A Four-Level Maturity Model for Finance

How Advanced Is Your Finance Function?

A Four-Level Maturity Model For Finance

Find out where your business is currently operating and how to advance to the next level

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We help businesses gain access to strategic insights and actionable solutions to help them grow. We take the guess work out of the equation so you have more time and resources to focus on what counts.

In this guide, we share our proprietary four-level financial maturity model – a tool to assess your business’s current level of financial maturity and chart a course from where you are to where you want to be.

Introduction

We start with a cautionary tale: A $100 million distributor was reluctant to invest in the business’s financial maturity by hiring a CFO and building a full finance function. As the business quickly grew, the finance team struggled to keep up with the books and records and at the same time the company became an appealing target for acquirers. Lacking bandwidth and experienced leadership, the finance team’s energy was focused on staying on top of the day-to-day transactional processing requirements of the business and were not equipped to go through a transaction.

When their investment bankers started to request data to put together their marketing materials for the company, the team could not provide timely information to the bankers and slowed the time to market substantially. During the course of this process, numerous accounting errors and data integrity issues were discovered in their financials which needed to be addressed for a trailing three-year period. What resulted was a large and expensive project to rebuild their books and records which ended up impacting historical profitability numbers, liabilities, and ultimately enterprise value. Their offers ended up being well below what they expected and their inability to produce accurate numbers during the transaction process disrupted their momentum, resulting in the deal falling through.

As they quickly learned, the costs of not investing in your finance function can be just as high — or higher — than being proactive.

“The trade-off between cost reduction and increased effectiveness of the finance function is a false

choice,” according to McKinsey. But many mid-market companies are reluctant to make the investment, and by the time they realize they need to make a change in their finance organization, it is too late. They are already in a crisis state.

Between the great resignation, the finance talent shortage, and external economic volatility, it is more critical than ever for mid-market companies to proactively address their financial maturity. Running on outdated systems, relying on institutional knowledge, and not clearly defining your core processes can all cause avoidable financial losses — through errors, inefficiencies, and difficulties retaining, recruiting, or training staff.

The good news is that this is also a huge opportunity for the companies that are willing to make the investment. And the timing could not be better: many of the systems that were previously reserved for the enterprise class of companies are now accessible to the middle market. With better, cheaper, and higherfunctioning tools, it has never been easier to get your finance team running like a well-oiled machine.

In this guide, we share our proprietary four-level financial maturity model — a tool to assess your business’s current level of financial maturity and chart a course from where you are to where you want to be. By the end, you will feel equipped to make changes to increase your team’s effectiveness so you can better weather the challenges that will inevitably come your way.

The Cost of Financial Immaturity

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Difficulties retaining and recruiting

Ambitious, talented people want to work at innovative companies. They do not want to be stuck doing rote tasks in outdated systems. They have options now. The number of finance job openings and finance professionals quitting their jobs has remained near record highs. Recruiting firm Robert Half found that 83 percent of finance executives across the U.S., Canada, UK, France, Germany, Hong Kong, and Singapore are “somewhat” or “very” concerned about losing top performers to better opportunities and 89 percent are finding it “somewhat” or “very” challenging to hire skilled finance professionals.

Manual processes

Employees waste as much as two hours each day on “pointless” tasks, according to The Independent. These tasks include things like completing unnecessary paperwork, performing manual tasks, and attending meetings that do not result in any action. Not only are these manual processes more likely to introduce errors, but they also add up to a significant amount of lost time. Over the course of a month, teams waste about 40 hours, or an entire work week, on tasks that do not add value.

Poor governance

Ineffective governance will ultimately lead to inconsistent processes, poor data integrity, and an inaccurate picture of your financials. Without strong governance systems in place, teams may struggle to engage in accurate planning, budgeting, forecasting, and analysis activities. According to Gartner, just 47 percent of decision makers feel like financial analysis accurately represents how their business is performing. Misled by their assumptions, leaders end up making decisions that are not fully based on reality — which can lead to costly mistakes. Each one of these poor decisions can cost organizations as much as one percent of revenue, according to the same Gartner study.

While not every company will experience a single $200k mishap, most will end up accruing the costs of financial immaturity through countless little errors, inefficiencies, and missed opportunities. It is death by a thousand paper-based invoice paper cuts.

