Profiting from effective business process integration: implementation isn't easy, but the payoff from operating in real time across multiple platforms and disconnected systems can be enormous. (It Integration).

The role of today's CFO is undergoing a radical transformation. Yesterday's number-crunchers have become today's power brokers, charged with implementing reforms aimed at improving corporate governance and restoring investor confidence in America's capital markets. And, they are also on the hook for delivering the profitability Wall Street is now demanding after posting some of the weakest earnings since the Great Depression.

Along with that newfound power comes the challenge of executing on these responsibilities -- while often using outdated legacy finance systems. Almost half of U.S. public companies still rely on inefficient spreadsheet-based reporting systems and are unable to produce consistent, comprehensive financial snapshots of their companies on demand. The financial information CFOs need to satisfy regulators is buried deep within disparate finance programs running on multiple platforms, forcing financial analysts to spend valuable time chasing down numbers and compiling them across disconnected business process systems. Critical information on customers and suppliers is also tied up in multiple systems, preventing the same analysts from achieving real-time insights into problems or trends that could improve enterprise performance.

As a consequence, business process integration has become the battle cry of CFOs and CIOs looking to achieve a single source of financial information to improve management and regulatory reporting, and to better align finance activities with strategic corporate goals. Companies embarking on an integration strategy want to seamlessly link up their systems in disparate locations in a way that protects legacy investments and allows for forward-looking, multidimensional analytics throughout the enterprise.

According to Profile in World-Class Finance 2003, by The Hackett Group, a leader in benchmarking and best practice research, integrating financials into other corporate business processes can generate benefits in three key areas:

* Planning and reporting becomes faster, simpler and more reliable.

* Risk management becomes more comprehensive as finance routinely analyzes and advises on risk in all forms, even in areas that haven't been traditionally scrutinized.

* Process efficiency increases and frees up resources for profit-generating core business activities.

A Roadmap to Business Process Integration

What are the steps to incorporating finance systems into a real-time organization? First, know the business at hand by identifying how finance activities come into contact with other business processes throughout an organization, and how their integration can improve organizational efficiencies and worker productivity The next step is to work with the CIO to determine which manual business processes should be automated, and which technologies are best suited to accomplish that task.

The final step is to aim for strong and tangible return on investment (ROI) by standardizing on best-practice business processes. This will drive down finance costs and also increase the time allocated to value-added decision support, putting companies in the same league with leaders like Toyota, FedEx Corp. and Marriott International.

Step 1: Know The Business

Begin by considering how a company's financial processes intersect with its customers, suppliers and partners. A customer relationship management (CRM) system might review past customer purchases in order to formulate new sales plans, while a supply chain system captures orders, forwards requests to suppliers and manages payment along that chain. All of these activities have consequences for a company's financial health. International operations might have additional, parallel systems operating in local currencies.

Companies have invested heavily in systems to automate these processes, yet senior executives and middle management rarely get an accurate and complete picture of assets, income, expenditures and relationships. Disparate systems can be out of synch with other systems due to manual entry mistakes or inaccurate data transfers. Faulty or conflicting information can also slow down decision-making, preventing employees from capturing market trends or spotting internal red flags that can hurt enterprise performance.

Step 2: Strive for Cost-Effective Integration

Integrating a company's financials with the rest of a company's business processes dictates a careful and strategic approach. The integration should be cost-effective and seamless, allowing operations to continue uninterrupted so that the transition is invisible to external customers and partners.

To do this, managers need to map out the existing relationship between legacy technologies and business processes, then determine what kinds of new technology are needed to connect and integrate disparate information. In its 2003 report on best practices, The Hackett Group cites the elimination of manual data entry--and the errors that inevitably result--as a best practice adopted by world-class finance organizations. Hackett also underlines the importance of using Internet-based integration to increase the accessibility of data and to speed report delivery.

CFOs and CIOs should also look for solutions that offer built-in integration capabilities. They should ensure that HR and financials data should be available to all modules, both new and legacy. Web-based software offers clear advantages, since no client installation is needed, and users can access whatever information they need on the go. A robust billing system is another key feature to look for; this can allow for more aggressive billing to decrease days/sales outstanding and improve cash flow.

A financials integration project is also an appropriate context for the insertion of business intelligence and analytics tools. These tools are invaluable, providing accurate, context-rich real-time analysis of a company's financial health, and proactively searching for patterns or trends that might escape human eyes, so that decision-makers can react quickly to changing market conditions.

Unified financials are also best viewed using an enterprise portal, and it makes sense to deploy this tool while rationalizing and consolidating financials systems. The best such portals offer role-based security clearance, allowing employees to view as much as is appropriate for their role, but no more. With these safeguards in place, financial information can be viewed more widely, extensively and consistently across an organization, putting everyone on the same page, heightening accountability and empowering employees to make the right decisions.

Oxfam, a relief organization dedicated to alleviating poverty and suffering, is using such a unified financials approach to ensure effective financial management while decentralizing operations to better address local operations. When it recently formed eight regional centers, Oxfam wanted to empower them by providing real-time access to information for rapid response and delivery.

At the same time, Oxfam wanted to maintain centralized policy, process and information standards, along with appropriate financial controls. The resulting implementation was so effective that Oxfam brought its business plans forward by almost a year.

Step 3: Aim for Strong, Tangible ROI Finance organizations seeking to maximize their business process integration ROI must go beyond merging their activities into enterprise business processes. They need to become world-class, standardizing on proven best-practice finance business processes to deliver high-quality management information, proactively manage risk and flawlessly execute basic transactions.

World-class finance organizations operate with 90 percent fewer applications per billion dollars of revenue than their average counterparts, while spending 47 percent less on transaction processing and 44 percent less on total finance costs.

The following five proven finance best practices can deliver immediate results within an organization:

1. simplify financial processes by eliminating unnecessary iterations, handoffs, excessive reviews and approvals.

2. Automate manual processes, using self-service, Web-enabled tools to execute core transactions and facilitate direct access.

3. Consolidate related activities and information to reduce systems complexity, eliminate redundancy, and leverage economies of scale.

4. Standardize business processes and data to eliminate inconsistencies and integrate disparate information sources.

5. Align decision support activities like planning, budgeting, forecasting and reporting to strategic objectives to increase competitiveness and response time to events.

Standardizing on finance best practices and integrating those across core business processes can deliver impressive results--as much as $900,000 in finance operations savings for every $1 billion in revenue--and improve the quality of decision support by making it more value-aligned.

Connecting and relating the numbers that flow from customer, supplier and employee systems means that senior executives and middle management can get meaningful, accurate and real-time answers to the queries about every aspect of a company's financial operations and how they relate to each other. Ultimately, this means that corporate leaders can make business decisions--and sign off on financial statements--with more confidence than ever before.

Susan Foley Kane is Vice President, Product Marketing, for PeopleSoft Financial Management Solutions. She can be reached at [e-mail]