We have worked with many companies over the years, analyzing their back office operations and looking for ways to increase performance and efficiency.
Sadly, we have consistently seen that much (too much!) of an organization’s time, focus and attention are spent of “transactional” activities. In fact, our analysis has consistently shown that at least 70-80% of an organization’s back office activities are transactional in nature.
- These activities are routine, repetitive and process-driven. Generally, these are lower value-added, and include activities such as reconciliations, journal entry processing, invoice processing, payment processing, cash application, credit and collections. Even certain key accounting and FP&A activities such as the closing process, financial reporting, inventory and cost accounting, budget monitoring and forecasting are highly transactional in nature,.
- These activities are generally easier to transition to a shared
service center and/or to an outsourcing provider.
- These activities are critical and closely related to the definition and execution of the company's strategy and vision. The specifics may vary from business to business, but generally include such activities as business analytics, customer and market analytics and profitability analysis.
- These activities are core to the business and should be retained close to the company’s strategic center.
- These activities require a specialized skill or knowledge, and are generally unique to an organization. Examples would include local statutory and regulatory compliance and governance activities, audit and others.
- These activities should be evaluated and a determination made as to whether they should be retained or, potentially “carved up,” with the more transactional activities considered for a shared service or outsourcing model.
What activities can be considered “Transactional,” “Strategic” or “Specialized” in your organization? Where is most of your organization’s time spent?
If you are like most companies (and you know you are!), you and your team get “bogged down” in the transactional nature of the work, leaving precious little time for higher value, more strategic work that helps drive business growth and performance.
Unfortunately, most back office operations don’t realize this, and resist the challenge of realigning their focus to higher value work, claiming that their work is “unique” or more complicated than that of other companies.
The reality is that back office processing is pretty much the same across all organizations and within industries, and achieving the right balance between transactional and strategic work is a key to driving business growth. There is much talk about automation, robotics and process efficiency in today’s back office operations, but the reality is that “transactional” work is not going away anytime soon.
You can minimize this kind of work by reducing the number of manual activities being performed in your business, often by simply revising and standardizing processes and adjusting business rules. Also, the use of automated tools for various manual activities can help to greatly drive efficiencies, reducing the time spent on manual work. Excel is a wonderful tool, but there are a lot better ways to handle reconciliations, journal entries, budgeting and forecasting.
And when you are still performing transactional work, make sure that you are paying appropriately for it. Take advantage of lower cost resources to perform this work, shifting higher value work to higher cost resources. By doing this, you can reduce the amount of time managers are spending on managing these activities, and, often, still actually performing them.