Finance

For Police Force, Best in Class Finance Functions

9 Mins read

Background

Police funding has risen by £4.8 billion and 77 percent (39 percent in real terms) since 1997. However, the days where forces have enjoyed such levels of funding are over.

Financing

Chief Constables and senior management NetWork Posting recognize that the annual cycle of looking for efficiencies year-on-year is not sustainable and will not address the cash shortfall in years to come.
Facing slower funding growth and real cash deficits in their budgets, the Police Service must adopt innovative strategies that generate the productivity and efficiency gains needed to deliver high quality policing to the public. The step-change in performance required to meet this challenge will only be achieved if the police service fully embraces effective resource management and makes efficient and productive use of its technology, partnerships, and people. The finance function has an essential role in addressing these challenges and supporting Forces’ objectives economically and efficiently.

Challenge

Police Forces tend to nurture a divisional and departmental culture rather than a corporate one, with individual procurement activities that do not exploit economies of scale. This is partly the result of over a decade of devolving functions from the center to the. Divisions. To reduce costs, improve efficiency and mitigate against the threat of “top-down” mandatory, centrally-driven initiatives, Police Forces need to set up a corporate back office and induce behavioral change. This change must involve compliance with a corporate culture rather than a series of silos running through the organization.

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Developing a Best in Class Finance Function

Traditionally finance functions within Police Forces have focused on transactional processing with only limited support for management information and business decision support. With a renewed focus on efficiencies, there is now a pressing need for finance departments to transform to add greater value to the force but with minimal costs.

1) Aligning to Force Strategy

As Police Forces need finance to function, finance and operations must be closely aligned. This collaboration can be compelling and help deliver significant improvements to a Force, but there are many barriers to overcome to achieve this model. Finance Directors must look at whether their Force is ready for this collaboration, but more importantly, they must consider whether the Force itself can survive without it. Finance requires a clear vision that centers around its role as a balanced business partner. However, to achieve this vision, a huge effort is required from the bottom up to understand the significant complexity in underlying systems and processes and devise a way forward to work for that particular organization.

The success of any change management program is dependent on its execution. Change is difficult and costly to execute correctly, and often, Police Forces lack the relevant experience to achieve such change. Although finance directors are required to hold appropriate professional qualifications (as opposed to being former police officers, as was the case a few years ago), many have progressed within the Public Sector with limited opportunities for learning from and interaction with best in class methodologies. Also, cultural issues around self-preservation can present barriers to change. Whilst it is relatively easy to get the message of finance transformation across, securing commitment to embark on bold change can be tough. Business cases often lack the quality required to drive through change, and even where they are of exceptional quality, senior police officers often lack the commercial awareness to trust them.

2) Supporting Force Decisions

Many Finance Directors are keen to develop their finance functions. The challenge they face is convincing the rest of the Force that the finance function can add value by devoting more time and effort to financial analysis and providing senior management with the tools to understand major strategic decisions’ financial implications.

Maintaining Financial Controls and Managing Risk

Sarbanes-Oxley, International Financial Reporting Standards (IFRS), Basel II, and Individual Capital Assessments (ICA) have all put financial controls and reporting under the spotlight in the private sector. This, in turn, is increasing the spotlight on financial controls in the public sector. A ‘Best in Class’ Police Force finance function will have the minimum controls to meet the regulatory requirements and evaluate how the legislation and regulations that the finance function are required to comply with can be leveraged to provide value to the organization. Providing strategic information that will enable the force to meet its objectives is a key task for a leading finance function.

Force

3) Value to the Force

The drive for development over the last decade or so has moved decision-making to the Divisions and has led to an increase in finance function costs. By utilizing several initiatives in a transformation program, a Force can leverage up to 40% of savings on the cost of finance and improve the responsiveness of finance teams and the quality of financial information. These initiatives include:

Centralization

By centralizing the finance function, a Police Force can create excellence centers where industry best practices can be developed and shared. This will re-empower the department, creating greater independence and objectivity in assessing projects and performance and leading to more consistent management information and a higher degree of control. A Police Force can also develop a business partner group to act as strategic liaisons to departments and divisions. The business partners would, for example, advise on how the departmental and divisional commanders can meet the budget in future months instead of merely advising that the budget has been missed for the previous month. With the mundane number crunching being performed in a shared service center, finance professionals will find they now have time to act as business partners to divisions and departments and focus on the strategic issues. The cultural impact on the departments and divisional commanders should not be underestimated. Commanders will be concerned that:

o Their budgets will be centralized
o Workloads would increase
o There will be limited access to finance individuals
o There will not be on-site support

However, if the centralized shared service center is designed appropriately, none of the above should apply. In fact, from centralization under a best practice model, leaders should accrue the following benefits:

o Strategic advice provided by business partners
o Increased flexibility
o Improved management information
o Faster transactions
o Reduced number of unresolved queries
o Greater clarity on service and cost of provision
o Forum for finance to be strategically aligned to the needs of the Force

A Force that moves from a decentralized to a centralized system should ensure that the finance function does not lose touch with the Chief Constable and Divisional Commanders. Forces need to have a robust business case for finance transformation combined with a governance structure that spans operational, tactical, and strategic requirements. There is a risk that the potential benefits of implementing such a change may not be realized if the program is not carefully managed. Investment is needed to create a successful centralized finance function. Typically the future potential benefits of greater visibility and control, consistent processes, standardized management information, economies of scale, long-term cost savings, and an empowered group of proud finance professionals should outweigh those initial costs. To reduce the commercial, operational, and capability risks, the finance functions can be completely outsourced or partially outsourced to third parties. This will provide guaranteed cost benefits and may provide the opportunity to leverage relationships with vendors that provide best practice processes.

