The finance team toolkit part 5: processes – economia

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Author: ICAEW Insights
Published: 30 Mar 2023
People generally confuse process with policy and procedure. ‘Process charts’ end up including 200 procedures that draw focus, and people start losing the woods for the trees. However, a finance function would typically have around 30 processes.
I like the Oxford Dictionary definition of a process, as it’s so simple: “A series of things that are done in order to achieve a particular result.” Another definition I like involves a policy, process and procedure triangle. Policies sit at the top of the triangle; these set out the strategic direction. Procedure is at the bottom of the triangle; these are the specific steps an individual would need to complete an activity. Processes are in between; they set out what you do, but not how you do it.
Let’s focus on processes for organisational transformation. We want to assume some strategic policies to drive the objectives, but we do not want to be distracted by procedures. We want to focus on processes. There are many tools that can help with this, but SIPOC (Suppliers, Inputs, Processes, Outputs, Customers) is a simple approach you can take. The important thing is that you’re consistent.
You would usually create a more detailed process map behind your SIPOC chart, but this is a first step to help you to understand the big issues and the segregation of duties. Remember: the reason we’re doing this is to drive organisational change. We’re not doing this for process reengineering. The question we’re trying to answer is: what do we need to do to transform the finance organisation?
There are often disconnects between the expectations of senior management and the people actually involved in the day-to-day work when it comes to processes. For example, there might be a lack of clarity between business owners and the finance team about who has the final approval over invoices, who chases for cash collection, who then is responsible if that invoice goes into default, and so on.
In a small organisation, the SIPOC can be useful in providing clarity for everyone in the organisation, to make sure the processes you’re running are complete. It gives you some simple high-level views, which is useful for communicating to other stakeholders outside of finance. It can show who the owners of those different processes are, preventing the CFO from becoming a bottleneck.
I’ve been to many organisations where there’s been an excessive preoccupation with very detailed procedures and process diagrams, but the organisation hasn’t been clear on the key purpose from a SIPOC perspective. So it can help to clarify processes in a big organisation, to make sure people aren’t stepping on each other’s toes, or there are no gaps.
By mapping out some of the key responsibilities within your team, it can help provide clarity over roles and responsibilities, and identify any problem areas.
When we’re thinking about transforming the finance function, we need to consider the typical processes a finance function is responsible for. These might include:
If we’re looking at how we can transform and improve these processes, we need to understand how they link with other processes and perspectives around the organisation. The processes you have need to work with the people you have and the structure you’ve already defined.
When it comes to the digitalisation of processes, this is of particular importance. When implementing a new enterprise resource planning (ERP) system, organisations often try to get people, structure and processes to ‘fit’ the new system, to avoid potentially costly customisations. This could be argued as the cart coming before the horse, but ERP solutions providers will argue that these processes are designed to fit those typical finance function processes.
When figuring out whether this default could actually work for your organisation, you need to consider:
Structure – it should be clear who is responsible for which areas in structure, for leadership and people’s specific role profiles.
Systems – it should be clear which technologies (systems) are used to deliver key parts of the process.
Metrics – these should help manage key components of the SIPOC process.
Look at the finance function: are there key processes which, when benchmarked, could provide more value to the organisation? For one of our clients, for example, we sped up the month-end process using technology, effectively taking five days out of the process.
Doing this meant we had an up-to-date forecast for actuals in the forecast reviews. So not only was that time in the process saved, but it allowed people to work on more value-added work. It also meant that the information for decision-making was better.
How much process documentation is needed? The short answer is: it depends. It essentially comes down to cost and benefit, risk and reward. A nuclear power plant, for example, will need more process documentation than a small consultancy.
When it comes to our Gap analysis, we need to assess maturity. Are processes defined within the organisation? How does it align with leadership, structure, people and systems? Are processes managed effectively?
You need to assess whether these processes need an evolution, ie process improvement, or a revolution – process reengineering. By completing your Gap analysis, you should know how far you need to go.
Let’s take an example where we have a senior finance leader with too many things coming through them rather than going to their team. This person realises that the maturity of the processes from a SIPOC assessment perspective is non-existent, if we go back to our maturity gap analysis. While there are loads of procedures and detail, there isn’t a high level summary providing clarity over processes.
What your action plan looks like depends on the findings in your Gap analysis. Let’s look at our example action plan here again. 
Technology will obviously play a critical role in this – we cover systems and technology more in the next article. For the purposes of this segment, think about how technologies such as AI can help to improve processes. Consider the processes in big ERP systems such as Oracle and SAP; do they offer an easy way to follow best process practice? Consider whether process improvements or technology upgrades should come first.
Once you’ve got your new technology and improvements in place, it’s important not to rest on your laurels. It’s hugely important that finance functions look to make continuous improvements. You should constantly and consistently evaluate and improve people, leadership and structure as well as processes and systems.
Finance team toolkit part 4: the right people

Neil Cutting
 has held many CFO and transformation leadership roles with complex global organisations – most recently with Jacobs Solutions Incorporated. He is also a member of ICAEW’s Business Committee.
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