Back-Office Transformation at Energy and Utilities Firms Builds Success

Christopher Baumgartner, Managing Director Business Performance Improvement
Matt Warren, Director Business Performance Improvement

Forward-thinking energy and utilities (E&U) leaders recognize that their company’s future success in a rapidly changing industry hinges on financial readiness as much as operational excellence.

Why it matters: E&U companies that wait too long to modernize their back office run the risk of encountering obstacles that could delay their transaction and growth goals — or derail them completely.

Pressure to prepare: Many E&U companies are already facing pressure from the private equity firms, investors and banks with active management roles in their companies to shore up their back office — and high expectations for seeing intuitive management reporting and return on investment within very short timelines.

Bottom line: Whatever goals an E&U firm may have for future sustainability and growth, back-office transformation is becoming a strategic necessity for achieving them.

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The energy industry is undergoing significant transformation, and one of the greatest drivers is the global push toward sustainability, which is reshaping traditional energy models. In response, E&U firms are stepping up investments in sustainable energy and positioning for strategic transactions that can help them grow in a fast-evolving landscape. But many are realizing they can’t achieve their goals without first transforming from within — that is, they must modernize their entire back office, from finance and accounting to IT to human resources (HR).

As investments in sustainable energy accelerate, E&U companies are seeing increased opportunities for private capital transactions and mergers and acquisitions (M&A). These moves can help shorten the path to accessing proven renewable assets, expanding into new markets, acquiring specialized talent and technology, and more. Some firms, watching for positive signs in the initial public offering (IPO) market, are also considering embarking on a public readiness journey soon.

Whatever goals an E&U firm may have for future sustainability and growth, back-office transformation is becoming a strategic necessity for achieving them. Companies must be prepared to launch business performance improvement and back-office modernization projects across areas such as record to report, procure to pay and order to cash. More than likely, they will also need to align external resources and expertise to undertake these crucial initiatives.

The Benefits of Bringing Back-Office Optimization to the Forefront

Taking a deep dive into back-office transformation isn’t easy, especially for E&U firms that are laser-focused on operations. And many do have an operations-first mindset, given that investments in infrastructure, technology and processes are key to helping them deliver services to their customers efficiently. It can also be challenging for high-growth firms to suddenly have to flip the switch from operating in a less structured startup mode to ensuring that their back office is well-staffed, high-functioning, and capable of reporting accurate and timely results.

Forward-thinking E&U leaders recognize that their company’s future success in a rapidly changing industry hinges on financial readiness as much as operational excellence. Robust transformation of the entire back office, from finance to supply chain operations, helps firms ensure they won’t be caught off guard when transaction opportunities arise. Rather than scrambling to address back-office inefficiencies in the eleventh hour, they can move proactively and confidently, knowing they can meet the demands of due diligence, investor scrutiny and regulatory compliance from day one.

On the flip side, E&U companies that wait too long to optimize their back office run the risk of encountering obstacles that could delay their transaction and growth goals — or derail them completely. Financial reporting gaps, misaligned human resources or poorly integrated IT systems could raise red flags for potential investors or buyers during due diligence procedures. By evaluating their back office early and thoroughly, companies can demonstrate both operational and financial readiness, which inspires investor confidence and helps expedite the timeline for transactions and operations integration.

Indeed, many E&U companies are already facing pressure from the private equity firms, investors and banks that have active management roles in their companies to shore up their back office — and high expectations for seeing reporting and returns on very short timelines. Here are some ways that back-office transformation can drive value for E&U businesses and, ultimately, their stakeholders:

  • Automation and standardization of routine tasks: The automation of manual or routine processes like AP/AR reduces error rates and allows the finance team to focus on more strategic and value-adding initiatives for the business, like cash flow analysis and profitability assessments.
  • Faster, data-driven decision-making: With access to accurate, real-time financial data, company leadership can make more informed decisions quickly. Quality management reporting capabilities is more critical than ever in an industry like energy that is not only volatile but also requires real-time decision-making.
  • Enhanced operational efficiency: Instituting standardized processes across the finance function can lead to greater efficiency, reducing the time needed to close the books and ensuring that financial reporting is repeatable and reliable. Many E&U businesses are also optimizing their legal business processes to help drive operational excellence further.
  • Improved accuracy and scalability of critical internal systems like ERP: Back-office transformation plays a pivotal role in enhancing enterprise resource planning (ERP) system operations by streamlining processes, improving scalability, increasing accuracy and enabling better integration of critical functions. It also ensures that ERP and other internal systems can handle the increased complexity and reporting requirements that come with transactions like M&A.

Back-Office Transformation Is a Team Effort

The time for an energy and utilities company to pursue back-office transformation is before a transaction opportunity arises — not when it is already on the table. The good news is that findings from Protiviti’s latest Executive Perspectives on Top Risks Survey indicate that many firms are comfortable with the idea of proactively pursuing major change initiatives.

For several years, resistance to change ranked among the top 10 risks for the energy industry. But the threat dropped out of the top 10 this year and fell to the 22nd spot on 2034’s list of top risks. As noted in a post about these and other survey findings, we believe that these downward moves suggest that E&U firms now recognize they must adapt to become more operationally efficient and sustainable.

Even so, a higher appetite for change isn’t enough to make it happen. Many E&U companies may not have the skilled resources available in-house to support their plans for back-office transformation — including setting up and managing a project management office (PMO) to help them drive and manage change effectively. Additionally, there is risk in devoting top team members to these projects, as it takes them away from other top priorities that boost the bottom line.

Energy and utilities businesses can cover critical skills gaps and pursue back-office transformation while keeping core staff focused on what they do best through investments in financial readiness, including the strategic use of Protiviti consulting and Robert Half staffing solutions.

Protiviti provides customized solutions and teams to help companies respond to challenges and transform their operations without overburdening their employees. Learn more about our Managed Solutions offerings here.

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