financial management in the government/military industry
OSBC METRIC COLLECTION: FINANCIAL MANAGEMENT IN THE GOVERNMENT/MILITARY INDUSTRY
Prepared with data from APQC’s Open Standards Benchmarking CollaborativeSM (OSBC), this collection contains metrics related to the performance of government/military organizations in financial management processes. These metrics can help organizations see where they stand in relation to their peers and identify potential areas for improvement. For more information, please email [email protected] or go to www.apqc.org/osbc.
AGGREGATED METRICS Bottom Performers
Metric Name
Median
Top Performers
N
Survey
Survey Question Calculation
Average cycle time in days to generate complete and correct billing data Percentage of invoice line items that are matched the first time
21.75
6.00
2.00
10
Finance Organization
76.0190
20.00%
38.39%
90.00%
13
(72.0260 / 72.0190) * 100.0
Number of finance function FTEs per $1 billion revenue
243.60
128.96
64.11
14
Accounts Payable and Expense Reimbursement Finance Organization
Number of FTEs for the process group "process accounts payable and expense reimbursement" per $1 billion revenue Personnel cost of the finance function per finance function FTE Personnel cost of the process "process accounts payable" per "process accounts payable" FTE Total cost of the finance function per finance function FTE
34.14
20.49
9.73
14
Finance Organization
$98,234.00
$65,240.00
$57,170.82
15
Finance Organization
76.0150a / 76.0120aa
$103,289.18
$74,500.33
$57,972.70
17
72.0150a / 72.0140
$167,335.56
$120,106.98
$90,119.71
11
Accounts Payable and Expense Reimbursement Finance Organization
123 North Post Oak Lane, Third Floor • Houston, TX 77024-7797 www.apqc.org • 800-776-9676 or +1-713-681-4020 • Fax +1-713-681-8578
76.0120aa / (76.0050 * 0.000000001) (76.0120s + 76.0120t) / (76.0050 * 0.000000001)
76.0150f / 76.0120aa
DEFINITION OF TERMS BOTTOM PERFORMERS: The “bottom performers” benchmark reflects the performance level where 25 percent of all responses fall below. BUSINESS ENTITY / BUSINESS SITE / BUSINESS UNIT: For survey purposes, a business site is defined as an entity that (1) performs significant aspects of the processes for the surveys identified, or (2) is part of a cost or revenue center within the company. Within your organization, diverse departments may be geographically co-located, with closely integrated operations that form part of one "business site" which may be a great distance apart. When trying to determine if related parts of your operation should be considered a single business site, look for the following characteristics: • Do they operate closely together? • Do they serve many of the same customers? • Do they support the same region or product group? • Do they share any performance measures? • Is data meaningful at a consolidated level? Examples of business site definition: 1. A general ledger accounting unit located in Germany has two groups. One performs general ledger accounting for the corporate headquarters, which has three business units. The other group does general ledger accounting for one of the three business units. In spite of their geographic co-location, their roles are substantially different and consolidating their data into a single response would make it less meaningful. Each group should be treated as a separate business site. 2. Three business units within a corporation use a shared services center for accounts payable and expense reimbursement, but are self-supporting for the other financial processes. The best approach is to make the shared services center a separate business site for accounts payable and expense reimbursement, and to retain the three original business units for the other financial processes. 3. A global manufacturing company has five plant locations, each manufacturing product and each with its own logistics operations. For purposes of completing a manufacturing and logistics survey, they should be treated as five separate business sites. N: The N value reflects the sample size based on the number of business entities. NM: NM indicates data that is not meaningful. The OSBC only reports top and bottom performers for sample sizes of typically 6 or more. If the sample size is less than this, we only report the median. MEDIAN: The median performance level for all participants in the database. The median reflects the value below and above which there is an equal number of values. SURVEY QUESTION CALCULATION: Survey question reference indicates the specific question number(s) contained within the official OSBC survey for this area. TOP PERFORMERS: The “top performers” benchmark represents the performance level where 75 percent of all responses fall below.
