Business Finance Analyst Management

I tend to be an apolitical person. I try to be internally apolitical within organizations I am employed by as well as related to government politics.

But now I have a dilemma. It is not with an employer. At the age of 64 I recently “semi-retired” from my employer, a large business intelligence software vendor, after being 16 fun years there. I now have time to write more and present seminars, talks, and webcasts. My dilemma is that I have been invited to present a keynote talk in Washington DC on March 28 to US Federal government civilian and military executives. What should I say to them?

Money for anything versus everything

Here is what I am thinking. Given the reality of the “sequester,” I will likely have little to no impact on what they are already doing. With forced spending cuts many of them are doing the standard “shaving the ice cube” and “slicing the baloney.” That is, they are doing percentage across-the-board cuts and furloughs. That may be an exaggeration, but how exaggerated?

Of course, spending reductions using those crude methods have little consideration as to where might there be more wisdom and impact than using a meat axe approach.

What I think I may say to them is this. “Look, you always have enough money to do anything. But you do not have enough money to do everything.” Am I on the right track?

Enterprise performance management (EPM) for the future

Public sector government agencies at all levels – Federal, state, and local – have been talking and writing about enterprise performance management (EPM) for many years. Some are implementing EPM methods like strategy maps, KPI balanced scorecards, bottom-up driver-based budgeting, and activity-based costing (ABC) to measure the conversion of budget spending “inputs” for visibility of their “output” costs. Some do it well, but I sense only a few. There is some legislation requiring use of EPM methods such as ABC. But are their costing models too simple and highly aggregated to gain insights? Do they calculate them for compliance but not for decision support?

When they measure and report KPIs, how much is linked to accountability with consequences?

What should I say?

Since I cannot alter the crude cost cutting today, maybe I can provide them with a vision of what they can do going forward. After all, their agencies will not be shut down (although some might be). Why not manage their resources and outcomes using progressive EPM methods?

It is not about monitoring the KPI dials of their scorecards (presuming that correct KPIs have been selected). It is about moving the KPI dials with the appropriate projects, initiatives, actions, and decisions.

And while I am at it lecturing to them, I can encourage them to begin embracing analytics of all flavors. These include segmentation, clustering, regression, and correlation analysis. One no longer needs to be a statistician to do these. The software vendors are making it easier to.

But government agencies need to think beyond just using business intelligence (BI) tools. BI is mainly limited to reporting and drill-down queries usually of past history. BI consumes stored data. What they need are analytics that converts the BI information into context to solve problems and pursue opportunities. They will also need better forecasting and predictive analytics to anticipate the workload demand that will be placed on them in future time periods,

Can I have an impact? Or will I just be another opinionated voice? We’ll see.

Author: Gary Cokins   

Web: https://www.garycokins.com/

A recent study by ADP found that 81% of finance executives felt compliance was getting more complex. ADP conducted the survey in collaboration with CFO Research showing 89% of senior finance executives rank compliance as a priority, but 73% expect the complexity of new regulations to make it ever more resource-intensive to comply over the next two years.

So how did the senior execs react to the news? Despite increasing complexity, ADP reports nearly 60% of survey respondents said their compliance budget would remain stagnant or decrease in the next two years. So, they expect more and harder work but aren’t increasing the resources to do the job.

The execs apparently believe that some magical efficiency gain will occur despite 60% of the companies reporting that they incurred compliance-related penalties with some regularity. Apparently these senior finance execs would rather pay penalties than increase compliance resources. As CFO, what would you do? Here is what ADP found. 

The ADP survey tried to uncover how these companies get into this situation in the first place. It turns out that more than 60% of respondents say compliance activities are not completely centralized within their organization while more than 70% of respondents report their compliance activities rely on multiple, separate information systems, both are surefire prescriptions for inefficiency.

But again, are these senior execs going to do anything about it? According to ADP’s survey, more than 80% anticipate the number of vendors they use will either increase (19%) or remain the same (63%) over the next two years. So the majority of execs are doing nothing to mitigate an underlying source of inefficiency in compliance and some, nearly one-fifth, are actually exacerbating the problem.

For sure, compliance already is difficult and getting worse. In just one example, employment tax, a company faces 17,000 proposed rule changes across multiple employment districts in US. How much the employer is to deduct for each employee may depend on where he/she works or lives. In some cases, the employer has to determine which is greater and deduct for that. And if they do it wrong, they incur penalties.

This clearly is a problem that begs for streamlined IT systems and automation. And that is partly what the ADP found in its study. Sixty-five percent of survey respondents believe reducing the number of touch points in compliance processes could increase efficiency and productivity.

Information presents another obstacle. More than 75% of finance executives report they have no access to real-time, consolidated compliance data. And they are unlikely to change the situation as long as their companies are using different, incompatible systems from multiple vendors.

