope of shared services andoutsourcing and what's the role of a CoE?”“Should we expect shared services to be significantlycheaper or even eliminated in the future?”“What are the benefits of next generation cloud ERPand what’s the role of Finance in leading this agenda?“What are the automation focus areas?”“How can we embed compliance and controls?”“Does real time reporting really exist and how can wereduce the number of days to close and the effortspent collecting and reconciling data?”[4] strategy business, 201819

Lead with ProcessPwCPwC20

Lead withProcessWith pre-configuredCloud ERP at the coreand broader digitalenablement; Financeprocesses, data andcontrols becomesimplified,standardised andautomated.PwCCloud ERP &Digital PlatformsProcess Excellence& AutomationRisk & RegulatoryPre-configuredCloud entAutomationNext generation cloud ERP and a ‘fitto standard’ design enablessimplification and standardisation ofglobal processes and controls whichimprove data quality and drive ahighly efficient end to end process.Leveraging ‘fit to standard’ CloudERP; end to end transactionprocesses can be automated withRPA and automation can extendfurther with Blockchain and speechRecognition.ML further automates financeprocesses beyond transactional, suchas automation of the “first mile” ofbudgeting & planning, the closeprocess, performance managementinsights and analytics.ConnectedSelf-ServiceDataDigital Twin& ProcessMonitoringPredictiveRisk &RegulatoryReportingCloud ERP and Finance Data Lakeswith in memory computing, simple touse app interface, speech recognitionand chatbots - real time self servicereporting further enhances theprocess.A digital replica and monitoring ofend to end finance processes,potential bottlenecks and the abilityto simulate process optimisationthrough changing team workload orapplying RPA drives continuousimprovement.Automated controls has advanced topredictive controls over and aboveretrospective trend and anomalyanalysis. Integration tools furtherenhance controls with electronicregulatory reporting.21

Lead with Performance56%25%of customers of Financesay that their BusinessPartners do not influencetheir decision-making [2]of employees’ time isspent gathering ratherthan analysing data dueto inefficient processes. [3]“We often hear from ourclients a desire to add valueto the business throughforward looking insights“How can we improve our data quality?”65%55%of organizations aredissatisfied with theirmanagementinformation. [1]of organizations do notlink metrics and budgetsto the strategy. [2]“Can we integrate our systems and data sources?”“How do we reduce the number of reports andspreadsheets and move to self service reporting?”“How do we start using more consistent and relevantmetrics that are aligned to strategy?”“How do we create forward looking insights leveragingadvanced analytics, Machine Learning and AI?”“What’s the role of a Finance CoE when it comes todata, analytics and decision support?”[1] PwC Finance Effectiveness Benchmark Study 2017[2] Harvard Business Review and PwC[3] PwC Finance Effectiveness Benchmark Study 2019PwCPwC22