CFOs who are busy analyzing KPI reports for benchmarking the broader organization should not neglect to benchmark the efficiency of their own finance teams.
With everything finance teams are expected to do in a working day, it is sometimes difficult to take a breath to look at how efficiently your finance team is working. However, benchmarking the finance team is more important than ever. By monitoring performance levels, CFOs can determine how teams can be streamlined, how efficiency can be boosted, and how to best incentivize team members to do a better job.
By taking a breath to evaluate and optimize finance teams, CFOs can trim excess capacity in less value-added activities, and reassign resources to more key areas. One example of how this would work is to eliminate redundant processes or automate tasks in order to increase capacity in more business-critical tasks such as analysis to further strategic objectives.
Key Metrics for Efficient Finance Teams
Some CFOs will argue that their finance teams are doing just fine and, of course, they do not have the time to assess performance. However, the time taken to assess the performance of your finance team can reap significant productivity benefits. The following key metrics for efficient finance teams can help determine whether or not your team is actually doing just fine, or whether there is some room for improvement.
In Accounts Payable, do you know:
- The total department spend divided by the number of invoices processed?
- The average time taken between its receipt and when it is processed?
- The percentage of invoices paid within terms and those that qualify for early pay discounts?
- The percentage of erroneous or duplicate payments, and the time taken to correct them?
In Accounts Receivable are you aware of:
- The days sales outstanding based on total accounts receivable/total credit sales?
- The best possible days sales outstanding that you can collect invoices in?
- The average number of days your invoices go past their due date?
- Your Collections Effectiveness Index or CEI – the amount collected within a time period compared to the amount of receivables within the same time period?
Where are you in Payroll with regard to:
- The cost per payroll payment?
- The cost per payroll enquiry?
- Payment errors and the time taken to resolve them?
- The number of manual checks cut?
It is important to note that the purpose of the exercise is not to catch errors and those most prone to making them. Indeed, it should be made clear from the outset that benchmarking the finance team has the objective of enhancing its value to the organization as a whole.