Factoring Trade Finance: The Best Function of Class Finance for Police Forces

3/29/19

The Best Function of Class Finance for Police Forces

Background

Police funding has increased by 4.8 billion and 77 percent (39 percent in real terms) since 1997. But the days when troops have enjoyed such a level of funding are over.

The Chief of Police and senior management acknowledged that the annual cycle of seeking year-to-year efficiency was not sustainable, and would not address cash shortages in the coming years. Facing slower funding growth and real cash deficits in their budgets, the Police must adopt innovative strategies that result in increased productivity and efficiency needed to provide high-quality policies to the public.

The performance changes needed to meet this challenge will only be achieved if police services fully embrace effective resource management and utilize technology, partnerships, and people efficiently and productively. The financial function has an important role to play in overcoming these challenges and supporting the objectives of the Force economically and efficiently.

The Best Function of Class Finance for Police Forces
The Best Function of Class Finance for Police Forces

Challenge

Police forces tend to foster a division and department culture rather than corporate culture, with the procurement of individuals who do not exploit economies of scale. This is partly a result of more than a decade of functions that move from center to division.

To reduce costs, increase efficiency, and mitigate the threat of "top-down", initiatives that are driven from the center, the Police need to establish a corporate headquarters and encourage behavior change. This change must involve compliance with the corporate culture rather than a series of silos that run through the organization.

Developing the Best Class Financial Functions

Traditional financial functions within the Police have focused on transactional processing with only limited support for management information and business decision support. With a new focus on efficiency, there is now an urgent need for the finance department to transform to add greater value to strength but with minimal costs.

1) Aligning to Force Strategies

Because the Police Forces need funds to function, it is very important that finance and operations are closely aligned. This collaboration can be very strong and help provide a significant increase in the Force, but to achieve this model, there are many obstacles to overcome. The Finance Director must see whether their Forces are ready for this collaboration, but more importantly, they must consider whether the Force itself can survive without it.

Finance requires a clear vision that focuses on its role as a balanced business partner. But to achieve this vision great efforts from the bottom up are needed to understand the significant complexity in the system and the underlying processes and to develop advanced ways that can work for the organization.

The success of each change management program depends on its implementation. Changes are difficult and expensive to implement correctly, and often, the Police do not have relevant experience to achieve these changes. Even though financial directors are required to have appropriate professional qualifications (not as former police officers as happened a few years ago) may have developed in the Public Sector with limited opportunities to learn from and interact with the best methodology in the class. In addition, cultural issues surrounding self-preservation can present obstacles to change.

Although it is relatively easy to convey a message of financial transformation, getting a commitment to initiate bold changes can be difficult. Business cases often do not have the qualities needed to go through change and even where they are of high quality, senior police officers often lack commercial awareness to trust them.

2) Supporting Power Decisions

Many Finance Directors are interested in developing their financial functions. The challenge they face is convincing other Force members that financial functions can add value - by devoting more time and effort to financial analysis and giving senior management tools to understand the financial implications of key strategic decisions.

The Best Function of Class Finance for Police Forces
The Best Function of Class Finance for Police Forces


Maintaining Financial Control and Managing Risk


Sarbanes Oxley, International Financial Reporting Standards (IFRS), Basel II and Individual Capital Assessment (ICA) have all placed financial controls and reporting under the spotlight in the private sector. This, in turn, increases the spotlight on financial control in the public sector.

The 'Best in Class' Police financial function not only has minimum control to meet regulatory requirements but will evaluate how laws and regulations that must be fulfilled by financial functions can be used to provide value to the organization. Providing strategic information that will enable the power to fulfill its objectives is the main task for leading financial functions.

3) Value for the Force

The impetus for development over the past decade has moved decision-making to the Division and has led to increased costs in financial functions. By utilizing a number of initiatives in the transformation program, the Force can utilize up to 40% savings on financial costs along with increasing financial team responsiveness and quality of financial information. These initiatives include:

Centralization

By concentrating on financial functions, the Police can create centers of excellence where industry best practices can be developed and shared. This will not only re-empower the department, create greater independence and objectivity in assessing projects and performance, but also leads to more consistent management information and a higher level of control. The Police Unit can also develop a group of business partners to act as a strategic liaison for departments and divisions. Business partners will, for example, advise on how department and division commanders can meet the budget in the coming months instead of merely suggesting that the budget has been missed for the previous month.

With regular figures carried out at shared service centers, financial professionals will find they now have the time to act as business partners for divisions and departments and focus on strategic issues.

The cultural impact on the department and division commander should not be underestimated. The commander will worry that:

  • Their budget will be centralized
  • Workload will increase
  • There will be limited access to financial individuals
  • There will be no support on the spot


However, if a centralized shared service center is properly designed, none of the above applies. Even from centralization under the best practice model, leaders must obtain the following benefits:

  • Strategic advice provided by business partners
  • Increased flexibility
  • Improved management information
  • Transactions are faster
  • Reducing the number of unresolved queries
  • Greater clarity about services and provision costs
  • The forum for finance is strategically aligned with the needs of the Force


A Style that moves from a decentralized system to a centralized system must try and ensure that the financial function does not lose contact with the Chief of Police and Division Commander. Troops need to have strong business cases for financial transformation combined with governance structures that include operational, tactical and strategic requirements. There is a risk that the potential benefits of implementing such changes may not be realized if the program is not managed carefully. Investment is needed to create a successful centralized financial function. Usually, the potential future benefits of greater visibility and control, consistent processes, standard management information, economies of scale, long-term cost savings and a group of financial professionals who are proudly empowered, must outweigh the initial costs.

