When considering opportunities to optimize your finance organization, it is easy to fixate on quick wins that could accelerate close cycles, improve reporting capabilities, or cut overhead costs. However, if your goal is to build a new finance organization, implement a new ERP system, or generally position your organization for exponential growth, you cannot solely rely on quick or easy solutions. Slapping a Band-Aid on is not an option. You need to assess the entirety of your business—including the people, processes, data, and technology—to identify sustainable solutions and ensure your finance organizations’ long-term success.

Where do you start? With a target operating model.

A target operating model (TOM) is a tool that every finance professional should have in their arsenal. It is a blueprint that describes how your finance organization should deliver value by connecting your strategic vision with your business’s underlying services and capabilities.

Many finance organizations overlook the evolving needs of stakeholders and changes to priority, services, reporting cadence, and value that they would like from finance when a company is seeing growth, undergoing an acquisition, or changing ownership. Level-setting on the big picture is absolutely critical before trying to problem-solve and troubleshoot.

There are three key parts to every TOM:

1. The vision. Arguably a clear strategic vision is the most important part of any TOM transformation project. Well-defined objectives will help you identify where, when, and how the finance organization should support other critical business functions, such as sales or operations. This needs to be a long-term vision. Changing your organization’s strategic vision after a recent finance transformation could result in costly consequences. For example, if you designed your TOM around a B2B model and then change it to a B2C model, you will experience a tremendous impact on key business processes, as well as roles and responsibilities, across your organization, requiring a complete overhaul of your TOM.
2. Operating and engagement model. Once you have solidified your vision, you need to connect it with your business’s underlying finance capabilities and processes. This requires defining key service offerings, an operating model, and an engagement model for your finance organization. This is a unique opportunity for you to consider shared services centers and centers of excellence, as well as offshoring or outsourcing firms, to help reduce costs or complexities across your organization.
3. Organizational design. Finally, you need to make sure you design the finance organization around your defined vision, operating model, and engagement model. This step includes defining roles and responsibilities, as well as the required level of effort needed to deliver critical finance processes and capabilities.

Where you start largely depends on the size and maturity of your business. If you are a multinational corporation that already has a clear strategic vision, you can focus your efforts on your operating and engagement model or organizational design, ensuring these areas align with your existing vision. However, if you are a startup or changing your business’s core strategy, you want to focus on the vision, which will provide the foundation for your future finance organization.

Once you have addressed each of these areas, you should have an operating model that clearly defines what activities will be performed, where and by whom they will be performed, what activities will be shared, and how large the overall finance organization will be.

Now, all you have to do is implement!