The finance execs apparently realize they are in a losing situation when they identified the top four potential benefits of improving compliance management as: 1) More effective risk management, 2) Lower cost, 3) Avoidance of penalties or fines, and 4) Shift of employee resources to higher-value activities. Whether they want to boost resources or not, something needs to be done to boost efficiency.

Along with its compliance survey, ADP introduced its ADP SmartCompliance offering. It is designed to help organizations streamline employment-related compliance activities by bringing together seven key compliance capabilities on a single, unified platform. The platform provides enhanced accessibility and visibility into compliance across the organization, effectively helping to free up time and resources and allowing the newly freed resources to focus on growth and ROI and the organization to avoid paying penalties.

The ADP SmartCompliance platform handles: 1) Employment tax, 2) Tax credits, 3) Wage payments, 4) Wag garnishments, 5) Employment verification, 6) Unemployment claims, and 7) W2 management. In the end, the managers get actionable data through comprehensive cross-service displays that produce a single, visual snapshot enabling them to quickly assess the status of multiple business areas, including the seven capabilities already noted.

A few competitors do some of this. Or a company could do it themselves, which many try. In the end, you have to determine whether your resources are best spent on managing compliance mandates or doing revenue producing work. Your call.

Author: Alan Radding -  Web: http://technologywriter.com/about-tw/

Have you found the missing metric? As CFO you probably feel you have all the metrics you need and more but one is missing.

For Google Analytics, the missing metric is $ Index, described as the fastest way to figure out how each of your web pages contributes to your total revenue. It takes your total revenue, analyzes the pages that visitors went through before they converted, and weights them so you can see which ones are the most valuable. For sure that is a valuable metric for your CMO but that’s not the missing metric wiredFINANCE is talking about.

Especially if you are a manufacturer there is a more important metric, profit velocity. As Profit Velocity Solutions explains: All manufacturers worldwide carefully measure and manage the profit per unit of their products, but very few manufacturers have any idea how much profit per hour their equipment produces. That is why it’s called the missing metric; until recently, there simply hasn’t been a tool capable of measuring it. But now there is. 

The tool, PV Accelerator, enables manufacturers to identify and analyze how much profit per hour their machines yield as various products flow through them so they can optimize profits on the fly. In this case, time truly is money.

Why so important? One word: ROA. CEOs and CFOs are largely rated by their ability to wring profits from the assets under their control. As such, ROA is perhaps the premier metric of quarterly and annual results. But how many manufacturing firms are able to measure and report on ROA at the transactional level of detail? How many can provide their middle-management ranks with accurate, timely, detailed reporting of ROA by invoice line item, production run, customer order, production line, etc.? Virtually none, notes Michael Rothschild, founder and chairman of Profit Velocity Solutions. Yet, not measuring profit velocity allows misguided management decisions, which by some estimates, are causing $100 billion per year in global manufacturing profits to be frittered away.

That’s why this metric has been so sorely missed. “The problem is that accounting systems are designed to measure unit margins, and until a few years ago the raw data required to accurately calculate the profit velocity of production assets was neither captured nor stored in databases,” explains Rothschild. Until his company introduced, PV Accelerator, no information platform existed that could weave together the necessary raw data to calculate and report on the missing metric.

“Despite decades of massive investment in sophisticated information systems,” Rothschild continues, “when it comes to the management accounting challenges facing managers of complex, asset- intensive manufacturing enterprises, an enormous gap remains between management’s need for actionable, profit-optimizing information and the capabilities of today’s systems.”

PV Accelerator, however, gives manufacturers visibility into asset return—not just per product unit, but per asset hour—and it does it for every product, customer, and machine on every production line at every facility. Without it you would need battalions of accountants armed with spreadsheets to even attempt this. The results, if any ever arrived, would be too late to be useful.

The challenge becomes getting the right numbers fast enough and in a form that can be effectively used.

In today’s world, businesses meticulously track so many metrics, yet ironically the metric that matters most, how fast you’re making money from your assets, is the one metric managers are missing. With PV Accelerator you get exactly the information you need in near real-time and in a form you can put right to work.

For example, a sales rep sitting in Starbucks with an iPad preparing for his next call can access the tool to determine which product he should offer right then to maximize both his commission and profit for the company. Near real-time profit velocity data like this is tantamount to information-based decision making on steroids. And once the system is in place, everybody can take advantage of it, from the sales rep in the field to the operations director to the CFO and CEO.

Rest assured the IT team will have no problem; PV Accelerator, a cloud-based SaaS offering, runs as just another virtual machine on your network. After a quick mapping exercise, it will start collecting a blend of historical and current data and begin analyzing it. Results show up fast. The CIO will love it because it leverages the IT investment in a clean simple way that has the potential to deliver a clear payback, adding points, not just fractions of a point, to the company’s bottom line, which will please the CFO too.

Author: Alan Radding -  Web: http://technologywriter.com/about-tw/