finance priorities survey results for 2014 - a protiviti survey of cfos

2014 Finance Priorities SurveyNegotiating a Challenging Business Landscape With Slippery Slopes and Uncertain Terrain

12014 Finance Priorities Survey

IntroductIon

In many ways, corporate finance functions encounter challenges similar to those that confront teams of mountain climbers as they determine how to best scale snowy peaks. Just as climbers must employ advanced skills and training to negotiate such uncertain terrain, so, too, must CFOs and finance executives and professionals possess the knowledge and skills required to navigate a business landscape that’s becoming increasingly uncertain and potentially hazardous for their organizations.

New and changing regulations, evolving international and domestic tax laws, and ongoing demands for finance functions to deliver strategic contributions to their organizations in the form of business intelligence, data analysis and effective forecasting represent just some of the factors (but hardly all of them) pulling CFOs and their teams along many different but critical paths.

Not surprisingly, these themes top the list of priorities for today’s finance functions, according to the CFOs and finance executives and professionals we polled. Key findings from the results of our 2014 Finance Priorities Survey include the following:

• Managing cash flow and working capital efficiently and effectively is key – Finance functions are combating inefficiency aggressively as they strive to make their financial transaction processes and systems as streamlined as possible. These efforts include a wide range of improvements to cash forecasting, banking relationships and other crucial areas. As many of our respondents commented, “Cash is king.”

• There continues to be a strong focus on streamlining the financial close – From improv-ing the period-end close process and account reconciliations to financial consolidation processes, finance functions want to achieve greater efficiency.

• Harnessing business intelligence and “big data” is critical for strategic planning, forecast-ing, budgeting and profitability analysis – Finance functions are intensifying their focus on strategic planning and profitability analysis capabilities through greater use of business intel-ligence, big data and related analytical tools. There is a major drive within more organizations to understand in minute detail the performance and profitability of product and service lines, customers, customer segments, and sales channels, thus strengthening executive management’s strategic decision-making regarding investments.

• Changes to U.S. healthcare regulations are having a major impact – This is no surprise given the many questions that remain open for companies related to the Affordable Care Act, from compliance to short- and long-term costs. Finance functions face a growing need to manage uncertainty and also accurately provide/supply the data and information necessary for compliance on a timely basis.

• Major and looming changes to U.S. tax laws and business regulations represent signifi-cant concerns – These changes will have significant implications on tax planning and forecasting.

This heightened focus on what’s most important to finance functions today is presented in tables throughout our report – including exclusive views from CFOs and finance executives, as well as from respondents with large companies (annual revenues of US$1 billion or greater). Please note that, upon request, we can provide customized reports based on the results of respondents from specific groups – industry, company size, etc.

Protiviti October 2013


results and analysIs

The five categories in our survey, the results for which are detailed in the following pages, are:

• Process Capabilities (Financial Transactions)

• Process Capabilities (Financial Analysis)

• Emerging Issues

• Technical Capabilities

• Organizational Capabilities

For each of these five categories, respondents were asked to rate, on a scale of one to 10, the level of priority for them and their organizations to improve in different issues and capabilities. A “10” rating indicates the issue is a high priority while a “1” indicates the issue is a low priority.

We have classified each of these issues with an index of 6.0 or higher as a “significant priority” for finance functions. Those with an index of 4.5 through 5.9 are classified as a “moderate priority” and those with an index of 4.4 or lower are classified as a “low priority.”

ProceSS caPabilitieS (Financial tranSactionS)

Key Findings

• Efficiency,efficiency,efficiency:Thereclearlyisastrongdesiretoperformtransactionalactivities,suchastheperiod-endclose(andtheaccountreconciliationandconsolidationprocessesitincludes),asefficientlyaspossible.Thisworkencompasses,whereverpossible,ongoingprocessimprovementsandtheautomationofmanualprocesses.

• Financeexecutivesandprofessionalswanttocontinueimprovingtheircashforecastingandworkingcapitalmanagementcapabilities–thisis,ingreatpart,aresponsetothegrowingneedfororganizationstorespondtoeconomicvolatilitywithgreaterprecision,speedandflexibility.

• Relatedtomoreeffectivecashandcapitalmanagement,therealsoisahighprioritybeingplacedonimprovingbankingrelationships,whichfacilitatesastrongerunderstandingoftheorganization’scashpositiononadailybasis,aswellasneededaccesstolinesofcredit.

overall results, Process capabilities (Financial transactions)