NOTE: APQC wishes to acknowledge the Open Standards Benchmarking CollaborativeSM (OSBC) Advisory Council and its members for their ongoing contribution to APQC research efforts and success. We offer a special thanks to IBM Business Consulting Services, which has sponsored this research initiative in addition to generously providing thought leadership in supply chain management and other areas.
©2009 APQC. All rights reserved. Read our User Privacy Policy. Read our User Legal Policy
INDUSTRY-SPECIFIC Government/Military
AVERAGE CYCLE TIME IN DAYS TO GENERATE COMPLETE AND CORRECT BILLING DATA PCF 8.2.2.2 GENERATE CUSTOMER BILLING DATA
METRIC FINDING
If correct billing data can be generated more efficiently, customer payments can be received more quickly. Organizations with long cycle times stand to gain significantly by emulating the best practices of organizations with shorter cycles. 21.8
6.0 2.0 Government/Military Top Quartile
Median
Bottom Quartile
N=10 Average Cycle Time in Days to Generate Complete and Correct Billing Data
WHERE DOES YOUR ORGANIZATION STAND? Cycle time to generate complete and correct billing data is a measure than can be vitally important to an organization's day-to-day operations. Before customer payments can be received, complete and correct billing data must first be created. Organizations that can bill their customers faster can also receive payments more quickly. This data reveals a large difference between top and bottom performing governmental organizations, with top performers generating complete and correct billing data in two days and bottom performers taking almost a month (or 21.8 days) to do the same.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 04.09
INDUSTRY-SPECIFIC Government/Military
PERCENTAGE OF INVOICE LINE ITEMS THAT ARE MATCHED THE FIRST TIME PCF 8.2.2 INVOICE CUSTOMER
METRIC FINDING
Organizations that increase the number of line items that match the first time shorten the overall cycle and free up time for employees to complete other tasks.
90.0%
38.4% 20.0%
Government/Military Top Quartile
Median
Bottom Quartile N=13
Percentage of Invoice Line Items that Are Matched the First Time
WHERE DOES YOUR ORGANIZATION STAND? Another key measure from accounts payable is the percentage of invoice line items matched the first time. This figure gives an idea of how incoming invoices are matched to purchase orders or other authorizations to pay. Organizations with a higher percentage of first-time matches take less time to approve invoices. The faster processing of invoices leads to an increase in productivity. For top-performing governmental organizations, 90 percent of invoice line items are matched the first time, while both the median and bottom performers fare much worse at 38.4 percent and 20 percent respectively.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 04.09
INDUSTRY-SPECIFIC Government/Military
NUMBER OF FINANCE FUNCTION FTES PER $1 BILLION REVENUE PCF 8.0 MANAGE FINANCIAL RESOURCES
METRIC FINDING
Ensuring that the finance function only uses as many full-time employees (FTEs) as it needs optimizes efficiency and can reduce costs.
243.6
129.0 64.1
Government/Military Top Quartile
Median
Bottom Quartile N=14
Number of finance function FTEs per $1 billion revenue
WHERE DOES YOUR ORGANIZATION STAND? A high-level measure of the productivity of the finance organization is the number of FTEs required per $1 billion revenue. Top-performing governmental organizations require on 64 FTEs per $1 billion revenue, while bottom performers require almost four times as many (or 243 FTEs per $1 billion revenue). Examining this measure, organizations can easily get a sense of how fit or bloated their finance organizations are. With this, they can begin the journey of determining where effective adjustments may be made either in personnel or in processes.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 04.09
INDUSTRY-SPECIFIC Government/Military
NUMBER OF ACCOUNTS PAYABLE FTES PER $1 BILLION REVENUE PCF 8.6 PROCESS ACCOUNTS PAYABLE AND EXPENSE REIMBURSEMENTS
METRIC FINDING
Reducing the number of full-time equivalent employees (FTEs) needed to process accounts payable and expense reimbursements can dramatically lessen costs.
