Resiliency is all about being able to bounce back after adversity. But for some companies, the journey to normal might be akin to walking barefoot through a room full of Legos. Being able to make decisions requires you to understand how your business works in order to refine your practices. But what should you be focusing on?
Over the past year, we’ve looked at some of the interesting metrics highlighted in CFO and APQC’s Metric of the month series. Always informative, these metrics help you to benchmark your company and see if you are a leader or a laggard:
- Part one discussed a few crisis metrics meant to help you overcome tight revenues. This included uncontrollable balances as a percentage of revenue, total cost to reward and retain employees, and short-term cash forecasting.
- Part two explored some of the ways you can control your cash flow, including days sales outstanding, days payables outstanding, and duplicate and erroneous payments.
- Part three looked at some of the things you should be refining to make the most out of your business, including the number of budget variations, the number of employees involved in the order to cash process, and the cash to cash cycle time.
Today, we would like to dive into three more metrics highlighted by the brilliant mind of Perry Wiggins, CPA, each focused on knowing more, reducing bottlenecks, and increasing tax management efficiency.
Total Cost to Manage Taxes
April’s Metric of the Month was all about taxes. With filing deadlines delayed, Wiggins wanted to figure out how well companies were dealing with taxes in 2021. Using the Open Standards Benchmarking Database, he compared companies on the total process cost as the sum of outsourced, overhead, personnel, system, and other costs, normalized per every $1,000 of organizational revenue.
The results were shocking, with bottom performers paying eighteen times more than the top 25%. By this measure, companies in the 25th percentile pay $0.14 per $1,000 revenue to manage their taxes, those at the median spend $0.70, and those in the 75th percentile spend $2.50.
Though many companies can benefit from spending more time and money on taxes to find deductions, those with an automated solution make the most of both taxes and costs. Understanding the bottlenecks in tax management is key here, and many companies can reduce costs through automating their reporting.
“Some organizations also achieve savings and greater efficiency by leveraging tax centers of excellence (COEs). For example, energy and automation digital solutions company Schneider Electric leverages regional COEs for tax planning. Comprised of small teams of subject matter experts, these COEs provide high-quality tax support and advice that would be expensive outside of a shared services or COE framework.”
Payroll Cycle Times
Discussed in February, Wiggins found that the time spent processing payroll varied greatly. Looking at the time spent submitting hours, approving timesheets, and passing the data off to payroll for processing, Payroll Cycle Times reached a full week at bottom performers. Median performers took a business week and top performers got done with payroll in as little as three days.
In turn, the article touched on four ways to address the challenges, recommending HR changes and technology improvements to set yourself up for success. Here are the four areas Wiggins recommended for improvement:
- Time Record Completeness: To avoid delays from missing or incomplete payroll data, encourage employees to fill out time records on a regular schedule and submit them at least a few days before the cutoff date.
- Manager Approvals: After data is submitted, there are ways to reduce the time spent approving hours. Communicate clear expectations to managers about when time-record review and approval needs to begin and end so that your payroll staffers aren’t spending time following up.
- Change Request Management: Calculating employee benefits can stand in the way of success. Manual change requests can take time, and a self-service portal can automate the request process.
- Consolidation of Pay Type: Codes for overtime, double-time, night/day shift, and other situations can quickly proliferate and add complexity. This can make for unnecessary delay and increase errors.
Time to Create Reports
Reports are the way that decision makers decide. With a significant focus on giving finance more time to focus on decision making support, companies need to understand how long it takes between running the initial business entity trial balance and completing the period-end management reports. Improving this can improve business agility and help people understand the overall health of the organization’s general accounting and financial reporting processes.
In this, shorter cycle times allow finance teams to focus on daily operations and provide other forms of decision support and analysis to the business, while longer ones stand between decision makers and advanced metrics they need. APQC found that t top performers produce period-end management reports in 7 days or fewer. This is more than twice as fast as bottom performers, which take 16 days (or more) to produce the same reporting. The median cycle time is 12 days.
To improve this, the article recommends that leaders ensure roles are clear, that reporting is proactive, and that data quality is unmatched—three keys to speeding up reporting and giving better information.
Add up the Numbers—It Pays to Join the Controllers Council
Though these just scratch the surface of the metrics you need to track on a daily basis, there are many more ways to get ahead of the curve. We launched the Controllers Council as a community and forum for controllers across the US to discuss and benchmark against similar companies. With just a small annual investment, you can join the discussion and get a lot more benefits along the way. Ready to learn more? Click here to read all the membership benefits.