Process Efficiencies

Typically for Police Forces, the focus on development has developed a silo-based culture with disparate processes. As a result, significant opportunities exist for standardization and simplification of processes that provide scalability, reduce manual effort and deliver business benefit. A force can typically accrue a 40% reduction in the number of processes from simply rationalizing processes. An example of this is using electronic bank statements instead of using the manual bank statement for bank reconciliation and accounts receivable processes. This would save considerable effort in analyzing the data, moving the data onto the different spreadsheets, and inputting the data into the financial systems.

Organizations that possess a silo operating model tend to have significant inefficiencies and duplication in their processes, for example, in HR and Payroll. This is largely due to the teams involved meeting their own goals but not aligning to an organization’s corporate objectives. Police Forces have some independent teams that rely on one another for data with finance in departments, divisions, and headquarters sending and receiving information from each other and the rest of the Force. The silo model leads to ineffective data being received by the teams that then have to carry out additional work to obtain the information required. Whilst the argument for development has been well made in the context of moving decision-making closer to operational service delivery, the added cost in terms of resources, duplication, and misaligned processes has rarely featured in the debate. In the current financial climate, these costs need to be recognized.

Culture

Within transactional processes, a leading finance function will set up targets for staff members daily. This target setting is an element of the metric based culture that leading finance functions develop. If the appropriate metrics of productivity and quality are applied and when these targets are challenging but not impossible, this is proven to improve productivity and quality. A ‘Best in Class’ finance function in Police Forces will have a service-focused culture, with the primary objectives of providing a high level of satisfaction for its customers (departments, divisions, employees & suppliers). A ‘Best in Class’ finance function will measure customer satisfaction on a timely basis through a metric based approach. This will be combined with a team-wide focus on process improvement, with process owners will not necessarily be the team leads, owning force-wide improvement to each of the finance processes.

Organizational Improvements

Organizational structures within Police Forces are typically made up of supervisors leading teams of one to four team members. Through centralizing and consolidating the finance function, an opportunity exists to increase the span of control to best practice levels of 6 to 8 team members to one team lead/supervisor. By adjusting the organizational structure and increasing the span of control, Police Forces can accrue significant cashable benefit from a reduction in the number of team leads, and team leads can accrue better management experience from managing larger teams.

Technology Enabled Improvements

A significant number of technology improvements that a Police Force could implement to help develop a ‘Best in Class’ finance function.

These include:

A) Scanning and workflow

Through adopting a scanning and workflow solution to replace manual processes, improved visibility, transparency, and efficiencies can be reaped.

B) Call logging, tracking, and workflow tool

Police Forces generally have several individuals responding to internal and supplier queries. These queries are neither logged nor tracked. The consequence of this is dual: o Queries consume considerable effort within a particular finance team. There is a high risk of duplicated effort from the lack of logging of queries. For example, a query could be responded to for 30 minutes by person A in the finance team. Due to this query not being logged, if the individual that raised the query called up again and spoke to a different person, then just for one additional question, this could take up to 20 minutes to ensure that the background was appropriately explained.

police

o Queries can have numerous interfaces with the business. An unresolved query can be responded to by up to four separate teams with considerable delay in providing a clear answer for the supplier. The implementation of a call logging, tracking and workflow tool to document, measure, and close internal and supplier queries combined with the set up of a central queries team would significantly reduce the effort involved in responding to queries within the finance departments and divisions, as well as within the actual divisions and departments, and procurement.

C) Database solution

There are many spreadsheets throughout finance departments utilized before input into the financial system. There is a tendency to transfer information manually from one spreadsheet to another to meet the needs of different teams. Replacing the spreadsheets with a database solution would rationalize the number of inputs and lead to effort savings for the front line police officers and police staff.

D) Customize reports

In obtaining management information from the financial systems, police staff runs a series of reports, imports them into excel, uses lookups to match the data, and implements pivots to illustrate the data as required. There is a significant manual effort that is involved in carrying out this work. Through customizing reports, the financial system’s outputs can be set up to provide the data in the formats required through the click of a button. This would have the benefit of reduced effort and improved motivation for team members that previously carried out these mundane tasks. In designing, procuring, and implementing new technology-enabling tools, a Police Force will face several challenges, including investment approval, IT capacity, capability, and procurement. These challenges can be mitigated through partnering with a third party service company with whom the investment can be shared, the skills can be provided, and the procurement cycle can be minimized.

Conclusion

Cultural, process, and technology change is required if police forces deliver both sustainable efficiencies and high-quality services. In an environment where for the first time, forces face real cash deficits and face having to reduce police officer and support staff numbers whilst maintaining current performance levels, the current finance delivery models require new thinking.

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