Process capabilities – Financial transactions Priority Index

cash forecasting 6.8

Period-end close 6.7

account reconciliations 6.4

Working capital management 6.2

Banking relationships 6.0

4 2014 Finance Priorities Survey

Process capabilities – Financial transactions Priority Index

consolidation 5.9

debt and other investments 5.8

Pricing 5.8

Variance analysis 5.7

accounts receivable 5.6

Financial risk management (hedging, credit risk, FX risk, interest rate risk, etc.) 5.6

cost allocation 5.5

Invoicing/billing 5.5

Project accounting 5.5

accounts payable 5.3

Mergers and divestitures 5.3

standard costing 5.2

tax processing (sales and use tax, 1099, t&e tax coding, etc.) 5.1

time capture and reporting 5.1

Fixed asset accounting 5.0

Payroll processing 5.0

travel and entertainment reimbursement 5.0

activity-based costing 4.9

Payroll tax processing 4.9

commentary

Among all respondents, cash forecasting and the period-end close stand out as the two top priori-ties in this category of our study. The financial close has long been viewed as one of the finance function’s most important transactional activities.1 The fact that it currently remains a significant priority indicates that finance functions a) continue to invest in process improvement and automa-tion to achieve efficiency gains, particularly in organizations that still rely on manual processes, spreadsheets, etc., and b) are committed to leveraging these efficiency gains to increase the resources they allocate to more strategic activities, including cash forecasting and working capital management.

Given that cash forecasting and working capital management rank as significant priorities, finance functions are signaling that they are keenly aware of some of the lessons inflicted by the global financial crisis – namely, that greater clarity into cash positions, sometimes on a daily basis, as well as greater flexibility (generated by having higher levels of working capital) are critical. The empha-sis on strengthening relationships with bankers also relates to the need for greater clarity. By ensur-ing the number of banking relationships a company maintains (and how it manages those relation-ships) is optimal, finance functions gain a precise view of their real-time cash positions and enhance their ability to access needed lines of credit. In addition, the potential for changes in accounting rules – in particular, those for revenue recognition and leases – requires vigilance on the part of those charged with financial reporting so that bank covenants, which drive banking relationships between many companies and their lenders, can be established or modified accordingly in the event of significant accounting-based changes.

1 For more on the financial close, please see “Why the Financial Close Matters,” Protiviti: www.protiviti.com/en-US/Documents/Featured-Articles/Why-the-Financial-Close-Matters.pdf.


Key Questions to consider:

• Whatopportunities(e.g.,processadjustments,centralization,supportingtechnology,etc.)existtoimprovetheefficiencyandaccuracyofourperiod-endcloseandallofthetransactionalprocessesthatcompriseit?

• Arethereopportunitiestoleverageashared-servicesmodeltoincreasetheefficiencyofourtransactionalprocessingactivities?

• Aswemakechangesthathelpdrivegreaterefficiencyinourtransactionalprocesses,arewemaintainingtheright–andrightamountof–financialcontrolsfromariskmanagementperspective?

• Whatisthecurrentlevelofclarityinourorganization’sdailycashposition?

• Howcanourfinancefunctiongainamoreaccurateandmorereal-timesnapshotofourcompany’scashposition?

• Whatisthecurrentstateofourfinancefunction’sworkingcapitalmanagementcapability?Howwouldourcurrentworkingcapitalmanagementcapabilitywithstandtheeffectsofanotherfinancialcrisiswithsimilarorgreaterforce(comparedtothe2008-2009recession)?

• Towhatdegreedoourcurrentbankingrelationshipshelporhampertheclarityandflexibilitywemaintainwithregardtoourcashposition?Howcanwerethinkand/orrestructureourbankingrelationshipstoequipuswithgreaterclarityandflexibility?Doourbankingrelationshipsandrelatedgoverningagreementscontainsufficientflexibilitytoaccommodateanychangesinaccountingstandards?

Focus on cFos/Finance executives and large companies

Process capabilities (Financial transactions) – results for cFos/Finance executives and large company respondents

Process capabilities – Financial transactions

overallcFos/Finance

executives2

large company respondents3

cash forecasting

Period-end close

account reconciliations

Working capital management

Banking relationships

consolidation

debt and other investments

Pricing

Variance analysis

accounts receivable

2 Includes responses from CFOs and Vice President-level executives.3 Companies with revenues of US$1 billion or more.


Process capabilities – Financial transactions

overallcFos/Finance

executiveslarge company

respondents

Financial risk management (hedging, credit risk, FX risk, interest rate risk, etc.)

cost allocation

Invoicing/billing

Project accounting

accounts payable

Mergers and divestitures

standard costing

tax processing (sales and use tax, 1099, t&e tax coding, etc.)

time capture and reporting

Fixed asset accounting

Payroll processing

travel and entertainment reimbursement

activity-based costing

Payroll tax processing

significant Priority Index of 6.0 or higher

Moderate Priority Index of 4.5 to 5.9

low Priority Index of 4.4 or lower

commentary

The top priorities in this category for CFOs and other finance executives are very consistent with those identified by all survey respondents.

Compared to the overall findings, there are several notable differences in the responses of large company participants. First, they ranked a greater number of financial transaction areas as signifi-cant priorities compared with those identified by all respondents. Second, nearly every area ranked by large company participants has a higher priority index than that of the overall response, some significantly so, including financial risk management, accounts receivable, consolidation and pricing.

