Transformations, turnarounds and transactions are critical inflection points for any CFO. And one thing they all have in common is the need for the finance function to be at the top of its game. The other thing they do is shine a light on finance function capabilities.
Are you trying to map a rapid strategic change without the right data or insights? How about getting your management buyout (MBO) up and running when your private equity (PE) backer is making demands on financial reporting your systems just can’t meet? Or turning around a business where lax invoicing or poor customer visibility were a big cause of the problem in the first place?
As a managed services specialist at EY I have seen all these situations first-hand, and it’s why we have developed EY Finance Operations. We help our clients to solve complex challenges across the finance function. Our EY team takes on key operations, such as accounting, tax, payroll and data analytics and delivers the service using leading technology. We bring speed, capacity and heightened insight, and can stand-up the service in as little as six weeks.
Who needs fast finance support?
The type of companies that need speed are typically carve-outs or those going through a wider business transformation, which might mean key people are leaving and they’re left without the resources or finance systems to keep the finance function running. Yet the drivers for rapid action are varied.
Some companies create a lot of start-up entities in order to be as agile as possible. It can be a pain for them to get these fast-moving businesses onto the group accounting systems, so they need a standalone finance function to start generating data and insights quickly.
Another situation might be an inbound business looking to set up rapidly in the UK. They might be looking to take advantage of or mitigate against regulatory change, for example. They need to move fast because there is uncertainty around the timing.
Building a firm foundation for finance
Organisations looking to build finance function operations quickly will typically have CFOs who need to balance competing priorities. On the one hand, speed is essential; they need to get the finance function to a place where it’s partnering with the business to deliver valuable data quickly. On the other, they know that quick-fix solutions have potentially unforeseen effects further down the line.
That balance often hinges on the talent in the finance function, which is one reason staff leaving during a transformation is so debilitating. We can set up EY Finance Operations swiftly, giving access to a team of high quality, experienced people who can run the operations at short notice, whether on existing technology or ours – that’s the core of the offer. CFOs find it hugely valuable.
Compare that to the nightmare of trying to recruit or implement a new accounting system at short notice. The last thing that is wanted during a period of change is recruitment, training and time being taken up by the in-house team on system implementations.
First steps to fast finance: find out, show how
Knowing what the CFO’s priorities are is a must. Spending time with the people in the business – seeing how the processes work, how the data flows, what their reporting requirements are, what has to be in place – that’s essential.
Best practice processes, streamlining, efficiency, continuous improvement in functionality – these all happen at the next stage. Any rapid transition demands stabilisation and quality first. It’s about business continuity and creating resilience for finance functions that are under stress.
Getting a productive finance function up and running quickly doesn’t mean it can be rushed. Working at speed is important but stability is critical. That means understanding what the business has today and what data or reporting the stakeholders need as a matter of priority. Then we can work out the quickest way to provide finance operations; deploying our team and technology to ensure they get the data they need during a change.
Collaboration is vital as the project kicks off. The discovery phase with stakeholders and the subsequent list of requirements are not just focused on providing the data stakeholders need to make strategic decisions, but also on running the finance processes themselves in order to keep the business going. Payroll, aged debtors reports and cashflow forecasts are all key to any business, as are compliance tasks such as filing VAT returns. Then we bring that all together as a roadmap, focused on the business’s priorities.
The pace is dictated by the client organisation. In many cases, CFOs need to be able to report back to the board and investors that the basic building blocks are in place almost immediately. We can go very quickly, but always in a way that’s in-step with the client’s organisation. After all, the aim is to reduce the amount of stress in the business.
Our continuous investment in people, underlying technology and processes that take advantage of innovation means that once those foundations are in place, the service can then scale and develop alongside the business’ needs.
Lessen the load on management when they’re time-poor
A business in flux needs its management to be focused on change, not worrying whether the basic foundations are fit for purpose and compliant.
So many things are happening in transitional or transformational situations that a management team can’t get bogged down in the details on these issues. Ideally, whether it’s the CFO, CEO or Chair, they just want to be able to check in with us and ensure that issues and finance processes are being handled. We are trusted to get on and do it.
Having a single point of contact – not a whole roster of systems people, however skilled – during a fast spin-up makes a huge difference. And that’s especially true if things don’t go to plan.
Carve-out lessons: fast finance in the field
A great example of a finance function that needs to be built at pace is the corporate carve-out. When a group divests a subsidiary, one of the biggest issues is likely to be the loss of finance function capabilities. Any CFO is going to find that a burden.
Not all the relevant people will move across to the new company – and a CFO could be dealing with a significant business that needs to hit the ground running on operational and financial data, reporting requirements and basic capabilities like supplier payments and staff payments.
Developing full capabilities independent of a parent can take a while, from handling office supplies or business travel arrangements to broader balance sheet reliance.
Spot-on monthly reporting and handling core processes is a crucial first step. Once the CFO knows they can report accurate numbers, the team can tackle what might be thousands of historic transactions a CFO can use for comparative analysis to support future decision-making.
Full functionality fast: a must for PE investors
While carve-outs are a clear case for rapid finance function outsourcing, other transactions also create an acute need. CFO in an MBO team bringing on board PE investors, for example, is almost certain to face significant new demands on management information and controls.
The frequency of bank reconciliations and cash flow forecasts, for example, might increase significantly. Or credit ratings might be new to the CFO – there are all sorts of requirements with new debt and equity structures. Our job is never simply a ‘lift and shift’ of the existing functions – it’s always about making them fit for purpose in a new reality.
Our breadth of experience of dealing with both portfolio companies and PE houses also helps. And it’s not just about the finance operations. Where issues emerge in a rapid EY Absolute roll-out, we can bring in specialists. It might be a working capital review or bigger picture issues where people feel out of their depth. That can be a major stress-reliever when a PE partner is looking for operational changes at speed.
From challenge to change
Our approach solves both speed and capability issues, because it can draw on wider expertise without having to recruit.
There might be issues with the controls or with the segregations of duty, which expose the organisation to added risk. For example, we might find some transactions that aren’t properly supported with documentation.
Rapid problem-solving is only half the story. The same attributes – discipline, flexible resources, up-to-date systems and specialist knowledge – set the foundations for a finance function that remains fit for the future.
The initial finance function support phase is about business continuity and stability – but after that we work with a CFO and the team to help them determine what the long-term finance function vision is. Then we can put in place the framework for continuous improvement. That’s about more efficient processes and better use of data. The point is to create the options to transform, not just lift-and-shift existing processes or systems.
For a business to thrive during times of change it is vital that CFOs can quantify and mitigate risk; have reliable data at their fingertips; and have clarity around cashflow. Getting to the heart of what is needed quickly sets a base level and enables the CFO to deliver on their promises.
Not every business needs to build the foundations for that in six weeks, but if a CFO has a need for speed, there is a way to ensure they don’t sacrifice those crucial elements to get working – fast.
To find out how EY Finance Operations can help you adapt and stay agile in a rapidly changing world, book a time to speak with one of our team.