Below is a break down of these avoidable costs.

“Misuse of finance analytics can cost organizations as much as 1% of revenue per decision.” — Gartner

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Costly physical materials

Dealing with physical invoices and sending paper checks involves many avoidable materials such as paper, printer ink, envelopes, stamps, and more. As of 2022, a standard first-class letter stamp costs $0.58. If you send 1,000 checks each month, you are spending $6,960 on postage alone. Plus, it is an antiquated form of low-impact work that squanders your team’s time, which is also your money, when they could be working on more valuable projects.

Inaccurate data

An MIT study found that bad data costs companies 15-20 percent of their revenue. This accounts for all the time wasted correcting errors, cross-referencing with other sources, and dealing with the quality issues created by earlier mistakes. By their estimates, knowledge workers waste up to 50 percent of their time on “mundane data quality issues.”

Is your team safe from vishing?

The Opportunity for Financially Mature Teams

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Access top talent and avoid the return-to-work revolt

While 66 percent of employers plan for their teams to return to the office full-time, the majority of finance employees are interested in remote-optional positions, according to research from Robert Half. Their study also found that 40 percent of candidates who turn down a role do so because they want more schedule flexibility. Mature companies are able to offer flexible roles that are also highly efficient and effective —roles that align with the desires of top talent — allowing them to attract top performers and bypass the return-to-work revolt

Enhance efficiency and improve work satisfaction

Improving your processes can give you back a significant amount of time and money. One McKinsey study found that leading finance teams were able to reduce their costs by 26 percent by optimizing their processes and finding new efficiencies (which is especially impressive, considering that these companies were starting from a lower cost base than their similarly-sized peers in the market). Increasing efficiency has the added benefit of freeing your team to pursue interesting, satisfying work — not endless manual tasks.

Protect your data and improve decisions with strong governance

Gartner predicts that by 2023, 95 percent of Fortune 500 companies will converge simple analytics governance into broader data and analytics governance initiatives. Having strong governance processes in place gives you the confidence that your data is reliable, protects you from would-be threat actors, and lays the groundwork for more advanced technologies, like machine learning (ML) and artificial intelligence (AI). In fact, you can only realize the return on investment (ROI) on these advanced tools if you already have strong governance processes in place. Better decision-making, with the support of today’s advanced tools, all starts with strong governance.

Data is the fuel the 21st-century economy runs on. Being able to rely on your data and leverage it effectively is key to everything else you do as a finance organization. By eliminating bad data, you can reclaim the 15-20 percent of revenue and 50 percent of your team’s time that MIT estimates is getting lost to errors, manual fixes, and workarounds. Not only that, but you will be a better finance partner to your team — enabling them to make the best decisions for the business.

Financially mature teams drive value for their companies in numerous, measurable ways. Once you invest in creating great finance processes and systems, the business will immediately begin generating return.

Take advantage of technology to save time and money

Upgrading your systems and designing your digital ecosystem in a way that aligns with how your business needs to operate going forward (not how it did a decade ago) has numerous benefits, including reducing human errors, saving money, and saving your team time. One Forrester study, in collaboration with Zuora, found that companies that moved from spreadsheets to automated tools closed their books in half the time.

Better understand the future

Traditional accounting is designed to look at how the business has performed. The better and faster your accounting processes are, and the more future-oriented your reporting and analytics teams are, the more you can use planning, forecasting, and scenario modeling to make decisions based on how the business is likely to perform in the future. This allows businesses to scale and react faster to the performance of investments, products/services, and market dynamics to be more decisive as the markets change. Financial planning and analysis (FP&A) is a capability that many middle market companies don't have yet. If you can save costs on core finance by automating and streamlining processes, you can invest in high-value FP&A capabilities that give you these forward-looking tools to enhance your management decision making.

The Finance Team Maturity Model

The key to reducing your costs and maximizing your opportunities is having the right combination of people, processes, governance, technology, and data in place. Our goal with this model is to help you diagnose your current challenges and surface potential efficiencies.

As you review the maturity model below, take a moment to place yourself in each category. What level would you place your team at in terms of your people, processes, governance, technology, and data? It does not have to be precise — just your best estimation. Note: teams rarely fall into one level for all categories but have strengths and weaknesses in different areas.