“ OUr BUSINESS hAS SEVErAl lEGAl ENTITIES ThAT hAVE TO PrOVIDE rESUlTS IN A TIMEly

MANNEr. AS A rESUlT, ThE PErIOD-END ClOSE AND rECONCIlIATIONS ArE CrITICAl PArTS

FOr EACh rEGION.”

FinanCe exeCUTive, large ManUFaCTUring CoMpany


ProceSS caPabilitieS (Financial analySiS)

Key Findings

• Financefunctionsareincreasingtheirinvolvementinstrategicplanning–intermsofindexscores,thisranksasthehighestpriorityinoursurvey.

• Notsurprisingly,periodicforecastingandbudgetingalsoaretopprioritiesasorganizationsseekgreaterunderstandingandclarityrelatedtoperformanceandtheircashpositions.

• Financefunctionsarerespondingtoincreasingdemandsfromtheirorganizationsforadditional,andmoreactionable,informationregardingtheprofitabilityofspecificproductorservicelines,customers,customersegments,andchannels.

• Aspartofanongoingdrivetostrengthencompetitiveintelligencecapabilities,financefunctionscontinuetoleveragebusinessintelligenceandotherperformancemanagementtoolsandtechniques(includingbigdataandrelatedanalytics)todeliverstrategicinsightstoexecutivedecision-makers.

overall results, Process capabilities (Financial analysis)

Process capabilities – Financial analysis Priority Index

strategic planning 7.0

Periodic forecasting 6.9

Budgeting 6.8

Performance management/executive dashboards/balanced scorecards 6.6

Profitability analysis (product, customer, channel, etc.) 6.6

Business intelligence (operations reporting) 6.4

Margin management 6.3

Profitability reporting – product 6.2

Profitability reporting – segment 6.1

Board of directors financial reporting 5.9

competitive intelligence (competitor, customer, geopolitical, etc.) 5.9

Profitability reporting – customer 5.9

external reporting (10-Q, 10-K, 8-K, Proxy and other shareholder) 5.7

Profitability reporting – channel 5.7

Management reporting – ad hoc or self-reporting 5.4

nonfinancial reporting – ad hoc reporting 5.4

Project management 5.4

enterprise risk reporting 5.3

Md&a 5.3

other statistical reporting 5.0


commentary

Given the uneven and highly risky business and economic terrain, all companies need to chart safe paths in their ascent to greater profitability and success. This explains why survey respondents at all levels of the finance function (and across all company sizes) place a high priority on improving their organization’s strategic planning capabilities.

Finance functions also are focusing heavily on a wide range of analytical capabilities and processes – including periodic forecasting, budgeting, profitability analysis, performance management, business intelligence and margin management, among other areas – to produce sharper clarity regarding the company’s current and future performance. Such clarity strengthens strategic decision-making (e.g., what product lines should the company invest more resources in due to their direct impact on the bottom line?) and strategic planning (e.g., what geography, customer segment or service line should the company pursue to increase future profitability in the most effective and efficient manner?).

Three years ago, MIT Senior lecturer Jonathan Byrnes wrote a book in which he predicted that CFOs would assume the role of “chief profitability officers” in their companies by managing profit-ability as “a central part of their existing jobs” while building “grassroots profitability management processes into [their] company’s core management activities.”4 Today, many CFOs and their finance teams would likely confirm the accuracy of Byrnes’ prediction: Our survey results confirm that finance functions are intent on showing the rest of the business a) which product lines, customers, segments and channels are unprofitable so that those investments can be reduced or eliminated, and b) which of those areas are the most profitable, arming management with information needed to decide whether to expand investment and operations in these areas.

This approach is helping to burnish the finance function’s credentials as a strategic partner while motivating the function to improve its capabilities in performance management, business intel-ligence and related analytical proficiencies. This is no small task; while it is a challenge to develop the capabilities necessary to conduct profitability (and related) analyses, it is even more difficult to sustain these abilities because the data that produces these strategic insights changes constantly. If data integrity issues crop up, decision-makers will quickly lose trust in the information.

Finally, it should be noted that competitive intelligence – a related analytical capability – narrowly missed ranking (with an average index of 5.9) as a “significant priority” in our survey. Nevertheless, finance functions continue to place a priority on identifying, tracking and synthesizing data from a wide variety of internal and external sources (e.g., customers, competitors, governments and other public sources) to produce insights that fuel strategic decision-making.5

4 Byrnes, Jonathan l.S., Islands of Profit in a Sea of Red Ink: Why 40 Percent of Your Business Is Unprofitable and How to Fix It, Portfolio Penguin, 2010: http://jlbyrnes.com/.

5 Performance/Risk Integration Management Model - PRIM2, Early Mover Series: Maximizing the Value of Competitive Intelligence, Protiviti: www.protiviti.com/en-US/Documents/PrIM2-Competitive-Intelligence-Protiviti.pdf.

“ WE hAVE VAlUABlE DATA ThAT WE NEED TO lEVErAGE BETTEr FOr FUTUrE FINANCIAl GrOWTh.”

