Tracking the total cost of the finance function helps CFOs make informed decisions about resource allocation and investments in tools and staffing. Despite dramatic shifts in labor markets and technology in recent years, the relative cost of managing all aspects of an organization’s finances has remained roughly constant. That’s according to cross-industry benchmarking data gathered by the American Productivity and Quality Center (APQC) and reported as a percentage of total revenue: top-performing companies spend .66% of their total revenue to perform finance-related functions (a slight increase from .6% a decade ago); middle-of-the-road companies spend 1%, and bottom-performing organizations spend 1.5% (down from 2% in 2015). These expenditure levels have plateaued, but that’s not a reason to ignore them. As a finance leader, it’s important to track the total cost of performing all financial functions — from forecasting and budgeting to payroll, accounts receivable and more — and measure it against peer organizations within and outside your industry. Why? Well, there are a few reasons, and their applicability depends on the size and current performance of your organization.

Cost savings or time savings

Bottom-performing organizations spend more than double what top performers spend to complete the same set of processes. Closing this gap could result in significant savings for both median and bottom performers. Top-performing organizations, on the other hand, are unlikely to see any significant savings, given the relative stability of spending levels over time. These companies should instead aim to reinvest time savings from process efficiency into higher-value activities like strategic planning and growth. Explore CXO Insider for the latest innovations in Operations, IT, and Finance, featuring valuable insights from top C-Level industry leaders!  Source: https://www.cfo.com/news/the-cost-of-financial-management-metric-of-the-month/736658/