34.1
20.5
9.7
Government/Military Top Quartile
Median
Bottom Quartile N=14
Number of full-time equivalent employees (FTEs) for the process group “process accounts payable and expense reimbursement” per $1 billion revenue
WHERE DOES YOUR ORGANIZATION STAND? A key function of the finance organization is the payment of vendors. For governmental organizations, top performers dedicate just 9.7 FTEs per $1 billion revenue to this process. Bottom-performing organizations, in comparison, dedicate over three times as many FTEs (or 34.1 FTEs per $1 billion revenue). Organizations looking to cut costs should examine the number of personnel performing processes to determine whether and how more can be done with less. For a hypothetical organization with revenue of $1 billion, the potential savings from 24 fewer FTEs could surpass $1.5 million per year in personnel costs (assuming a median FTE cost of $65,000).
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 04.09
INDUSTRY-SPECIFIC Government/Military
PERSONNEL COST OF THE FINANCE FUNCTION PER FINANCE FUNCTION FTE PCF 8.0 MANAGE FINANCIAL RESOURCES
METRIC FINDING
Examine total cost of personnel to see if your organization needs to revisit the allocation of human resources in the finance function.
$98,234
$65,240 $57,171
Government/Military Top quartile
Median
Bottom quartile
N=15 Personnel cost of the finance function per finance function FTE
WHERE DOES YOUR ORGANIZATION STAND? In most organizations, personnel costs are the single greatest cost component for finance processes. Automation certainly reduces overall personnel costs, but the tools selected for implementation should be evaluated and deemed appropriate for organizational needs. Many organizations investigate outsourcing options and discover that processes can be performed more cheaply elsewhere, while other organizations opt for a shared services model that combines functions that frequently overlap (usually within HR and finance), eliminating duplicate costs by focusing employee workloads. Despite the prevalence of those two models, many organizations benefit from simply reexamining employee skill sets and workloads. Often, personnel can be streamlined according to the proficiencies and interests of each individual employee, reducing the number of personnel needed and increasing the retention of employees who are more engaged in their work. Investigating benefits reports and assessing which benefits are actually used by employees can also help organizations figure out which benefits are utilized sufficiently to justify costs and attract premium employees.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 05.09
INDUSTRY-SPECIFIC Government/Military
PERSONNEL COST TO PROCESS ACCOUNTS PAYABLE PER ACCOUNTS PAYABLE FTE PCF 8.6 PROCESS ACCOUNTS PAYABLE AND EXPENSE REIMBURSEMENTS
METRIC FINDING
Measure the cost of specific processes like accounts payable against other industry organizations to see if your costs seem relatively high. Then, consider reexamining allocation of resources in that function.
$103,289
$74,500 $57,973
Government/Military Top Quartile
Median
Bottom Quartile
N=17 Personnel cost of the process "process accounts payable" per "process accounts payable" FTE
WHERE DOES YOUR ORGANIZATION STAND? Accounts payable is a key finance process that many organizations find quite labor intensive. Organizations looking to keep costs in control should pay attention to their personnel costs in comparison with others in their industry. By measuring personnel costs per FTE, comparisons are less skewed by organization size. If your organization’s costs fall within the bottom quartile, there are likely ways that those costs can be reduced. Automation decreases the number of tasks employees must perform and the number of employees required. Outsourcing is another option, as well as shifting to a shared services model that consolidates functions that are duplicated between departments (such as finance and human resources). Reassessing the allocation of skills within the accounts payable process can also reveal holes and ineffectively used talent. Looking at benefit options and seeing what discounts are currently available can also make a difference. Take assessments and examine benefits reports to uncover which benefits customers actually use and which simply sap the organization of resources.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 05.09
$167,336
$120,107 $90,120
Government/Military Top Quartile
Median
Bottom Quartile
Prepared with data from APQC’s Open Standards Benchmarking CollaborativeSM (OSBC), this collection contains metrics related to the performance of government/military organizations in financial management processes. These metrics can help organizations see where they stand in relation to their peers and identify potential areas for improvement. For more information, please email [email protected] or go to www.apqc.org/osbc.