CFo, SMall ConSUMer ServiCeS CoMpany



• HowisourfinancefunctionsupportingtheCEO’sstrategicplanningactivitiesandhowcanthatsupportbeenhanced?

• Howcanourfinancefunctionincreasetheaccuracyandcredibilityofperiodicforecastingprocesses?

• Isourcompany’scurrentbudgetingapproachtrulyeffective?Whatbehaviors–bothpositiveandnegative–doesthisbudgetingapproachgenerate?Howcanourbudgetprocessbeimprovedtoreduceand/oreliminateitsnegativeconsequencesandbuilduponitsbenefits?

• Whattypesofprofitabilityanalyses(product,customer,channel,etc.)providethegreatestvaluetothebusiness,andwhatisourfinancefunction’scurrentabilitytoproducetheseanalyses?

• Towhatextentdoexistingperformancemanagementandbusinessintelligencecapabilitiesenablethetypesofanalysesourbusinessneedstostrengthenitsstrategicdecision-making?Andhowcanthesecapabilitiesbeimproved,ifnecessary?

• Whatoversight,responsibilities,controlsandotherstepsareinplacetoensurethatprofitabilityanalyses,aswellasotherdata-driveninsightsthatourfinancefunctionproduces,remaincontinuallyfreefrompotentialdataintegrityissues?


Process capabilities (Financial analysis) – results for cFos/Finance executives and large company respondents

Process capabilities – Financial analysis

overallcFos/Finance


respondents

strategic planning

Periodic forecasting

Budgeting

Performance management/executive dashboards/balanced scorecards

Profitability analysis (product, customer, channel, etc.)

Business intelligence (operations reporting)

Margin management

Profitability reporting – product

Profitability reporting – segment

Board of directors financial reporting

competitive intelligence (competitor, customer, geopolitical, etc.)

Profitability reporting – customer

external reporting (10-Q, 10-K, 8-K, Proxy and other shareholder)


Process capabilities – Financial analysis

overallcFos/Finance


respondents

Profitability reporting – channel

Management reporting – ad hoc or self-reporting

nonfinancial reporting – ad hoc reporting

Project management

enterprise risk reporting

Md&a

other statistical reporting




commentary

The top priorities in this category for CFOs and other finance executives closely match those iden-tified by all survey respondents.

The top priorities among respondents from large companies are similar to the priorities identified by other respondents, with a notable exception: large company respondents ranked two additional priorities, competitive intelligence and external reporting, as significant. Other respondents identi-fied these two areas as moderate priorities.

“ OFTEN, EVEN lATE IN ThE qUArTEr, ThErE CAN BE SUrPrISES BETWEEN WhAT WAS ExPECTED

PEr FOrECAST AND WhAT ACTUAl rESUlTS COME IN. ThIS IS A CONTINUAl ArEA OF FOCUS

FOr [US].”

CorporaTe ConTroller, large ManUFaCTUring CoMpany


emerging iSSueS

Key Findings

• SwirlinguncertaintyregardingU.S.healthcarereformanditsshort-andlong-termcostsisamajorconcernforfinanceexecutivesandprofessionals.

• Otheremergingissuesviewedtobekeypriorities–sustainability,globalizationandworkforcemobility–representforcesthatpromisetoinfluencethefinancefunction’sdecisionsandactivities.

overall results, emerging issues

emerging Issues Priority Index

changes to u.s. healthcare regulations 6.5

sustainability 5.8

Globalization 5.6

Workforce mobility 5.1

sequestration (federal government) 4.9

aging workforce 4.7

conflict minerals compliance 2.9

commentary

Not surprisingly, separate research we’ve conducted recently indicates that the implementation of healthcare reform is the top concern among executives and board members within the healthcare industry.6 These changes also represent a pressing priority within finance functions across all indus-tries, according to our respondents in this study. Clearly, this regulatory change has the potential to alter organizational cost structures, workforce strategies and compensation approaches significantly, and executive management is looking to the finance function to provide clarity around these costs as quickly as possible.

Other emerging issues finance professionals identify as primary concerns also pose new risks, chal-lenges and opportunities for finance functions. The definition of “sustainability” – and how it is managed within companies – continues to evolve in rapid fashion. rather than treating sustainability as strictly an environmental issue, organizations are embracing a more expansive approach to manag-ing and measuring sustainability, and finance functions figure prominently in these efforts. Unilever CEO Paul Polman reports that his global company is integrating sustainability considerations into research and development programs, planning and other traditional organizational processes. “[W]e easily have saved just last year alone over 200 million [euros] by thinking about the use of our scarce resources differently,” Polman recently noted.7 Organizations and efforts such as the U.K.-based Prince’s Accounting for Sustainability Project are working with businesses, investors, the public sector, accounting bodies and other groups to develop processes for embedding sustainability into decision-making and reporting processes.

6 Executive Perspectives on Top Risks for 2013, Protiviti and North Carolina State University’s ErM Initiative, www.protiviti.com/toprisks.

