Just Say No to Day-to-Day Transaction Processing

By: Jeffrey C. Steinhoff, CGFM, CPA, CFE

Jeff Steinhoff is a Past AGA National President and the Executive Director of the KPMG Government Institute.

AGA’s 2008 CFO survey[1] showed that federal finance organizations feel they face steeper compliance requirements with smaller rewards; whereby mission priorities get a back seat to compliance. They feel they are pushed into a chief accountant role as opposed to an executive leadership role. They expressed a desire to spend more time on strategic decision-making activities and less time on day-to-day transaction processing activities.  

High-performing finance organizations effectively manage and reduce the time they spend on routine transaction processing. But what does this mean in real-life terms? The Government Accountability Office (GAO) found that leading finance organizations try to spend no more than 20 percent of their time on routine transaction processing.[2]

Research by the KPMG Government Institute[3] found that the finance work force that supports the transaction processing needs of today may not be well-positioned to support the analytical needs of tomorrow. It is expected that finance organizations of the future will have fewer people, with a much greater percentage of financial analysts than accounting technicians involved with routine transaction processing. To reduce the cost of finance operations and better support agency program objectives, a leading finance organization manages the cost of performing routine transaction processing and accounting activities. It does this through a variety of means such as:

• Moving to shared services centers
• Outsourcing to transaction processors
• Consolidating, streamlining, and/or reengineering existing transaction processing
• Standardizing transactions and adopting common transaction processes
• Using technology 

Leading finance organizations understand the need to establish the right balance and smartly carry out routine finance operations, especially transaction processing. They have a baseline of where they are and what they want to achieve. This is not conceptually difficult; but implementation and sustainability can be challenging. The 2008 AGA survey clearly showed that federal CFOs were not satisfied with the status quo.

There are some things you can do that KPMG’s research shows are a staple of high performing finance organizations.

Think about it in terms of the following questions:

Does your finance organization have a formal goal and an action plan to reduce the time spent on routine transaction processing so that it can instead focus its resources on strategic support activities, such as financial analysis and managerial cost accounting?

Does your finance organization know what percentage of its resources is spent on each of its major activities, such as routine transaction processing, financial analysis, and strategic and operational planning as a baseline that is periodically updated?

Is the finance organization generally in line with the GAO finding that high-performing finance organizations typically spend no more than 20 percent (and hopefully less given significant technological advances since the GAO study) of their time on routine transaction processing and other routine finance activities?

Has the finance organization compared itself against other organizations to identify leading practices and opportunities to reduce routine transaction processing?

Does the finance organization continually explore opportunities to outsource and take advantage of emerging leading practices and advancements in technology?

Is transaction processing standardized, which entails having common accounting codes and common accounting processes?

Is it recognized that financial and other information needed for transaction processing can come from program systems and other information systems outside of the purview of the finance organization, which also need to be in sync with the common accounting codes and common accounting processes?

Has reengineering taken place to eliminate inefficient processes, consolidate transaction processing activities not outsourced and streamline operations?

Is technology fully leveraged in transaction processing, such as the through the use of electronic commerce, data warehousing, document imaging and other transaction processing techniques?

My questions to you:

• Has your agency’s finance organization implemented the leading practices highlighted in this essay to reduce the cost of routine transaction processing activities?
• If so, what has been the result? Has the finance organization been successful in reducing the cost of routine transaction processing? What practices have had the greatest positive impact on reducing costs? What practices have had the least impact on reducing costs?
• What are the areas that continue to present the greatest challenge to the finance organization in reducing the cost of routine transaction processing?
• What other ideas do you have for reducing routine transaction processing activities so that CFOs can focus more attention on strategic decision-making activities as called for in the AGA’s 2008 CFO survey?

The views in this essay are those of the author only, and do not necessarily represent the views or professional advice of KPMG LLP.

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[1] Association of Government Accountants’ Annual CFO Survey, Financial Management—Providing a Foundation for Transition, July 2008

[2] GAO Executive Guide: Creating Value Through World-Class Financial Management (AIMD-00-134),

April 1, 2000

[3] The KPMG Executive Guide to High Performance in Federal Financial Management, 2009

Comments

[Jeff Steinhoff]

Government Financial Manager --

Thank you for your thoughtful insights regarding this challenge and your kind words about the KPMG Executive Guide. The KPMG Government Institute performed extensive research in developing the Executive Guide as a tool to provide federal financial managers a road map of the activities that typically represent high performance. We are pleased that you have found the Executive Guide useful.

Also, you are correct that this is something the financial management community needs to do but that getting there will not be easy for anyone. It should be thought of as an iterative process that evolves over time. Hopefully, someone who has actually made or started this journey will share their success factors and lessons learned as you suggest.

Again, thank you so much for insightful and kind comments.

Jeff

[Government financial manager]

Your points are well taken. It will require a concerted effort; but doing so would be most worthwhile. I doubt that most federal CFOs have the information to let them know how their time is being spent and the true cost of transaction processing and the range of compliance issues on which they must focus attention. The steps outlined in your essay and covered in greater detail in the KPMG Executive Guide you referenced, which I have found to be most useful and strongly recommend people get a copy of if they do not already have one, are on target. This is something we have to do, but getting there will not be easy for anyone. It would be interesting to know if anyone has actually done what you are talking about and what were their success factors and lessons learned.

[Jeff Steinhoff]

Andrew --

Thank you for your most insightful comments. The CFO community says time and time again that they want to make the transition from the "back room" and a compliance regimen to the "board room" of strategic support. But that change is not easy. As you point out, it is normal to do what you are comfortable doing and have been trained to do. Also, work in the back room is very important to successfully managing an agency and should be viewed as so.

Change is nornally an iterative process of setting one buiding block on top of another. There has been a quantum shift in the role of the CFO since passage of the CFO Act, and for those CFOs that have the lead for the budget, they oftentimes are extensively involved in enterprise operations.

I am hopeful that we will continue to see progress and that the financial management community will have the chance to "just say no to transaction processing" as we know it today and escape the shackles of compliance addressed in the 2008 AGA CFO Survey.

The research by the KPMG Government Institute provides a way to look at the next steps and what would typically represent high performance across the three dimensions of finance operations, program operations, and enterprise operations, which is where the AGA Survey was pointing to as the end game.

Thanks again for your insightful comments.

Jeff

[Andrew Lewis]

Jeff -

Excellent thoughts to consider!

I've seen several CFO organizations that, although they have the desire to move from the "back room" to the "board room", they struggle with training and refocusing their personnel to discuss what the numbers mean, and not what the numbers are.

It's so natural for most accountants to gravitate to the debits and credits. It's much harder to sit down with personnel from the operational side of the organization and discuss how the numbers speak to a program's performance and effectiveness.

- Andrew Lewis