AGGREGATED METRICS Bottom Performers
Metric Name
Median
Top Performers
N
Survey
Survey Question Calculation
Average cycle time in days to generate complete and correct billing data Percentage of invoice line items that are matched the first time
21.75
6.00
2.00
10
Finance Organization
76.0190
20.00%
38.39%
90.00%
13
(72.0260 / 72.0190) * 100.0
Number of finance function FTEs per $1 billion revenue
243.60
128.96
64.11
14
Accounts Payable and Expense Reimbursement Finance Organization
Number of FTEs for the process group "process accounts payable and expense reimbursement" per $1 billion revenue Personnel cost of the finance function per finance function FTE Personnel cost of the process "process accounts payable" per "process accounts payable" FTE Total cost of the finance function per finance function FTE
34.14
20.49
9.73
14
Finance Organization
$98,234.00
$65,240.00
$57,170.82
15
Finance Organization
76.0150a / 76.0120aa
$103,289.18
$74,500.33
$57,972.70
17
72.0150a / 72.0140
$167,335.56
$120,106.98
$90,119.71
11
Accounts Payable and Expense Reimbursement Finance Organization
123 North Post Oak Lane, Third Floor • Houston, TX 77024-7797 www.apqc.org • 800-776-9676 or +1-713-681-4020 • Fax +1-713-681-8578
76.0120aa / (76.0050 * 0.000000001) (76.0120s + 76.0120t) / (76.0050 * 0.000000001)
76.0150f / 76.0120aa
DEFINITION OF TERMS BOTTOM PERFORMERS: The “bottom performers” benchmark reflects the performance level where 25 percent of all responses fall below. BUSINESS ENTITY / BUSINESS SITE / BUSINESS UNIT: For survey purposes, a business site is defined as an entity that (1) performs significant aspects of the processes for the surveys identified, or (2) is part of a cost or revenue center within the company. Within your organization, diverse departments may be geographically co-located, with closely integrated operations that form part of one "business site" which may be a great distance apart. When trying to determine if related parts of your operation should be considered a single business site, look for the following characteristics: • Do they operate closely together? • Do they serve many of the same customers? • Do they support the same region or product group? • Do they share any performance measures? • Is data meaningful at a consolidated level? Examples of business site definition: 1. A general ledger accounting unit located in Germany has two groups. One performs general ledger accounting for the corporate headquarters, which has three business units. The other group does general ledger accounting for one of the three business units. In spite of their geographic co-location, their roles are substantially different and consolidating their data into a single response would make it less meaningful. Each group should be treated as a separate business site. 2. Three business units within a corporation use a shared services center for accounts payable and expense reimbursement, but are self-supporting for the other financial processes. The best approach is to make the shared services center a separate business site for accounts payable and expense reimbursement, and to retain the three original business units for the other financial processes. 3. A global manufacturing company has five plant locations, each manufacturing product and each with its own logistics operations. For purposes of completing a manufacturing and logistics survey, they should be treated as five separate business sites. N: The N value reflects the sample size based on the number of business entities. NM: NM indicates data that is not meaningful. The OSBC only reports top and bottom performers for sample sizes of typically 6 or more. If the sample size is less than this, we only report the median. MEDIAN: The median performance level for all participants in the database. The median reflects the value below and above which there is an equal number of values. SURVEY QUESTION CALCULATION: Survey question reference indicates the specific question number(s) contained within the official OSBC survey for this area. TOP PERFORMERS: The “top performers” benchmark represents the performance level where 75 percent of all responses fall below.
