Compliance Drives up Finance Expenses

A news release from the Atlanta-based The Hackett Group said companies now typically spend 1.26% of revenue on the finance function – the first time in the business process advisory firm’s 13 years of study that typical finance costs have risen.

Hackett 2005 data found that typical firms now allocate $940,000 per billion dollars of revenue on compliance management, while companies Hackett designates as “world class” spend 36% less. According to Hackett, world-class CFOs rely on standardization and reduced complexity to more effectively manage compliance costs and, as a result, those CFOs have continued to see reductions in their total finance cost.

Not only that, but the world-class finance organizations now spend 42% less in the finance function than typical companies, and have 44% fewer finance staff. More than half of the overall spending gap between world-class and typical companies is attributable to lower labor costs, despite the fact that world-class finance organizations pay staff more, with fully-loaded wage rates 11% higher than typical companies ($79,345 versus $71,411).

World-class finance organizations also spend 63% less on technology. For example, world-class finance organizations rely on just one enterprisewide finance platform, while typical companies rely on two. World-class finance organizations also process a larger percentage of their payments electronically and rely on online systems for T&E submissions more than twice as often as typical companies.

More information on The Hackett Group is  here .