E-commerce is so different from doing business in more traditional ways that
companies need to redesign their corporate finance functions to enable
e-business transformation, says a new industry study.
Many CFOs view their companies as lacking the necessary structure and culture
to effectively account for today’s changing e-business conditions, says the
report from Andersen Consulting in cooperation with the Economist Intelligence Unit (EIU).
The report
is entitled E-Commerce and the CFO: A framework for finance in the new
economy.
“Our survey, focusing on the impact of e-commerce on corporate finance,
indicates that many CFOs doubt the ability of traditional metrics to evaluate
key elements of operating in the new economy,” said Daniel T. London, a
partner in Andersen Consulting’s Finance and Performance Management group.
“The majority of corporations is still applying traditional business
evaluation techniques to e-business,”
he said.
Only 17 percent of survey respondents said new revenue/cost streams could be
accounted for “very effectively” by established processes. And despite these
concerns, 56 percent of respondents said they still apply traditional
techniques when considering capital investments.
The survey confirms that most companies are aligning their e-business
strategies with those of their traditional-economy businesses.
“E-commerce is changing the rules of the game and broadening the role of
financial officers,” said London. “New business models and innovative
technologies are requiring greater levels of finance leadership to ensure
long-term viability and success.
“Transforming brick and mortar companies to
e-commerce players requires CFOs to reassess their approach to capital
investment and rates of return. They are being asked to evolve at e-speed
and, in several instances, reorder their priorities.”
Illustrating just how dramatic the transition has been, 64 percent of
respondents said
their company has had an e-business strategy in place for two years or less.
In addition, 58 percent of respondents said that e-business strategy is
reviewed on an ongoing basis, rather than annually. The survey also shows
that by 2005, more than half of e-business initiatives will have a planning
cycle of less than one year.
The survey also found that e-commerce is driving the finance organization to
enhance
transaction processing, with an emphasis on “virtual” accounting, where
transactions are processed without human intervention.
There is an early sign
of this trend in the move by companies to close their books faster, and
perhaps, one day, virtually. Among the largest companies surveyed (with
revenues in excess of $10 billion), 43 percent hoped to implement a virtual
close by 2005.
The report is based on a global survey conducted by the Economist
Intelligence Unit (EIU) in cooperation with Andersen Consulting. The survey
covered 276 major corporations with a growing array of e-business
initiatives.
In addition, personal interviews were conducted with CFOs and
other senior finance executives at 35 companies in North America, Europe and
the Asia-Pacific region.
