By turning over contextual tasks to a trusted partner, finance professionals can work on key strategic imperatives and contribute to business growth.

1. • Cognizant 20-20 Insights
Moving Financial Planning and
Analysis to the Next Level
Turning over contextual tasks to a trusted partner can free
finance professionals to work on key strategic imperatives
and contribute to business growth.
Executive Summary focused on operational tasks, such as days-to-
close and journal entry accuracy and timeliness.
Many finance organizations are still fighting the
These narrow definitions of effectiveness only
age-old battle to optimize efficiency and effec-
tiveness. In today’s dynamic global economy,
Finance Organization Costs
however, agility and performance are challenges
that finance must now conquer.
as a Percent of Revenue
Truth be told, many finance organizations have 1.6
become more efficient than ever. In just the last
1.4 1.35
few years, the average company has reduced total
finance costs from an estimated 1.35% of revenue 1.2
to 0.93%, and leading companies are approach-
1 0.93
ing one half of one percent (see Figure 1).1
0.78 0.82
0.8
It is now time for finance to demonstrate how
it can support business strategy, competitive 0.6 0.54 0.56
analysis, overall enterprise performance planning
0.4
and management, and drive revenue and profit
growth. This white paper charts a course to help 0.2
finance departments accomplish these goals.
0
2008 2009 2010
Effectiveness Redefined
Top Quartile Median
Effectiveness is as important as ever, but the
effectiveness expected of the finance department
Source: PricewaterhouseCoopers Finance
is much broader than ever before. Much of what Benchmark Study, 2011
finance has traditionally called effectiveness Figure 1
cognizant 20-20 insights | august 2012

2. indirectly translate to true business outcome Leading FP&A organizations2 are moving beyond
effectiveness. their historic scope of supporting a narrow set
of financial measures and are expanding to
Today’s enterprise must respond to a host of accommodate broad enterprise performance
new challenges and opportunities. The most management needs, such as business perfor-
disruptive challenges facing enterprises today mance reporting and analysis, profits forecasting,
are the increases in volatility and the emergence planning cycles, risk management, operations
of a new master IT architecture that we call the analysis and expanded analytics on both internal
SMAC stack, comprising integrated social, mobile, and market data. In addition, they are also digging
analytics and cloud technologies. The SMAC stack into an expanded scope of detailed line item
is changing the way that enterprises engage their expense analysis in an effort to leave “no stone
employees, customers and suppliers, from slow, unturned” in their search for immediate expense
structured, infrastructure-heavy interactions to reduction opportunities.
rapid, infrastructure-light, unstructured and more
personalized interactions. What’s Next for Finance
Increasing FP&A activities, while shrinking the
Increased volatility can be seen, felt and measured
overall finance function budget, will require a
in many ways, and it demands an increase in
large reduction in non-FP&A finance activities, as
enterprise agility. It can be measured in unem-
well as a more cost-effective way to deliver FP&A.
ployment data, GDP data, corporate revenues
Finance and accounting outsourcing (FAO) is one
and profits, personal incomes, commodity prices,
effective way to accomplish the required transfor-
consumer sentiment and a long list of other
mation while improving agility (see Figure 3, next
measures. One example is the S&P 500 stock
page).
price index, which is a broad measure of the stock
market’s price level. One glance at a chart of the All finance transaction processing (e.g., AP, AR,
S&P 500 Index shows an unprecedented level of GL, FA) can be outsourced, as well as select
volatility over the past dozen years (see Figure 2). compliance activities (e.g., routine statutory
filings, audit support). Transaction processing
A new set of challenges and opportunities
and compliance outsourcing yields significant
exist for financial planning and analysis (FP&A)
savings (typically 30% to 50%, we have found)
groups, thanks to the increased volatility of the
as a result of provider scale, consolidation,
world’s economies, currencies, stock markets
increased automation, process reengineering and
and regulatory environments, combined with
cost arbitrage from relocating work to lower cost
elements of the SMAC stack, such as the prolif-
locations.
eration of ”big data” and associated analytics.
S&P 500 Index: Market Volatility
1.60K
1.40K
1.20K
1.00K
0.80K
0.60K
0.40K
0.20K
0.00K
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Source: Yahoo Finance Graphs
Figure 2
cognizant 20-20 insights 2