7 “Unilever’s CEO on Making responsible Business Work,” hBr IdeaCast, May 17, 2012, http://blogs.hbr.org/ideacast/2012/05/unilevers-ceo-on-making-respon.html.


Two other emerging issues stand out as priorities for finance executives and professionals given the potential implications to finance functions: globalization, which has a significant impact on supply chain management processes and costs, and workforce mobility, which promises numerous business benefits but also gives rise to new IT and data privacy risks.


• TowhatextentdoesourorganizationandourfinancefunctionmonitoremergingissuessuchasU.S.healthcarereform,sustainabilitydevelopments,globalizationimplicationsandworkforcemobilitytrendstounderstandtheopportunities,challengesandthreatstheseforcescreate?

• DoesourorganizationhavesufficientresourcestotrackU.S.healthcareregulatorychangesandtheirimpactthroughoutourcompany?

• Isourfinancefunction’sinvolvementinsupplychainmanagementactivitiessufficientsothatnewopportunitiesandrisksrelatedtoglobalizationandsustainabilityareidentifiedandaddressedproactively?

• Towhatdegreeisourfinancefunctioninvolvedinintegratingsustainabilityeffortsthroughoutourorganizationsothattheseeffortsaremanaged,measuredandreportedinarigorousmanner?

• Whatopportunities,challengesandrisksdoesourworkforce’sgrowingmobilitycreate?Howcantheseopportunitiesbeexploited?Howcanthechallengesbemanaged–andthethreatsavoided?

“ AS A GlOBAl COMPANy, OUr WOrKFOrCE IS BECOMING INCrEASINGly SPrEAD OUT, MOBIlE

AND rEMOTE. ThIS rAISES MANy OThEr rElATED ISSUES SUCh AS ByOD, PrOTECTION OF

COMPANy DATA, AND MANAGING EMPlOyEES rEMOTEly ... WE NEED TO ENSUrE WE rEMAIN

COMPETITIVE IN ThESE ArEAS.”

CorporaTe ConTroller, MidSize TeCHnology CoMpany


“ hEAlThCArE IS A lArGE COST AND ChANGES hAVE A SIGNIFICANT BEArING ON OUr ExPENSES.”

CFo, SMall Mining CoMpany


emerging issues – results from cFos/Finance executives and large company respondents

emerging Issues overallcFos/Finance


respondents

changes to u.s. healthcare regulations

sustainability

Globalization

Workforce mobility

sequestration (federal government)

aging workforce

conflict minerals compliance




commentary

The top priorities in this category for CFOs and other finance executives are similar to those iden-tified by all survey respondents, though it is interesting to note that sustainability and globalization rank one point or more lower as priorities for this group compared to the overall response.

For large company respondents, the data generally mirrors that of the overall response. One noteworthy difference is the ranking of sustainability as the highest priority (slightly above changes to U.S. healthcare regulations). We feel this is likely due to the relative lower impact of changes in healthcare regulations on larger companies versus smaller companies, combined with the geographic diversity of many large businesses that must comply with more complex local sustain-ability regulations.


technical caPabilitieS

Key Findings

• Companies–andbyextension,theirfinancefunctions–continuetofaceintensepressuretoaddressandcomplywithevolvingbusinesstaxpolicies,businessregulationsandaccountingstandards,particularlygiventhemagnitudeandpaceofchangesinthem.

• ApotentialoverhaulofU.S.taxlaws,changestostateorjurisdictiontaxes,andU.S.businessregulatorychanges,includingtheongoingimplementationoftheDodd-FrankWallStreetReformandConsumerProtectionAct(DFA),rankamongthetoppriorityareasforfinancefunctions.8

overall results, technical capabilities

technical capabilities Priority Index

u.s. tax laws 6.1

domestic regulations (tax) 6.0

tax planning/forecasting 5.8

state or jurisdiction taxes 5.7

revenue accounting – general: revenue recognition – multiple element deliverables 5.6

sarbanes-oxley reporting and disclosures 5.5

In-country taxes 5.4

readiness for adopting new and impending accounting pronouncements 5.4

International/transfer pricing regulations 5.3

International cash/earnings repatriation – compliance and accounting implications 5.2

Fair value accounting (asc 825 – formerly Fas 159, Fair Value option for Financial assets and liabilities)

5.1

International Financial reporting standards/GaaP convergence projects 5.1

reporting uncertainties – external reporting 5.0

segment reporting 5.0

FasB exposure draft – revenue from contracts with customers 4.9

Foreign taxes 4.9

reporting uncertainties to the Irs (new regulations) 4.9

Business combinations 4.8

FasB accounting standards codification – impact on both research capabilities and disclosures

