As finance executives emerge from the recent economic slump, many are considering benchmark-driven organizational and process-related changes. In fact, according to Michael J. Alfonsi, Managing Director of AnalyticResults, treasurers' interest in benchmarking and performance improvement is at a five-year high.

"Benchmarking is back with a bang as companies seek comparisons against their peer group and other companies to create targets for improvement and the motivation to evolve," says Alfonsi, whose consulting firm works with clients to improve and transform people, processes, technology utilization and knowledge management.

Others reasons for the benchmarking boom relate to technology changes, continuing merger activity and Sarbanes-Oxley (SOX) compliance efforts, Alfonsi says.

Five Areas Draw Attention
He notes that finance executives are focusing their benchmarking efforts on the following five areas:

• International operations. US businesses are testing and/or opening markets abroad. The benchmarking issues to address are: Where do I bank? How does that country's payments system work? Can I move money out when I want/need to? How do I forecast? Am I getting the accounting treatment right?
  
  
• SOX compliance monitoring. SOX was designed to regulate good governance in public companies and enhance the reliability of financial reporting. However, nearly three years after its passage, SOX still has executives scrambling to decipher its well-intended but complex and costly requirements. Consequently, companies are turning to benchmarking data for tips on shoring up their internal defenses and providing the necessary audit trails to document controls.
  
  
• Cost improvements. When benchmarking, managing external costs (e.g., banking fees) is often the first place a company looks, Alfonsi says. After that, they examine full-function costs (e.g., all-in costs to make a travel and entertainment payment or collect a payment), which often include several internal processes and timeliness indicators.
  
  
• Risk management. Best practices improvements are sought around: Am I staffed properly and with the right skill sets? Will my disaster recovery plan work if it has to or if it is audited/tested? Do I have the right controls on my processes? Do my procedures cover the right activities? Am I hedged appropriately and accounting for my activities properly? Can I forecast better?
  
  
• E-commerce and/or image utilization. The focus here is on electronic interchange, including payments, between customers and suppliers.
  

Step by Step
Implementing organizational- or process-related changes with benchmarking resources doesn't have to be cost prohibitive. Companies can elicit improvements for several thousand dollars or even a few hundred, Alfonsi says.

Initially, finance executives can work inexpensively with their banks to manage external costs or things they can control quickly.

The next step is to look at full-function costs and benchmark staffing levels, full costs for accounts receivable or payable, bank account structures, payments utilization, risk management efforts, liquidity management practices, technology approaches and even educational and experience levels.

Six Sigma Mindset
A final approach to managing successful benchmarking projects is to enter a transformative or Six Sigma Business Process Improvement (BPI) mindset.

"Six Sigma is the platinum standard in benchmarking," Alfonsi says. "Enlist an expert to walk you through the first improvement project. For the second project, have the mentor available as an advisory resource. By the third project, you'll have mastered the method."

The Bottom Line
True-blue benchmarkers share a passion for not just the benchmarks themselves, but also for best practices.

"That's the whole reason for benchmarking," Alfonsi says. "Just this year, I know of a dozen treasury people who collectively saved their companies nearly $10 million and reduced risk levels to their lowest points in 10 years. Benchmarks can change your business life by keeping your focus on adding value."

View other articles in this edition

  Revisit Short-Term Investment Strategies
    in Rising Interest Rate Environment

  Best Practices for Accounts Payable
    and Receivable Efficiency

  Effective Collection Strategies
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