Disconnected people and processes

Steps towards centralization

Transformation through automation

Leadership through innovation

PEOPLE

Ill-defined roles and responsibilities

Defined roles and responsibilities

Well-trained and appropriately deployed staff

Forward thinking, highly analytical, and technology centric

PROCESSES

Manual, timeconsuming processes

Fewer manual processes

Centralized activities

Fully automated processes

GOVERNANCE

Informal and ineffective policies and procedures

Defined policies and procedures

Integrated policies and procedures

Automated governance

TECHNOLOGY

Unintegrated systems and data architecture

Common platforms

Integrated and automated systems

Machine learning (ML) / Artificial Intelligence (AI)

DATA

Limited data which is rarely used

LEVEL 1: SUSTAINS

Ad hoc analysis and manual data cleansing

LEVEL 2: REACTS

Data is clean, accessible, and easy to analyze

LEVEL 3: TRANSFORMS

Predictive analytics

LEVEL 4: INNOVATES

Once you have figured out your scoring for each category, you can calculate a rough average and read on for a detailed breakdown of the level that fits you best, followed by tips on how to elevate your practice.

Note: Complexity is the hidden third dimension of the maturity model. When assessing your maturity, keep in mind the complexity of your business today and how it may evolve tomorrow. Your level of complexity can be determined by factors such as transaction volumes, number of systems, global operations, entity structure, and so on. Companies that are more complex may require higher levels of maturity in order to realize efficiencies and scalability, while companies that are less complex may not.

We are here to help:

Do your finance challenges seem daunting? We have been there. Citrin Cooperman’s team of strategic advisors can complete a comprehensive assessment of your finance team’s operations and provide custom recommendations to elevate your practice. If you would like to “skip ahead” in your learning, we would be happy to share how we can help your team achieve financial maturity, faster.

Get in Touch

Level 1 (Sustains)

DISCONNECTED,

TIME-CONSUMING PROCESSES

At this level, organizations are in survival mode. Work is siloed and disjointed, and important processes require institutional knowledge that lives only in the minds of key personnel. Teams likely experience difficulties in gathering key performance information, undergo lengthy close cycles that result in missed business opportunities, and have a poor connection between their forecasts and actual results.

PEOPLE

Finance roles and responsibilities are not well defined

Lack of visibility into what each resource is performing

Finance and accounting resources are not optimally aligned across business units and provide limited support to business operations

Nearly impossible to adapt to a remote or hybrid work environment

At risk of losing staff to better opportunities

TECHNOLOGY

Primarily paper-based and still relying on tedious, low-impact work like data entry and scanning to get information into core systems

Using multiple tools that do not “talk” to each other to complete a single process (e.g., contracts are maintained in the ERP system but tracking of contract and billing is maintained in Excel)

Using complex spreadsheets for results consolidation

Inability to automatically check for duplicate payments, so it must be done manually

PROCESSES

Processes are manual, labor-intensive, and often dependent on key personnel

Key processes are not defined and are inadequate to effectively carry out close activities

Finance teams struggle with the volume of invoices, monthly accruals, and basic procurement management just to keep the business running

Siloed, disjointed checklists require institutional knowledge from individual contributors and are often dependent on one person’s activities

DATA

Limited financial management reporting data, with only a rear view of performance

Finance staff acts as data gatherers, not data analyzers

Decisions made on feelings rather than dataadequat

GOVERNANCE

Policies and procedures are poorly defined, inconsistently followed, and ineffective

Lack of documentation and understanding of processes

No centralized way to manage requests — causing leadership to send frequent, informal requests to team members, derailing them from other tasks and obscuring their real workload from others

Level 2 (Reacts)

STRIDES

TOWARDS CENTRALIZATION

One level up, organizations are beginning to take more ownership over their processes and systems. Their policies, procedures, and governance guidelines are defined, but not always consistently applied. There is much more centralization in terms of common tools and while there are still manual processes, teams are taking the first steps towards automation. Staff have distinct roles but still require training to advance their skillsets.