To reduce commercial, operational and capability risks, the financial function can be fully outsourced or partially outsourced to third parties. This will provide guaranteed cost benefits and can provide opportunities to improve relationships with vendors that provide a best practice process.

Process Efficiency

Usually, for the Police, the focus on development has developed a silo-based culture with different processes. As a result, there are significant opportunities for standardization and simplification of processes that provide scalability, reduce manual effort and provide business benefits. From just rationalizing the process, a style can usually produce a 40% reduction in the number of processes. An example is the use of electronic bank reports instead of using manual bank reports for the bank and receivable reconciliation processes. This will save the huge effort involved in analyzing data, transferring data into different spreadsheets and entering data into the financial system.

Organizations that have a silo operating model tend to have significant inefficiencies and duplications in their processes, for example in HR and Payroll. This is largely due to the teams involved meeting their own goals but not aligning with the organization's goals of the organization. Police forces have a number of independent teams that are interdependent for data with finance in departments, divisions, and headquarters that send and receive information from each other and from the entire Force. The silo model leads to ineffective data received by the team who then have to do additional work to get the information needed.

While the arguments for development have been well-made in the context of decision making that moves closer to providing operational services, additional costs in terms of resources, duplication and inconsistent processes rarely appear in the debate. For the current financial climate, these costs need to be evaluated.

Culture

In the transactional process, leading financial functions will set targets for staff members every day. This target set is a metric-based cultural element that develops leading financial functions. If the right productivity and quality metrics are implemented and when these targets are challenging but not impossible, this is proven to result in increased productivity and quality.

The 'Best in Class' financial function in the Police will have a service-focused culture, with the main goal of providing a high level of satisfaction for its customers (departments, divisions, employees & suppliers). The 'Best in Class' financial function will measure customer satisfaction on time through a metric-based approach. This will be combined with a broad team focus on improving the process, with process owners, who do not have to be team leaders, who have a thorough improvement for each financial process.

Organizational Improvement

The organizational structure within the Police usually consists of leading team supervisors consisting of one to four team members. Through centralization and consolidation of financial functions, there is an opportunity to increase the range of controls to the best practice level from 6 to 8 team members to become a team leader/supervisor. By adjusting the organizational structure and increasing the range of controls, the Police Force can obtain significant cash benefits from reducing the number of team leads and lead teams can add a better management experience than managing a larger team.

The Best Function of Class Finance for Police Forces
The Best Function of Class Finance for Police Forces

Technology Enabled Enhancements

There is a large number of technological improvements that can be applied by the Police to help develop 'Best in Class' financial functions.

This includes:

A) Scanning and workflow

By adopting scanning and workflow solutions to replace manual processes, better visibility, transparency, and efficiency can be harvested.

B) Call recording, tracking and workflow tools

Police forces generally have a number of individuals who respond to internal questions and suppliers. This query is not recorded or tracked. The consequences of this are double:

  • Requests spend a lot of effort in certain financial teams. There is a high risk of duplication efforts from the lack of query queries. For example, requests can be responded to for 30 minutes by person A on the financial team. Because these queries are not recorded, if the individual submitting the query is called again and talks to different people then for only one additional question, this can take up to 20 minutes to ensure that the background is explained correctly.
  • Questions can have multiple interfaces with business. Unresolved requests can be responded to by up to four separate teams with substantial delays in providing clear answers to suppliers.


The implementation of call recording, tracking and workflow tools to document, measure, and close internal requests and suppliers combined with central query team settings, will significantly reduce the effort involved in responding to questions within the finance department and division, because as well as in the division and the actual department, and procurement.

C) database solutions

In all financial departments, there are a large number of spreadsheets used before they are incorporated into the financial system. There is a tendency to transfer information manually from one spreadsheet to another spreadsheet to meet the needs of different teams.

Replacing spreadsheets with a database solution will rationalize the number of inputs and lead to austerity efforts for frontline Police officers and Police Staff.

D) Customize reports

In obtaining management information from the financial system, police staff run a series of reports, import this into excel, use search to match data and apply pivots to describe data as needed. There are significant manual efforts involved in carrying out this work. Through adjusting reports, the output of the financial system can be set to provide the data in the format needed through the click of a button. This will benefit from reduced efforts and increased motivation for team members who have previously carried out these worldly tasks.

In designing, organizing and implementing tools that enable new technology, the Police Unit will face a number of challenges including investment agreements; IT capacity; ability; and procurement.

These challenges can be reduced by partnering with third-party service companies with whom investments can be shared, skills can be provided and the procurement cycle can be minimized.

The Best Function of Class Finance for Police Forces
The Best Function of Class Finance for Police Forces

Conclusion

It is clear that cultural, process and technological changes are needed if police forces want to provide sustainable efficiency and high-quality services. In an environment where for the first time troops face a real money deficit and must reduce the number of police and support the number of staff while maintaining current levels of performance, the current model of financial delivery requires new thinking.

Although there are a number of obstacles that must be overcome in achieving the best class financial function, it will not be long before such a decision becomes mandatory. Those in front of the curve will surely find themselves in a stronger position.

Rakesh Sangani is a Partner at Proservartner and focuses on transforming back office in the Police, Health, Local Government, and Professional Services.

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