4.8

Proxy rules, including risk and compensation disclosures 4.8

regulation s-K and s-X requirements 4.8

stock-based compensation (asc 718 or asc 505-50 – Fas 123r share-Based Payments) 4.8

extensible Business reporting language (XBrl) 4.5

8 “Dodd-Frank at 3: Accepting Uncertainty,” FS Insights, Special Edition: Volume 4, Issue 4, Protiviti: www.protiviti.com/en-US/Documents/Newsletters/FS-Insights/FS-Insights-V4-I4-Dodd-Frank-at-3-Protiviti.pdf.


commentary

The unsteady implementation of DFA – three years after the sweeping law was enacted in July 2010, roughly half of the new regulation’s rules had yet to be finalized – crystallizes the regulatory uncertainty bearing down on finance functions and also helps explain the desire CFOs and their staffs express to maintain a state of vigilant readiness. The possibility of a substantial overhaul of the U.S. income tax code – a move that enjoys broad support even if it is not currently atop the federal legislative priority list – further underscores the magnitude of change finance functions need to be prepared to address.

Achieving this state of readiness requires finance functions to possess the expertise necessary to:

• Monitor and understand pending accounting, tax and other regulatory pronouncements.• Create new (and/or revamp existing) policies and processes concerning relevant regulatory and

accounting rules changes.• Ensure that these new policies are transformed into procedures that the rest of the enterprise

understands and follows.

Accessing and deploying this expertise can be a challenge for companies of all sizes. Smaller orga-nizations may have difficulty justifying the expense of keeping that expertise on staff, while larger companies must strike the right balance between devoting too many full-time resources to this type of readiness and remaining prepared to respond with sufficient expertise when the level of new accounting pronouncements and related regulatory changes increases. regardless of company size, our survey results show that readiness – to potential tax, regulatory and accounting rules and policy changes – represents a crucial requirement.


• Whatistheoverallstateofourfinancefunction’sreadinesstorespond(withinternalpolicyandprocedureguidance)tonewaccountingpronouncementsaswellastotaxandregulatorychangesthataffectaccountingandfinancialreportingprocesses?

• Doesourfinancefunctionpossesstheexpertisetoaddressinternational/transferpricingregulationsaswellasothernewbusinessregulationsandtaxrules(bothforeignanddomestic)?

• Areourrevenue-accountingpolicies,processesandcontrolsmonitoredinasufficientlyrigorousmanner?


technical capabilities – results for cFos/Finance executives and large company respondents

technical capabilities overallcFos/Finance


respondents

u.s. tax laws

domestic regulations (tax)

tax planning/forecasting

state or jurisdiction taxes

revenue accounting – general: revenue recognition – multiple element deliverables


technical capabilities overallcFos/Finance


respondents

sarbanes-oxley reporting and disclosures

In-country taxes

readiness for adopting new and impending accounting pronouncements

International/transfer pricing regulations

International cash/earnings repatriation – compliance and accounting implications

Fair value accounting (asc 825 – formerly Fas 159, Fair Value option for Financial assets and liabilities)

International Financial reporting standards/GaaP convergence projects

reporting uncertainties – external reporting

segment reporting

Foreign taxes

FasB exposure draft – revenue from contracts with customers

reporting uncertainties to the Irs (new regulations)

Business combinations

FasB accounting standards codification – impact on both research capabilities and disclosures

Proxy rules, including risk and compensation disclosures

regulation s-K and s-X requirements

stock-based compensation (asc 718 or asc 505-50 – Fas 123r share-Based Payments)

extensible Business reporting language (XBrl)




commentary

There are a few differences worth noting here – specifically, CFOs appear to consider a number of areas to be lower priorities compared with the overall response. These areas include, but are not limited to, SOx reporting and disclosures, international/transfer pricing regulations, international cash/earnings repatriation, IFrS/GAAP convergence, fair value accounting, segment reporting, and proxy rules.

The priorities cited by respondents from larger companies are similar to the overall results, with a couple of exceptions: large company respondents identified SOx reporting and disclosure requirements as a more significant priority, and view regulation S-K and S-x requirements to be a lower priority.


organizational caPabilitieS

Key Findings

• Financeexecutivesandprofessionalscontinuetofocusonstrengtheningtheirleadershipandchangemanagementskills–areasthathelpthemaddressmanyoftheircorefinancepriorities,suchasstrategicplanning,forecasting,budgetingandtheperiod-endclose.

• Coaching/mentoring,personnelperformanceevaluationanddevelopingrapportwithbusinessunitexecutivesalsoarekeypriorities.

overall results, organizational capabilities

organizational capabilities Priority Index

leadership (within your organization) 6.0

change management 5.9

coaching/mentoring 5.7

Personnel performance evaluation 5.5

developing rapport with business unit executives 5.3

developing rapport with senior executives 5.3

leveraging outside expertise 5.2

developing outside contacts/networking 5.1

negotiation 5.1

Working effectively with regulators 5.1

Written communication 5.1

leadership (in outside organizations, groups, etc.) 5.0

Management of shared services 5.0

time management 4.9

Working effectively with external auditors 4.9

Working effectively with outside parties 4.9

dealing with confrontation 4.8

Management of outsourcing arrangements 4.8

networking with peers 4.8

High-pressure meetings 4.6

Presenting (large groups) 4.5

Presenting (small groups) 4.5

six sigma/continuous improvement 4.4


commentary

The personal skills priorities survey respondents ranked highest in this category reflect most, if not all, of the other priorities detailed earlier in our report. Additionally, these priorities point to the finance function’s rising strategic importance. It is noteworthy that all survey respondents – regardless of their position or company size – identified the same top-two priorities regarding their personal skills: leadership within the organization and change management.

