Cost of Control 2010

Cost of Control Research Report 2010 ExEcutivE Summary May 2010 Cost of Control 2010: Executive Summary Contents Foreword 3 Executive Summary 5 Finance Strategy 2010 7 Finance challenges 10 Financial confidence 12 Procurement Performance 14 Finance automation 16 automation Efficiency 17 conclusion 19 recommendations 21 appendices: country Summaries 23 Germany 24 uK 25 uS 26 Scandinavia 27 Benelux 28 France 29 australia 30 appendices: country Data reference tables 31 © Basware Corporation 2009 | www.basware.com 2 Cost of Control 2010: Executive Summary Foreword by Dr. Markus Maedler and Dr. Steve Jones, iESE Business School and indiana university, Kelley School of Business a call for collaboration between Finance and Procurement Now in its second year, the Cost of Control study offers a unique perspective into the rarely researched world of senior financial directors and provides valuable insights into the strategies that businesses are employing as the efforts continue to reshape the global economy. Last year’s inaugural survey found that many financial directors were deeply troubled by the external risks in their supply chains, yet largely ignorant of procurement’s impact on financial risk, and at the same time they struggled to manage their procurement costs. In the average company surveyed 61% of the corporate costs were managed by the procurement department. Reflecting on last year, perhaps “survival” is the word that best describes the tone of 2009’s study since few financial directors had either experienced such difficult times or confronted such critical decisions in their careers. To address the challenges of 2009, an overwhelming majority of financial managers expressed a need for more “visibility” in regard to risks, expenditures, and costs. Notably, most managers voiced dissatisfaction with the quality of their internal visibility of financial information; for example, many reported that more than half of the indirect spend in procurement was out of control. To put it bluntly, respondents do not have crucial information about where pockets of risk reside, such as good information about “where the money is” and “where the money is at risk” in the business. In this regard, the 2009 results emphasized that improved collaboration between finance and procurement directors directly impacts corporate performance. This “Cost of Control 2010” study is the outcome of a survey of 550 companies from some of the most important economies across the globe, and in a year in which many things have changed, much has still remained the same. For 2010, poor visibility of key financial information is undermining CFOs’ confidence in company performance, ultimately leading to doubts about profitability. In turn, 58% of CFOs see improving profit margins as a strategic priority in 2010, up from 9% in 2009. Additionally, concerns over cost saving, cash flow and working capital management have lessened. In another sign that portends of recovery, almost one in five companies report that they are now interested in making new investments, including investments in invoicing and purchasing automation. In short, opportunity for “revival” characterizes 2010’s results. While seasoned financial directors know that dangers still remain, many sense that the worst days are behind them, and there is a guarded optimism in this Cost of Control study that was clearly missing just 12 months ago. This “Cost of Control 2010” study is the outcome of a survey of 550 companies from some of the most important economies across the globe, and in a year in which many things have changed much has still remained the same. © Basware Corporation 2009 | www.basware.com  Cost of Control 2010: Executive Summary The goal of Cost of Control 2010 remains the same as that of last year’s successful study. We do hope that it helps guide and shape the ever- evolving relationships between finance and procurement professionals. Along those lines, it is clear from updating the findings that substantial cost savings were made in 2009, and thus identifying the next round of savings presents quite a challenge. Although down from 2009, supplier stability remains the biggest single source of financial risk, while the risk associated with the amount of spending outside the procurement system is also seen as important and increasing. Thus, this year’s edition of “Cost of Control” adapts its focus to include new questions on how finance professionals can tap into the potential for improving profitability and risk management through better management of procurement. Likewise, this edition investigates the factors that drive best practice in managing procurement and the most typical problems at the finance-procurement interface. In conclusion, we think that decision makers in the private sector and government, as well as academics, will find the results of this report both informative and compelling. Its insights are especially relevant to practicing finance and procurement decision makers. As we are all aware, the current economic crisis has put cost management at the top of managerial agendas, with no reversal in sight for the near future. And at the end of the day, cost management is all about finance and procurement professionals working together to identify opportunities for more efficient and effective operations. The goal of Cost of Control 2010 remains the same as that of last year’s successful study. We do hope that it helps guide and shape the ever-evolving relationships between finance and procurement professionals. Dr. MarkuS MaeDler IESE Business School Dr Steve JoneS Indiana University, Kelley School of Business © Basware Corporation 2009 | www.basware.com  Cost of Control 2010: Executive Summary Description of average participant in Executive Summary Cost of Control study 2010: the 2010 cost of control research highlights key trends shaping financial decision making across Europe, uSa and australia. it leads • Has 9 days sales on from research in 2009 that identified a lack of risk evaluation in procurement and the supply chain whilst demonstrating the presence of automation ‘gaps’ in finance and purchasing functions. this year’s outstanding (DSO) research shows notable changes in activity surrounding these enduring 7,299 topics and introduces other key findings including: • Generates • The pursuit of profits in 2010 set against a backdrop of revenue invoices per year contraction • Finance department confidence in company and economic • Currently manages 2,726 performance • Finance department performance strengths and weaknesses • Structural challenges between Finance and Procurement functions supplier relationships • Employs 20 full time The Cost of Control research, commissioned by Basware in association with IESE Business School (Europe) and the Indiana University Kelley procurement staff School of Business (USA), measures financial sentiment towards commercial performance, and the integration and automation of IT • Employs 17 full time accounts systems that support organizational buying and selling processes.