PEOPLE

Roles are defined and finance employees are recognized by their particular skill sets

Better visibility into what each resource is performing

Finance staff has broad skills but require crossfunctional training

Hybrid or remote work is challenging, but possible

TECHNOLOGY

Taking important steps towards becoming paperless, even if not entirely there yet

Systems and data architecture use common platforms, reducing manual entry and adjustments

Some integrations between systems DATA

PROCESSES

Key processes are informally and inconsistently defined and integrated across the organization

Communication and coordination between departments and different locations is limited

Fewer manual processes with the beginning of initiatives to drive automation

Data is available, but still mainly shows a rear view of performance

Significant manual cleansing and mapping of data required

Starting to perform ad hoc analysis of both historical financial and operational data to drive decision-making

dequat

GOVERNANCE

Policies and procedures for preparing financial information are defined

Processes are documented but inconsistently executed

Some centralized processes to manage requests

Level 3 (Transforms)

TRANSFORMATION THROUGH AUTOMATION

At level three, finance begins to act as a service center, providing enhanced organizational value and ultimately better customer service both internally and externally. Staff feel valued in their distinct roles and receive the right training to perform their best. Policies are consistently enforced, and technology enables common processes to be fully automated. All of these efficiencies allow the team to execute the close process in five business days or less.

PEOPLE

Finance staff are adequately trained, and work is evenly distributed to address the needs of close and reporting activities

Finance resources are deployed appropriately according to skills and business needs

Practicing performance management within the various finance functions, including regular performance reviews

Have a strategy in place and plans for staff development PROCESSES

Processes are defined and integrated across the organization

Errors may not yet be traceable to an owner, but are otherwise known to the organization

Activities are relatively centralized with strong coordination between departments

TECHNOLOGY

Reconciliation and financial analysis processes are executed quickly and rely upon integrated and automated information

Leveraging advanced tools like robotic process automation (RPA) or optical character recognition (OCR) as point solutions (for instance, using RPA for things like automated accrual schedules to close accounts payable, accounts receivable, and inventory sub-ledgers or using OCR to match invoices with associated receipts)

Shared dashboards standardize and centralize close activities, improve management oversight, and ensure balance sheet reconciliations from the sub to the general ledger

DATA

There are effective controls over data quality and governance

Data is clean, conformed, and easy to access

Analysis of both historical and forward-looking data is seamless to perform

GOVERNANCE

Policies and procedures for preparing financial information are integrated but are not completely automated

Centralized request process prioritizes requests from leadership while ensuring that team members are not derailed from their most important tasks

Global close checklist allows the team to gain full visibility, centralization, and clear due dates of who is working on what close activities

Data plays a critical role in decision-making dequat

Level 4 (Innovates)

LEADERSHIP THROUGH INNOVATION

Teams at the highest level are setting the standard for how financial organizations could run. What sets leading finance organizations apart is their capability to produce high-quality insights and support the business strategy — enabled by their strong governance, processes, people, and technology. Leading teams are staffed by highly specialized workers who benefit from continuous training and upskilling. They are able to move beyond first-wave automation to experiment with cutting-edge technologies like AI, while providing enhanced information to allow the business to make informed, forward-looking decisions.

PEOPLE

Staff focuses on data analysis and proactively manages key business decisions

Constantly cycling continuing training programs that build staff up

Continued advancement of people strategy and performance management

Team experiences high work satisfaction and feels bought-in to the mission

TECHNOLOGY

Systems are well integrated, customizable, automated, and accessible through finance portals, with on-demand access to assess performance using standard metrics

Intelligent automation is the standard, enabling the team to experiment with cutting- edge tools like AI and ML

Advanced use of robotic process automation (RPA) as a platform, not just a point solution

PROCESSES

The core processes are defined, communicated, and assigned owners across the business

Activities are centralized and cost-effective, with strong coordination between different departments and locations

Planning and forecasting is a core competency of strategic importance within the finance team

DATA

Leveraging data blending and data analytics to drive predictive analytics

Proactively identifying future data needs, reporting, and analysis strategies

GOVERNANCE

Automated governance set up within tech systems so policies are automatically applied

Policies and procedures become second nature

Governance is integrated, automated, and accurate

dequat

Getting To Financial Maturity

Achieving financial maturity is not an overnight process — you cannot jump straight from manual invoicing to machine learning. However, there are steps you can follow to help level up your finance org in a steady, sustainable way. To achieve long-term success, we recommend the following steps:

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Assess where you currently are

Proper planning is key to any major change in your finance organization/function. We recommend taking the time to do an assessment — whether you are doing it internally or getting external help — to ascertain not only the state of the finance organization, but also the state of the business around it. You want to identify where there is complexity, what your team’s biggest pain points are, and where there are obvious opportunities for automation. Looking at your current state holistically will allow you to think through and organize your approach. The most important deliverable from this phase is the roadmap. Use this roadmap to govern and make resource allocation decisions as you move forward.