NOTE: APQC wishes to acknowledge the Open Standards Benchmarking CollaborativeSM (OSBC) Advisory Council and its members for their ongoing contribution to APQC research efforts and success. We offer a special thanks to IBM Business Consulting Services, which has sponsored this research initiative in addition to generously providing thought leadership in supply chain management and other areas.
©2009 APQC. All rights reserved. Read our User Privacy Policy. Read our User Legal Policy
INDUSTRY-SPECIFIC Government/Military
AVERAGE CYCLE TIME IN DAYS TO GENERATE COMPLETE AND CORRECT BILLING DATA PCF 8.2.2.2 GENERATE CUSTOMER BILLING DATA
METRIC FINDING
If correct billing data can be generated more efficiently, customer payments can be received more quickly. Organizations with long cycle times stand to gain significantly by emulating the best practices of organizations with shorter cycles. 21.8
6.0 2.0 Government/Military Top Quartile
Median
Bottom Quartile
N=10 Average Cycle Time in Days to Generate Complete and Correct Billing Data
WHERE DOES YOUR ORGANIZATION STAND? Cycle time to generate complete and correct billing data is a measure than can be vitally important to an organization's day-to-day operations. Before customer payments can be received, complete and correct billing data must first be created. Organizations that can bill their customers faster can also receive payments more quickly. This data reveals a large difference between top and bottom performing governmental organizations, with top performers generating complete and correct billing data in two days and bottom performers taking almost a month (or 21.8 days) to do the same.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 04.09
INDUSTRY-SPECIFIC Government/Military
PERCENTAGE OF INVOICE LINE ITEMS THAT ARE MATCHED THE FIRST TIME PCF 8.2.2 INVOICE CUSTOMER
METRIC FINDING
Organizations that increase the number of line items that match the first time shorten the overall cycle and free up time for employees to complete other tasks.
90.0%
38.4% 20.0%
Government/Military Top Quartile
Median
Bottom Quartile N=13
Percentage of Invoice Line Items that Are Matched the First Time
WHERE DOES YOUR ORGANIZATION STAND? Another key measure from accounts payable is the percentage of invoice line items matched the first time. This figure gives an idea of how incoming invoices are matched to purchase orders or other authorizations to pay. Organizations with a higher percentage of first-time matches take less time to approve invoices. The faster processing of invoices leads to an increase in productivity. For top-performing governmental organizations, 90 percent of invoice line items are matched the first time, while both the median and bottom performers fare much worse at 38.4 percent and 20 percent respectively.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 04.09
INDUSTRY-SPECIFIC Government/Military
NUMBER OF FINANCE FUNCTION FTES PER $1 BILLION REVENUE PCF 8.0 MANAGE FINANCIAL RESOURCES
METRIC FINDING
Ensuring that the finance function only uses as many full-time employees (FTEs) as it needs optimizes efficiency and can reduce costs.
243.6
129.0 64.1
Government/Military Top Quartile
Median
Bottom Quartile N=14
Number of finance function FTEs per $1 billion revenue
WHERE DOES YOUR ORGANIZATION STAND? A high-level measure of the productivity of the finance organization is the number of FTEs required per $1 billion revenue. Top-performing governmental organizations require on 64 FTEs per $1 billion revenue, while bottom performers require almost four times as many (or 243 FTEs per $1 billion revenue). Examining this measure, organizations can easily get a sense of how fit or bloated their finance organizations are. With this, they can begin the journey of determining where effective adjustments may be made either in personnel or in processes.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 04.09
INDUSTRY-SPECIFIC Government/Military
NUMBER OF ACCOUNTS PAYABLE FTES PER $1 BILLION REVENUE PCF 8.6 PROCESS ACCOUNTS PAYABLE AND EXPENSE REIMBURSEMENTS
METRIC FINDING
Reducing the number of full-time equivalent employees (FTEs) needed to process accounts payable and expense reimbursements can dramatically lessen costs.
