Where does the time go in finance? At a high level, it may be obvious that your finance team is carrying out activities like transaction processing, setting controls, and providing decision support for the business throughout the week, but which activities get the lion’s share of finance’s time? What’s the right balance of time among each of these activities, all of which are critical for the business?
To think through these questions, we examined data from APQC’s Finance Organization Performance Assessment, which asks users to account for how finance allocates its time across four broad categories.
- Control tasks, which include mandating and checking the adoption of policies and procedures and developing guidelines for business units
- Transaction processing, including activities such as general accounting, processing accounts payable and receivables, processing journal entries and invoices, responding to basic customer or supplier inquiries, and producing financial statements
- Management activities like assigning tasks, prioritizing duties, reviewing important accounting activities, resolving unusual or complex problems, providing guidance and approvals, organizing projects, and evaluating subordinate employee performance
- Decision support activities like sophisticated business analysis, risk management, strategic or market issue evaluation, and cost analysis
The figure below shows the median percentage of finance function time allocated to these different activities. Regardless of size, companies tend to allocate the highest share of time (38% to 40%) to transaction processing, followed by control, decision support, and management activities.
There are some marginal differences between large and small companies when it comes to time allocation. For example, large companies tend to spend slightly less time on transaction processing and slightly more time on control and decision support. The differences, however, are not all that big. Especially when it comes to transaction processing, the wide availability of automated accounting solutions has allowed smaller companies to keep pace with larger companies.
Broadly speaking, many companies have done a good job bringing down the percentage of time allocated to transaction processing. As a result, the median percentage of time allocated to this activity is about 10% lower than it was when APQC last reported this metric in 2015 (49%). Automation and other technologies have allowed finance teams to move away from hands-on, highly manual work in this area, which leaves more time for other activities like decision support.
Context is Key
It’s important to note that there is no “right answer” or magic number when it comes to what a finance team’s time allocation should look like. The percentages in the figure are median values, so there are plenty of companies that spend more (or less) time in these areas. For example, companies that fall within the 75th percentile allocate 50% or more of their time to transaction processing, while those in the 25th percentile allocate 30% or less of their time to this area. The amount of time allocated to decision support also varies, from 14% or less at the low end to 22% or higher in other companies.
The appropriate amount of time to allocate to each of these areas will depend on the company and the nature of its work. It’s reasonable to expect that a credit card company or a company like Amazon will allocate more time for transaction processing because this activity sits at the core of those companies. A hard-charging investment company, on the other hand, might spend far more time on decision support as it works to determine what levers to pull to bring revenues up and costs down.
While companies allocate more or less time to these activities based on the work they do, any of these activities done in excess can be bad. Too much time spent on transaction processing can hamper strategic work, for example. However, spending too much time on decision support by working and reworking scenarios can also sap time away from mentoring direct reports or working to ensure the right controls are in place.
Know Where You Stand
The consequences of not spending time wisely underscore the importance of working toward an appropriate balance that helps drive the business forward. It’s incumbent on companies — finance teams in particular — to have an honest look in the mirror and recognize their own inefficiencies in these areas. Working to address them, as many companies have done with transaction processing, leaves more time for investment in more value-added activities.
The way you balance time in finance may need to change depending on what’s happening in the business or because of changes to the external business environment. For example, the time I’ve spent as a CFO on decision support since March has increased substantially because of COVID-19. I’m sure it has for many finance leaders. What’s important is that you know where the time goes and know where you need to make tradeoffs between competing priorities. All of them are foundational to the finance function and the business more broadly.
Perry D. Wiggins, CPA, is CFO, secretary, and treasurer for APQC, a nonprofit benchmarking and best practices research organization based in Houston.