Prioritize quick wins

After you complete your assessment you can start to prioritize. Certain initiatives will provide a bigger or faster return on investment than others, so it’s key to think through what the lowest-effort, highestimpact changes are and then get the go-ahead from the business to prioritize those things. You might want to think through some of the following questions:

• What needs to be done first? Focus on the processes, procedures, or technologies that will bring the greatest material benefit to your team. For instance, if you are a low-dollar, high-volume organization, optimizing the order-to-cash (O2C) process will likely bring the greatest immediate benefit. If you are not sure where to start, seek input across the organization to find out what the biggest pain points are and prioritize addressing those first. Keep in mind the amount of effort that each initiative will take. Focus on quick wins to drive momentum and buy-in, while building a plan for the long term.

• What goals can wait until later? For instance, there is no point in investing in a transportation management system right now if you need to replace your ERP system first.

• What will free up staff resources? Maybe you have a really good ERP system, but you are still manually processing accounts payable (AP). In that case, you do not need a full-blown procurement system, but rather some kind of automated invoicing tool that will help you process and code your invoices without needing manual intervention. For example, if you are processing 12,000 invoices annually, you could save around $100K+ a year.

Reallocate your team

Once your team is freed from time-consuming, manual tasks, you can start thinking about what valueadded activities they can spend their time on instead. For instance, an AP clerk who no longer has to focus on highly transactional processes now has the opportunity to lead training on AP policies, procedures, and trends. From there, they can help drive the evolution of that practice and take on additional responsibilities. One way you can help your team feel that they have more buy-in and also improve their performance is by building a weekly scorecard providing a snapshot of your most important strategic priorities. Having the bandwidth to introduce more exciting work will ultimately promote growth for your team.

Keep investing in incremental improvements and follow your roadmap

The Citrin Cooperman Solution

Today, more tools are available to finance teams than ever before — but cutting-edge technologies can only succeed with the right people, processes, and governance in place to manage them. By following this process to assess where you are and define where you want to be, you will be able to identify and achieve your most important goals.

Citrin Cooperman’s finance transformation services are here to help. We can conduct an in-depth assessment

of your team’s current setup and provide individually tailored recommendations to help you streamline your monthly financials, improve collaboration, and reduce time to close so you can become more efficient, reduce costs, and help your team feel more valued and connected.

Then we can help you implement and manage the transformation to help you achieve the results of the roadmap.

Steve Ronan

T: (212) 697-1000

E: sronan@citrincooperman.com

Steve Ronan is a partner and chief strategy officer at Citrin Cooperman. He leads the firm's Strategy and Business Transformation and Business Process Outsourcing Practices. He is an experienced professional in the theory and execution of improving business value. Steve has partnered with a range of companies, from the Fortune 100 to the middle-market, to develop and implement strategies that improve profitability, create scalable businesses, and strengthen customer relationships. His projects have created over $100M in value through top-line growth and bottom-line cost savings.

Peter Emerling

T: (781) 356-2000

E: pemerling@citrincooperman.com

Peter Emerling is a director in the firm's Strategy and Business Transformation Practice. He has over 14 years of experience supporting companies across a diverse range of industries and across various life cycle stages. Peter is focused on creating value and driving innovation, efficiency and scale via data analytics, technology, and industry insights. Proven skills in engaging and navigating complex business environments to achieve successful outcomes.

"Citrin Cooperman" is the brand under which Citrin Cooperman & Company, LLP, a licensed independent CPA firm, and Citrin Cooperman Advisors LLC serve clients’business needs. The two firms operate as separate legal entities in an alternative practice structure. Citrin Cooperman is an independent member of Moore North America, which is itself a regional member of Moore Global Network Limited (MGNL).