3. Finance Transformation: From Cost Reduction to Profitability
Phase IV B
Low
• Freeing up FP&A resources
to partner with businesses
to enhance enterprise
Phase IV A performance and
impact the bottom line.
• Offshoring/outsourcing –
management reporting,
audits, analysis, risk 30-50%
management, actuarial
analysis, internal consulting,
Phase III project management.
Time
• Offshoring/outsourcing –
transaction processes
30%-50%
Phase II • Centralization of analytics,
budgeting, audit, etc.
• Centralization –
transaction
10%-15%
Phase I processes
• Shared services
• Process standardization centers onshore
• Headcount reduction
• Process improvements, 10%-15%
Cost Reduction
High
re-engineering
• Technology & automation
Figure 3
In addition to cost reduction, FAO provides as well, including scale, technology, cost arbitrage
additional process improvements, such as tighter and access to skills. The reduction in expenditure
controls from the separation of duties, up-to-date on transaction and compliance work derived from
process documentation, more comprehen- outsourcing, combined with selective outsourcing
sive metrics reporting, better audit trails and of FP&A work, will enable an expansion of FP&A
heightened transparency. activities while shrinking the overall F&A budget.
Another significant lever to pull is the outsourc- Leading companies have already started out-
ing of portions of FP&A. With 25% of finance’s sourcing FP&A processes, such as balance sheet
budget taken up by FP&A,3 there is considerable preparation; competitor analytics (including
scope for cost savings. Of course, some portions segmentation and SG&A benchmarking); audit
of FP&A should always be kept in-house, such as support and reporting; implementing ABC models
assigning a finance leader to each unit to partner for activity-based costing, along with analysis and
with the business, explain results, lead the budget reporting; and decision support. These companies
process, etc. have also reaped the benefits of FP&A outsourc-
ing beyond cost reduction, such as reporting
But many other portions of FP&A — such as cycle-time reduction or increased forecasting
variance analysis, routine and ad hoc reporting, accuracy or productivity.5
market analysis and various analytical tasks —
can be outsourced (see Figure 4, next page). Just The advancement of technology also requires
by centralizing common FP&A activities (data FP&A organizations to change. Most ERP and con-
gathering, data cleansing and data aggregation), solidation software environments now provide
companies can achieve a 30% reduction of FTEs.4 business stakeholders with the ability to drill down
and understand finance and accounting data and
From our discussions with many finance orga- reasons for variances. Therefore, some of the tra-
nizations, we have observed that business ditional value provided by the FP&A team has now
analysts typically spend over 50% of their time been automated (see Figure 5, next page).
gathering, aggregating and scrubbing data. The
use of highly skilled and highly paid business F&A Outsourcing Benefits
analysts to perform basic data manipulation is The cost savings from transactional finance and
a waste of scarce talent. Outsourcing the data compliance outsourcing can be split between
management tasks provides additional benefits reducing the overall cost of finance and funding
cognizant 20-20 insights 3

4. To Outsource, Or Not
• FP&A Processes
Processes Extensively Processes Never
Processes Increasingly Outsourced
Outsourced Outsourced
• Real Estate Management • Budgeting and Financial Planning • Strategic Planning
• Internal Audit • Acquisitions & Divestitures
• Internal Audit • Accounting/Tax Policies
• Financial Analysis • Business Partnering
• Project Management
• Expense/Revenue Allocations
• Performance Measurements
• Multi-dimensional Reporting
• Analytics
• Risk Management
• Actuarial Analysis
• Financial Consolidations
• BU Financial Statements
• Statement Prep
• SEC Filings
• GAAP Adjustments
• Trial Balance Analysis
• SOX Planning
• Finance Change Management
• Tracking Competitor Financial Performance
Figure 4
the expansion of FP&A into expanded business Example 1: Fleet
partnering, enterprise performance management Many companies provide vehicles to employees,
and expanded line-item expense analysis. The primarily the sales force. While policies and
increased analysis of line-item expenses, although procedures exist to monitor and control costs,
a tactical initiative, helps make FP&A a self-fund- fleet management becomes a challenge for a
ing operation. large diversified organization with multiple
locations. Fleet cost is a one- or two-line item
The expansion of line-item expense analysis helps
on a company’s P&L. While this is not a material
companies focus on expense lines they normally
cost and is not significant for a drill-down
would not consider. Companies can expect to save
review, a detailed analysis of fleet costs of
between 5% and 10% of the costs of these newly
major corporations, in our experience, provides
analyzed cost elements, performing the analysis
an opportunity to reduce costs by taking a
either in-house or through an external provider.
FP&A: Old and New
Traditional View The New World
Back-office function. Revenue generating/self-financing function.
Provide insights into business. Finance business partners, provide insights and help drive
decisions and compliance.
Fragmented across various departments/ Consolidated/centralized function with ability to drive
divisions of the company. standardization and leverage best practices.
No significant role in policy decision-making. Ability to influence policy and change by providing
insights on business impact.
Compliance with policies and established Provide visibility into non-compliance with policies and
practices not a major focus area. established practices.
50% to 60% of the individual analyst’s time 70% to 80% of time spent on understanding data, trends
spent on data gathering and cleansing. and variances.
Figure 5
cognizant 20-20 insights 4