34.1
20.5
9.7
Government/Military Top Quartile
Median
Bottom Quartile N=14
Number of full-time equivalent employees (FTEs) for the process group “process accounts payable and expense reimbursement” per $1 billion revenue
WHERE DOES YOUR ORGANIZATION STAND? A key function of the finance organization is the payment of vendors. For governmental organizations, top performers dedicate just 9.7 FTEs per $1 billion revenue to this process. Bottom-performing organizations, in comparison, dedicate over three times as many FTEs (or 34.1 FTEs per $1 billion revenue). Organizations looking to cut costs should examine the number of personnel performing processes to determine whether and how more can be done with less. For a hypothetical organization with revenue of $1 billion, the potential savings from 24 fewer FTEs could surpass $1.5 million per year in personnel costs (assuming a median FTE cost of $65,000).
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 04.09
INDUSTRY-SPECIFIC Government/Military
PERSONNEL COST OF THE FINANCE FUNCTION PER FINANCE FUNCTION FTE PCF 8.0 MANAGE FINANCIAL RESOURCES
METRIC FINDING
Examine total cost of personnel to see if your organization needs to revisit the allocation of human resources in the finance function.
$98,234
$65,240 $57,171
Government/Military Top quartile
Median
Bottom quartile
N=15 Personnel cost of the finance function per finance function FTE
WHERE DOES YOUR ORGANIZATION STAND? In most organizations, personnel costs are the single greatest cost component for finance processes. Automation certainly reduces overall personnel costs, but the tools selected for implementation should be evaluated and deemed appropriate for organizational needs. Many organizations investigate outsourcing options and discover that processes can be performed more cheaply elsewhere, while other organizations opt for a shared services model that combines functions that frequently overlap (usually within HR and finance), eliminating duplicate costs by focusing employee workloads. Despite the prevalence of those two models, many organizations benefit from simply reexamining employee skill sets and workloads. Often, personnel can be streamlined according to the proficiencies and interests of each individual employee, reducing the number of personnel needed and increasing the retention of employees who are more engaged in their work. Investigating benefits reports and assessing which benefits are actually used by employees can also help organizations figure out which benefits are utilized sufficiently to justify costs and attract premium employees.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 05.09
INDUSTRY-SPECIFIC Government/Military
PERSONNEL COST TO PROCESS ACCOUNTS PAYABLE PER ACCOUNTS PAYABLE FTE PCF 8.6 PROCESS ACCOUNTS PAYABLE AND EXPENSE REIMBURSEMENTS
METRIC FINDING
Measure the cost of specific processes like accounts payable against other industry organizations to see if your costs seem relatively high. Then, consider reexamining allocation of resources in that function.
$103,289
$74,500 $57,973
Government/Military Top Quartile
Median
Bottom Quartile
N=17 Personnel cost of the process "process accounts payable" per "process accounts payable" FTE
WHERE DOES YOUR ORGANIZATION STAND? Accounts payable is a key finance process that many organizations find quite labor intensive. Organizations looking to keep costs in control should pay attention to their personnel costs in comparison with others in their industry. By measuring personnel costs per FTE, comparisons are less skewed by organization size. If your organization’s costs fall within the bottom quartile, there are likely ways that those costs can be reduced. Automation decreases the number of tasks employees must perform and the number of employees required. Outsourcing is another option, as well as shifting to a shared services model that consolidates functions that are duplicated between departments (such as finance and human resources). Reassessing the allocation of skills within the accounts payable process can also reveal holes and ineffectively used talent. Looking at benefit options and seeing what discounts are currently available can also make a difference. Take assessments and examine benefits reports to uncover which benefits customers actually use and which simply sap the organization of resources.
Taken from APQC’s Open Standards Benchmarking Collaborative research ©APQC For more information, e-mail [email protected] or visit our financial management homepage. Last updated 05.09
$167,336
$120,107 $90,120
Government/Military Top Quartile
Median
Bottom Quartile
