Poor Visibility of Key Financial Information is Undermining CFOs' Confidence in Company Performance

STAMFORD, Connecticut, May 26, 2010 /PRNewswire/ -- CFOs' poor visibility of key financial information is undermining confidence in their departmental and company performance, and ultimately leaving doubts about profitability, according to The Cost of Control 2010, the second annual global study and independent report released today by Basware. (http://www.basware.com/Pages/default.aspx) Constrained by this limited visibility, businesses are struggling to make informed decisions and effectively forecast and manage costs.

The Cost of Control 2010 provides insights into the opinions and priorities of 550 CFOs and finance executives around the world. Compared with research from The Cost of Control 2009, the new report uncovers the key trends of Finance and Procurement department over an economically turbulent 12-month period. Additionally, the new study identifies the levels of - and reasons for - confidence among senior finance professionals. The report was prepared in collaboration with professors Steve Jones and Mark Frohlich from the Indiana University Kelley School of Business, and Markus Maedler and Adrian Done of Barcelona's IESE Business School.

"Last year's Cost of Control survey uncovered a lack of collaboration between Finance and Procurement departments, each working separately toward shared business goals," said Ari Salonen, general manager, North America, Basware, Inc. "In this year's research, even though respondents acknowledge that their degree of collaboration is low, they realize the importance of collaboration; there is a clear correlation between successful collaboration and confidence in company performance. Financial executives also recognize the challenge of collaboration, which explains the trend toward an increase in integration and automation of purchase-to-pay systems and processes - a trend that looks set to continue amid a search for greater profits in uncertain market conditions."

According to the new study, just 50% of finance executives state a high level of confidence in the performance of their departments and only 44% maintain this level of confidence when considering the company's performance overall. Confidence in the regional economy drops to just 19%, and to 9% for the world economy. Successful collaboration between Finance and Procurement is most strongly linked to confidence in company performance, although 40% believe the relationship between Finance and Procurement could be improved. By working together, these often isolated departments can share responsibility for both cost and risk reduction when it comes to reducing expenditures, cutting transaction costs, mitigating potential liabilities and identifying ways to improve the bottom line.

Commenting on the findings, Steve Jones, associate professor of finance at Indiana University Kelley School of Business, said, "In its second year, The Cost of Control report is beginning to pick up on a growing realization among finance professionals that once the low-hanging fruit is gone, further efficiencies and risk mitigation require collaboration between Finance and Procurement so they work toward common objectives utilizing more integrated and automated systems. Levels of automation are still relatively low with fully automated/tightly integrated systems still only in place in fewer than one in six departments, and the majority are still reliant on manual processes."

Cost Cutting Gives Way to Other Priorities

In April 2009, 64% of CFOs claimed that raw cost cutting was top of their list of priorities over the next 12 months, but this year that focus seems to have fallen (to 59%). In its place, CFOs cite more strategic goals of improved profit margins and increased top line performance (58% and 51%, up from 39% and 37%, respectively in 2009).

Possibly reassured by the sharp cost-cutting efforts over the last 12 months, finance professionals are more likely to consider that procurement has a positive effect on profitability (48%) than in 2009 (29%). Finance also is becoming more aware of procurement's impact on risk. A more vigilant 39% of respondents cite procurement as a financial risk exposure, up from a more insulated 28% last year. These findings indicate that lessons have been learned in the last 12 months, probably as Finance departments were rocked by unpredicted turbulence within supply chains.

Automating purchase-to-pay processes from requisitioning to invoice handling and approval is gaining traction globally, with 72% of companies either implementing or planning more invoicing automation in the next 12 months, and with 65% having or planning for more purchasing automation.

"In the U.S., CFOs indicate a relatively high degree of confidence in company performance and the finance function, with progress having been made in terms of collaboration between the finance and procurement functions," said Professor Jones. "More so than in most other countries, these U.S. CFOs view systems integration as a significant challenge and a priority for improvement."

To help tackle the challenges identified in The Cost of Control, Basware recommends a four-step plan for CFOs:

1. Visibility: It is vital that all organizations have 100% visibility of spend - both direct (such as raw materials) and indirect (such as services) - across the business. Only once it has a single, unified view can a business make strategic financial decisions.

2. Cost Management: Managing cost was the most cited driver of confidence in company profitability. The research identified a small increase in the amount of indirect spending captured in procurement systems; however, it is still less than 50%. Businesses should ensure that the right controls are established regarding who spends money and what they can buy, to improve business processes and capital management.

3. Efficiency: Efficiencies are already being found through integration and automation of systems, both of which were up over last year. However, companies enjoying the benefits of full finance and procurement automation are still in the minority. The clear correlations of efficiency with confidence in performance indicate that automation brings reassuring rewards.

4. Collaboration: Collaboration, a key recommendation from the 2009 Cost of Control report, also featured strongly in this year's research, identified as the key driver of confidence in company performance. Only by working truly strategically and driving common objectives aligned to business goals, can Finance and Procurement make the decisions that will benefit the business as a whole.

For a full copy of the Cost of Control insight study, please visit http://www.basware.com/control.

About the research

The Cost of Control study was conducted for Basware by independent research company Loudhouse ( http://www.loudhouse.co.uk/loudhouse.swf) during April and May 2010. Results came from a range of businesses across the globe, with all respondents occupying CFO, Financial Director or equivalent level roles. The size of organization at which those surveyed are employed ranged from 1,000 to 50,000 employees.

Telephone interviews were conducted to present a proportional picture from across the globe, with 100 respondents surveyed each from the U.S., UK, Scandinavia and Germany, and with 50 responses each from Australia, Benelux and France, completing the total of 550.

About Professor Steve Jones

Steve L. Jones is assistant professor of finance at Indiana University Kelley School of Business. He has a PhD from Purdue University. He has received the MBA Teaching Excellence Award, presented by the Kelley School of Business MBA Student Advisory Board, Indiana University as well as Finance Professor of the Year Award, presented by the University of Georgia Finance Club. Steve's specialist subjects include asset valuation, corporate finance, financial markets and investment management.

About Basware

Basware is the global leader in purchase-to-pay solutions with more than 1,500 customers and 1,000,000 users in over 50 countries around the world. With Basware, organizations can reduce the cost of buying and paying for goods and services and gain visibility and control of their entire spending process by automating manual processes, from sourcing, contract management, purchasing and supplier collaboration to invoice automation. Basware solutions and services enable substantial cost reductions across businesses and deliver value by providing compliance and control, as well as fast return on investment. The solutions are distributed and implemented, either on site or as a service, in Europe, the U.S., and Asia-Pacific through an extensive network of Basware offices and business partners. The company's U.S. business, Basware, Inc., is headquartered in Stamford, Conn. More information can be found at http://www.basware.com/us.

The Basware name is a registered trademark of Basware Corporation. The Basware logo is a trademark of Basware Corporation. All other product and service names mentioned herein are trademarks of their respective companies.

SOURCE Basware Corporation