By Sergi Lemus and Caroline Leies
Finance departments operate amid a constant stream of disruptions: talent scarcity, rapidly evolving technology, emerging environmental, social, and governance (ESG) standards. But no matter how many external risks, regulatory changes, and market shocks roll in, chief financial officers are expected to deliver business insights with ever more speed, efficiency, flexibility, and control.
Tax directors, in turn, need to meet increasing demands for tax transparency, comply with new rules, and feed into business insights—often through technology systems that haven’t kept pace with regulatory changes.
To thread that needle, the modern CFO must make constant refinements to their strategy: What’s the best mix of in-house and external resources? How can we use new technologies to operate and transform essential finance functions? How can we make finance processes more flexible and adaptable? Which tax processes need to be merged into finance systems? And how can we deliver on our objectives as efficiently and effectively as possible?
From Outsourcing to Process Transformation
Finance departments have traditionally responded to such pressures by moving tasks into shared services centers, or outsourcing to cut costs and do more with less.
Yet today’s complex challenges—exacerbated by widespread skill shortages, rapidly evolving technologies such as generative AI (gen AI), and ever-changing global regulations—demand a different kind of support. That means CFOs need strategic partners that combine specialized talent, technology, transformation experience, and operational management to cut costs; access hard-to-source talent, capabilities, and technologies; evolve internal processes; and minimize risk.
A good service partner can efficiently operate the standard finance functions, such as payroll, compliance, and invoicing. The most innovative partners, however, also transform the processes to deliver sustainable long-term business value. The goal isn’t simply “reduce headcount” or “save money.” It’s a question: How can improving processes deliver better business outcomes year over year?
The answer lies in focusing on and delivering against such outcome-oriented metrics as optimized working capital, improved billing and payment cycles, improved compliance, and real-time reporting.
An Outcome-Oriented Model
Three organizational scenarios show how an outcome-oriented finance operating model can be extremely effective:
• Large technology modernization. Major projects such as enterprise resource planning (ERP) migrations and upgrades to meet regulatory compliance requirements demand significant time and money. But instead of bringing in separate vendors for business process optimization, technology implementation, and change management, finance departments can choose a single provider with expertise in operating and transforming processes and implementing new technologies. One trusted partner can drive the optimization of data, technology, and workflows, delivering a fully integrated program.
• Mergers and acquisitions (M&A). In M&A, finance departments must integrate new and existing systems on a tight timeline. CFOs need to identify data gaps and process misalignments to ensure compliance with tax laws in all the jurisdictions of the combined entity. The optimal third-party provider can document, standardize, and integrate critical processes, freeing the finance and tax practices to focus on strategic issues so they can transform and operate functions to quickly deliver sustainable business outcomes.
• Business expansion. When you’re expanding into new markets or launching a new business, a service partner with expertise and presence in multiple jurisdictions, regulatory markets, industries, and sectors can help quickly set up finance functions and tailor them to each market.
Accelerating Transformation
In the wake of rapid growth, a U.K.-based renewable energy group partnered with Deloitte as a single service provider, consolidating the core finance, tax, legal, and human resources functions of 87 international entities. In a post-acquisition integration situation, Deloitte used a continuous improvement approach and accelerated the transformation plan, bridging skill gaps across critical business functions and integrating new entities into a single operating model. This approach enhanced process and data standardization across seven countries, resulting in a 30% reduction in close cycle.
New Questions and New Models
The pressure to do more with less isn’t letting up. And for CFOs and tax directors, every answer yields new questions. Is your existing finance model flexible enough to withstand business growth, regulatory challenges, the implications of gen AI, tax challenges, and whatever else is on the horizon? What’s the best way to capitalize on innovation? And how can the right service partner deliver the operational support, specialized finance talent, and leading-edge tech to help your business adapt and grow?
It is not easy to manage the deluge of risks, requirements, and disruption that businesses are facing today. One solution, however, is to adopt an operating model incorporating the next level of outsourcing—working with a single service provider to not only ease the compliance burden but also transform business processes to deliver better strategic outcomes year after year.
Want to know more? Check out this HBR Analytic Services paper on how next-generation managed service providers are using innovative approaches, such as the build, operate, transform, and transfer (BOTT) model, to transform finance functions.
Sergi Lemus, a partner with Deloitte Spain, and Caroline Leies, managing director with Deloitte Consulting LLP (US), are Deloitte Global co-leaders for its Finance Operate services.