5. structured approach. Such an approach would • Example 2: Travel and Expense
include the following: Most companies have well-established travel
>> Compare the fleet cost line items with the and expense (T&E) policies and approval limits,
headcount report from HR. including arrangements to audit expenses on a
random sample basis. T&E is a significant cost
>> Ensure that only active employees have ve- item for almost every company.
hicles assigned to them.
>> Check whether the employee is entitled to a FP&A can provide insights into T&E expense and
company car and is in accordance with the help drive down cost by doing the following:
policy.
>> Provide visibility into line-level details (com-
>> Send an e-mail to all supervisors of inactive mon BI tools, sub-ledger-level analysis, etc.).
employees and reconfirm if the employee
has left the organization. >> Partner with the operations team.
>> Send an e-mail to all employees with mul- >> Identify potential cost reduction areas
tiple vehicles or those who are not in com- (e.g., airfare, hotel, phone).
pliance with the policy and seek an explana- >> Publish a dashboard to provide details of all
tion. travel not in compliance with policy.
>> Send a list of all inactive employees or
The Bottom Line
those not in compliance, along with the
vehicle numbers, to the fleet manager to While FP&A outsourcing and refocusing provides
ensure vehicles are returned to the leasing almost immediate cost reduction results, the true
company and confirmation is obtained. benefit is the ability to increase efforts to support
the company’s top-line and bottom-line growth.
Taking these steps will not only ensure that
the charges are accurate but will also help to FP&A outsourcing helps free highly skilled profes-
accurately attribute the cost to the correct cost sionals from doing routine work to spend more
center or company code if the employee has time partnering with the business to manage
been transferred to another location or group and execute strategy. This expands the scope of
company. FP&A groups from traditional financial planning
and analysis to true enterprise performance
management.
Footnotes
1
“Drifting or Driving? Finance Effectiveness Benchmark Study 2011,” PricewaterhouseCoopers, 2011.
2
Examples include Boeing and BBC (Source: “Finance Strategy: Delivering the Partnering Role,” IBM.)
3
“Developing a Center of Excellence (CoE) for Financial Planning and Analysis,” Deloitte, 2011.
4
Beyond Concierge: Transforming the FP&A Operating Model,” Deloitte, 2009.
5
“Financial Planning & Analysis: The Next Frontier of Business Process Outsourcing?” Deloitte, 2010.
cognizant 20-20 insights 5

6. About the Authors
Paul Nowacki, CFA, is Leader of Finance & Accounting, Transformation Consulting, within Cognizant’s
Business Process Services Group. In this role, Paul oversees all F&A consulting activities. He also serves
as a thought leader in F&A and helps identify market trends and shape new Cognizant offerings. He is a
frequent conference and webinar speaker and author of numerous articles and whitepapers on various
finance and accounting topics. By combining his industry experience in IT and finance leadership roles
with a background in transformational consulting, Paul looks holistically at finance and accounting orga-
nizations and blends process and systems with organizational design perspectives. He has a B.S. in quan-
titative business analysis and an MBA, with a concentration in operations research. Paul also holds the
Chartered Financial Analyst professional designation. He can be reached at Paul.Nowacki@cognizant.com.
Mathew George is a Solutions Leader within the Finance & Accounting Practice of Cognizant’s Business
Process Services Group. In this role, Mathew works closely with clients on strategic finance and accounting
deals. He also leads strategic assessments and develops optimal solutions that focus on the redesign and
reengineering of critical processes. Moreover, Mathew has led the global consolidation and standardiza-
tion of F&A processes across multiple countries and languages, into offshore and near-shore delivery
centers. He is a Chartered Accountant, a Certified Public Accountant and a Certified Internal Auditor
and holds a certified Six Sigma Green Belt from GE. Mathew can be reached at Mathew-3.George-3@
cognizant.com.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-
sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in
Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry
and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50
delivery centers worldwide and approximately 140,500 employees as of March 31, 2012, Cognizant is a member of the
NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing
and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
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