Raising the bar to world class standards - and beyond.

• Author: Roth, Richard T.

The ongoing FEI/Hackett finance benchmark divides participant performance into a four-quartile scale so organizations can see how they stack up against each other. Best-of-breed companies attain the cost efficiencies and productivity that are the first-quartile baseline.

That isn't to say, however, that companies shouldn't aspire to something greater.

Within the first quartile are those rarities defined as "world class." While no single entity is world class across the board, in every metric, that should be the goal. World-class finance departments, though, generate tremendous value across the people, processes and technology inherent in the mix. They couple high efficiency with low cost; they leverage technology throughout the process spectrum; and they direct their resources to the highest value-added activities. They've raised the bar of excellence to previously unheard-of levels, but here's a critical point: At some juncture, maybe not too long ago, they probably looked a lot less impressive. So what happened?

Attention Must Be Paid

Look at costs. That's where world-class organizations currently define the true bottom edge of the envelope. The overall average for finance costs as a percent of revenue is 1.2 percent, according to 1998 Hackett data, but world class is less than 1 percent - and dropping fast. Moreover, world-class organizations don't just drive costs down by being "quick and dirty," but instead lower expenses while enhancing the value provided to the larger organization. They do it better, not just faster and cheaper.

The point is driven home at the process level. It costs the average finance organization in the benchmark $2.93 to process each individual vendor invoice, but the price tag is less than $1.90 for world-class companies. The average cost to process a travel and expense report is $5.51, but only $3.39 for world-class firms. The difference between average and world class to process a customer billing invoice is $0.33 to $0.18; it's $1.24 to $0.80 per freight invoice. Extrapolate these savings across tens or even hundreds of thousands of transactions, and envision them incorporated throughout multiple finance processes, and the amount of money involved is eye-popping enough that every senior finance manager should be paying close attention.

The difference in process is also striking. For example, world-class customer billing operations handle over 223,000 invoices annually per full-time equivalent employee (FTE)...