As a youth basketball coach, the most frustrating skill to teach kids is how to play defense.  Actually, that's not quite correct - the most frustrating skill to teach is wanting to play defense.  Afterall, defense is not as "fun" as offense and playing good defense makes you tired.  This was exactly my son's attitude ... until this season.  Now he loves playing defense.

What changed?

Kevin Garnett came to the Celtics.  Tom Thibodeau was hired as the Defensive Assistant Coach.  The whole team bought into playing hard defense.  Who knew Paul Pierce could play such great defense???  The Celtics transformed into a defensive machine.

"I want to play defense like KG!"  I overheard my son telling a teammate at practice the other night .  Ahhh, sweet music to my basketball junkie ears --  talk about making a youth basketball coach's job easy!  I tried to preach defense till I was blue in the face.  The kids just didn't care ... until this magical Celtics season where defense has been THE focal point.

With the crowd deliriously chanting, "DEE-FENSE, DEE-FENSE, DEE-FENSE!," The Celtics won their 17th NBA championship last night. With their maniacal, suffocating team defense, the poor Lakers didn't stand a chance.

In the business world, great defense is about managing risk with strong internal controls.  My high school basketball coach always used to say that great offense starts with great defense. Similarly, strong internal controls (i.e. defense) optimizes business performance (i.e. offense).  Here's another way to think about it -- controls are like car brakes.  Cars have brakes so that they can go faster.  If a sports car didn't have brakes, how fast could it really go?  Strong internal controls, like brakes, allows a business to put the foot on the accelerator and compete aggressively.

The issue, of course, is that compliance costs, on average, have added $200K per billion in revenue to the cost of finance since SOX ... unless you are a world class company in which case, finance costs continue to go down as a percentage of revenue (Hackett Book of Numbers Insight, Dec. 2007)

So what are these world class companies doing to strengthen controls while keeping a lid on control costs?  4 things, they are:

• Centralizing and simplifying processes: Shared services is the best way to centralize processes and reduce costs.
• Leveraging technology: Leading companies leverage technology to have fewer ERP systems and minimal duplication of data. For example, having a single vendor master file and a single chart of accounts (which is easy if you have a single ERP system) allows you to have a single source of the truth which is critical for financial data.
• Automating controls: Average companies also perform a LOT more manual control activities than leading companies which means they are operating with an unnecessary level of risk.
• Using more preventative controls: Leading companies have more preventative controls. Of course an environment where deficiencies are prevented in the first place is more desirable and much less expensive than having to detect problems after the fact.

All of these points are especially true in Accounts Payable.  World-class AP organizations have strong internal controls that don't increase operating costs and don't sacrifice service levels.  If you believe the experts, this is only possible through automated, preventative controls that leverage technology -- automated routing of approvals, real-time enforcement of segregated duties at the transaction level, comprehensive audit trails that track ALL invoice touches, etc.

Just like great defense wins championships, strong internal controls enable world-class performance.

The final score last night was: 

131-92.

No, that's not a typo.  That score truly exemplifies that great DEE-FENSE leads to great offense.

-Rakesh

P.S.  for more information about strengthing internal controls & preventing fraud check out our February webcast with Nat Goodman titled "Preventing Procure-to-Pay Fraud - 5 Vulnerable Processes"

P.P.S.  If you want to see an example of probably the worst defense in the history of professional basketball, check out this clip from Game 4 of the NBA finals.  Heck, most 11 year olds play better defense than Laker guard Sasha Vujacic does here!