If CFOs are going to make good on their objective to strengthen their strategic planning contribu-tions, it makes sense that they also intend to invest time and energy in strengthening their leadership capabilities. And if finance professionals are to improve their function’s profitability analysis capabili-ties, it makes sense that they are also focused on improving their ability to affect and manage change. To illustrate, the analytical insights finance presents to the organization are designed to bring about positive changes (e.g., regarding how much the company invests, or does not invest, in various prod-uct lines, service lines, customer segments or sales channels).


• Whatformalandinformalopportunities(leadershipdevelopmentprograms,stretchprojects,rotationalassignments,mentoring,etc.)existtohelpallfinanceprofessionalsimprovetheirleadershipandchangemanagementskills?

• Aretherenewwaysfinanceprofessionalscan“getoutofthefinancefunction”toworkcloselywithbusinessandexecutivecolleaguestodevelopastrongerrapportwhilebuildinggreatertrustandcredibility?

• Areourfinanceexecutivesprovidingrisingfinanceprofessionalswithopportunitiestopresentto,andinteractwith,ourseniorbusinessexecutives?

“ lEADErShIP AT All lEVElS IN ThE COMPANy IS A PrIOrITy. SOlID lEADErShIP WITh SOlID

PrODUCTS WIll IMPrOVE [OUr] COMPANy. lEADErShIP AlSO INClUDES hIrING ThE rIGhT

PEOPlE TO lEAD AND AlSO ThOSE WIllING TO BE lED.”

CFo, MidSize TeleCoMMUniCaTionS CoMpany



organizational capabilities – results for cFos/Finance executives and large company respondents

organizational capabilities overallcFos/Finance


respondents

leadership (within your organization)

change management

coaching/mentoring

Personnel performance evaluation

developing rapport with business unit executives

developing rapport with senior executives

leveraging outside expertise

developing outside contacts/networking

negotiation

Working effectively with regulators

Written communication

leadership (in outside organizations, groups, etc.)

Management of shared services

time management

Working effectively with external auditors

Working effectively with outside parties

dealing with confrontation

Management of outsourcing arrangements

networking with peers

High-pressure meetings

Presenting (large groups)

Presenting (small groups)

six sigma/continuous improvement




commentary

The priorities concerning Organizational Capabilities identified by finance executives track closely to the priorities identified by all respondents.

The priorities cited by respondents from larger companies are similar to the overall results.


MetHodoloGy and deMoGraPHIcs

More than 220 respondents, including CFOs, vice presidents and directors of finance, and control-lers, participated in our study, which was conducted in the second and third quarters of 2013. respondents answered more than 100 questions in five categories: Process Capabilities – Financial Transactions; Process Capabilities – Financial Analysis; Emerging Issues; Technical Capabilities; and Organizational Capabilities. We are very appreciative and grateful for the time invested in our study by these individuals.

All demographic information was provided voluntarily and not all participants provided data for every demographic question.

Position

chief Financial officer 22%

Manager 14%

corporate controller 11%

Financial reporting director/Manager 10%

Vice President, Finance 9%

controller 6%

Finance staff 5%

Internal audit 4%

Budgeting/Planning director/Manager 3%

Management consultant 3%

other c-level executive 4%

other 9%

industry

Financial services 20%

Manufacturing 11%

Government/education/not-for-Profit 7%

Professional services 7%

technology 6%

Healthcare 5%

Hospitality 5%

life sciences/Biotechnology 5%

retail 5%

utilities 5%


distribution 4%

energy 4%

services 4%

Insurance 3%

real estate 3%

consumer Products 2%

telecommunications 2%

communications 1%

Media 1%

certification

certified Public accountant (cPa)/chartered accountant (ca) 75%

certified Internal auditor (cIa) 7%

certified Management accountant (cMa) 6%

chartered Financial analyst (cFa) 4%

certified Information systems auditor (cIsa) 2%

other (chartered Global Management accountant, certified treasury Professional, etc.)

27%

Size of organization (by gross annual revenue)

$20 billion or greater 6%

$10 billion - $19.99 billion 9%



$500 million - $999.99 million 15%

$100 million - $499.99 million 20%

less than $100 million 25%

organization headquarters

north america 94%

europe 3%

asia-Pacific 2%

other 1%


aBout ProtIVItI

Protiviti (www.protiviti.com) is a global consulting firm that helps companies solve problems in finance, technology, operations, governance, risk and internal audit. Through our network of more than 70 offices in over 20 countries, we have served more than 35 percent of FOrTUNE 1000® and FOrTUNE Global 500® companies. We also work with smaller, growing companies, includ-ing those looking to go public, as well as with government agencies.

Protiviti is a wholly owned subsidiary of robert half (NySE: rhI). Founded in 1948, robert half is a member of the S&P 500 index.

about our business Performance improvement Services

Our Business Performance Improvement experts help CFOs and other executives improve their business operations. This includes process improvements for financial and reporting processes and integrating risk considerations into their performance management activities, as well as assis-tance in reductions of working capital and improvements to cash flow, control and optimization of costs, and management of risk in their operations. We help drive performance of the supply chain through operations process improvements, strategic sourcing strategies, inventory manage-ment, contract management and enhancements to working capital. We assist client executives in improving their control over major capital and construction projects, creating more reliable project timelines and reducing exposure to cost overruns. We also support investment and divestiture transactions, including execution of financial and operational mergers and acquisitions (M&A) due diligence, and we assist in the selection and implementation of enterprise performance manage-ment software applications.

about our Financial advisory Services

Our Financial Advisory consultants help companies reduce their risk of non-compliance, while limiting exposure to financial restatements and other costly non-routine situations. The conditions in today’s global business market – including rapidly changing regulations; increased scrutiny of company financials; complex, nonrecurring business transactions; and a shortage of experienced finance and accounting professionals – strain the capabilities of many finance organizations. This increases an organization’s exposure to mistakes, lost synergies and the inability to maintain base-level financial processes, and has led to more than 5,200 financial restatements in the United States since 2004. The risk of these errors is typically higher during the adoption of new accounting stan-dards; significant business transactions; implementation of new IT/ErP systems; restructurings, acquisitions and divestitures; and expansion into new markets or businesses.

Our Financial Advisory professionals provide the critical functional and project management exper-tise necessary to prepare for and manage non-routine situations cost-effectively, such as restate-ments, mergers and IPOs. We proactively monitor new accounting rules and offer our clients assistance with addressing complex accounting or reporting challenges.


Protiviti Business Performance Improvement/Financial advisory Practices – contact Information

James PajakowskiExecutive Vice President – Global [email protected]

ChICAGO

James [email protected]

DAllAS

ryan Senter +1.469.374.2425 [email protected]

hOUSTON

Marcus Delouche +1.713.314.4982 [email protected]

Jay Thompson +1.713.314.4923 [email protected]

MIAMI

Byron Traynor +1.786.264.7166 [email protected]

NEW yOrK

Charles [email protected]

Christopher Wright +1.212.603.5434 [email protected]

SAN FrANCISCO

Gordon Tucker +1.415.402.3670 [email protected]

SANTA ClArA

Steve hobbs +1.415.402.6913 [email protected]

WAShINGTON, D.C.

Gary Callaghan +1.571.382.7228 [email protected]

AsiA-PAcific

AUSTRAlIA

BrisbaneCanberraMelbournePerthSydney

CHINA

Beijinghong KongShanghaiShenzhen

INDIA

BangaloreMumbaiNew Delhi

INDONESIA**

Jakarta

JAPAN

Osaka Tokyo

SINgAPORE

Singapore

SOUTHKOREA

Seoul

*ProtivitiMemberFirm **ProtivitiAllianceMember

The AmericAs

UNITEDSTATES

AlexandriaAtlantaBaltimoreBostonCharlotteChicagoCincinnatiClevelandDallasDenverFort lauderdalehouston

Kansas City los Angeles Milwaukee Minneapolis New york Orlando Philadelphia Phoenix Pittsburgh Portland richmond Sacramento

Salt lake City San Francisco San Jose Seattle Stamford St. louis Tampa Washington, D.C. WinchesterWoodbridge

ARgENTINA*

Buenos Aires

BRAzIl*

rio de Janeiro São Paulo

CANADA

Kitchener-WaterlooToronto

CHIlE*

Santiago

MExICO*

Mexico City Monterrey

PERU*

lima

VENEzUElA*

Caracas SOUTHAFRICA*

Johannesburg

euroPe/middle eAsT/AfricA

FRANCE

Paris

gERMANy

Frankfurt Munich

ITAly

Milan rome Turin

THENETHERlANDS

Amsterdam

UNITEDKINgDOM

london

Bahrain*

Manama

KUWAIT*

Kuwait City

OMAN*

Muscat

QATAR*

Doha

UNITEDARABEMIRATES*

Abu Dhabi Dubai

©2013ProtivitiInc.AnEqualOpportunityEmployer.PRO-1013-101052Protivitiisnotlicensedorregisteredasapublicaccountingfirmanddoesnotissueopinionsonfinancialstatementsorofferattestationservices.

finance priorities survey results for 2014 - a protiviti survey of cfos

Economy & Finance

finance executives

key finance functions

todays finance functions

finance priorities survey1

cash forecasting

data analysis

business regulations

significant priority