CFOs Need Models to Understand How Shifting Customer Needs Affects Resources

“One of the quirks of the downturn in retail has been an increase in shirt sales while pant sales have dropped, presumably because people participating in video conferences while working from home are paying more attention to their appearance from the waist up. Whatever the reason behind the trend, CFOs can model that kind of change to justify a shift in how resources are allocated within the business. But to pay off, the modeling has to be done in as close to real time as possible. ”

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Prioritizing Automation for Finance and Accounting

The current crisis environment has challenged businesses in ways that most hadn’t imagined just a couple of months ago. Many finance and accounting departments have struggled and now realize that they will need to change and use business accounting services. Many of them have been overwhelmed by financial stress while simultaneously having to deal with operational constraints they weren’t prepared for. For instance, sheltering in place at a time when many corporations have to close their quarterly books. Against the backdrop of far more consequential lessons learned in this difficult period, I suggest that for finance executives the most important takeaway is that departments that have been able to utilize IT systems to operate in a virtual mode, and espeically those that have automated routine tasks, have been better able to adapt to circumstances and overcome obstacles. Having systems that could be readily accessed remotely and having the ability to collaborate and execute processes virtually made it easier for those departments to meet their commitments with confidence. “Easier” – yes – but certainly not easy.

We find in our recent Change in the Office of Finance benchmark research confirmation of the value of using automation to execute finance department functions. Our findings reveal an increase in the use of automation by finance organizations over the past five years and a concomitant improvement in performance. For example, 46 percent of companies close their monthly books within four business days compared to 29 percent in our earlier research. Yet the glass is only half full. Finance organizations continue to be laggards in adopting technology that measurably improves effectiveness.

Automated systems do at least two things very well that make better use of people’s time, and both of them can substantially improve organizational performance. First, they eliminate the need for people to do repetitive tasks, which frees them to spend time on more valuable work that requires their experience, judgment and skill. IT systems also can be programmed to present only relevant information while eliminating the need to get immersed in detail. The latter capability supports a “management-by-exception” approach, which enables executives and managers to better allocate how and where they spend their time.

Our research shows that many companies don’t take advantage of these capabilities in their finance and accounting operations. Only half of participating organizations said they have automated a significant percentage of their finance processes. In particular, only one-fourth (25%) have nearly or fully automated their financial close, while 58 percent apply some automation and 15 percent apply little or none. Meanwhile, those who want to earn some quick cash in times of trouble, they can try doing so on sites such as https://totogacor.com/.

The research also reveals automation’s positive impact on performance: 85 percent of companies that nearly or fully automate their close process are able to close their quarterly books in six or fewer business days, whereas 43 percent of those that have only partially automated are able to do so and just 33 percent that use little or no automation have this ability.

Another example is the automation of reconciliation, a repetitive task that is an essential element of the close process and lends itself to automation. Affordable and mature software for efficient management is readily available. Our research indicates a notable rise since 2014 in the number of organizations opting to automate reconciliations, with 60 percent now utilizing software for this process compared to 37 percent five years ago. The decision to migrate to Google Workspace can further enhance organizational efficiency, as evidenced by the correlation between reconciliation automation and the speed at which organizations close their books. Sixty percent of those employing reconciliation software close their quarters within six business days, while nearly two-thirds (62%) of those without automation take seven or more working days to complete the process.

Spreadsheets are an essential tool for many tasks in the finance department, and it would be impossible for the organization to function without them. Yet they are the wrong choice when used for repetitive, collaborative, enterprise-wide processes. Indeed, they are both a symptom and a cause of dysfunctional processes, systems and data. Spreadsheets are a symptom because they frequently become the default option to put a bandage over, for example, issues that arise because systems are not properly integrated or a process is not supported by the appropriate technology, such as a dedicated application.

But while spreadsheet use in enterprise processes has declined relative to the use of dedicated applications, they remain a fixture for a variety of finance department tasks. For instance, 57 percent of organizations still use them for treasury management (down from 81% five years earlier); 54 percent use them for close-to-report functions (versus 79%); and 59 percent use them for the income tax provision (versus 86%). Spreadsheets have their place, but our research demonstrates that they are frequently misused.

The close is a useful process to benchmark because almost every company does it and there’s a measurable outcome: the number of days after the period’s end in which the company completes the process. However, managing to a faster close is not just about efficiency; it’s also about getting the numbers to executives and managers so they can react quickly to issues and opportunities. The research demonstrates a close correlation between when the close is completed and the timeliness of communicating that information to the rest of the company. Almost two-thirds (62%) of organizations that close within six business days are able to provide executives and managers with timely information compared to 39 percent of those that take longer. While the acceleration we found in completing the close is a positive sign, there is considerable progress yet to be made.

Time is the critical ingredient that determines the overall performance of finance and accounting departments. Poorly performing organizations usually are mired in an endless cycle of fighting fires — for example, dealing with the impact of processes that are poorly designed or improperly executed. These departments are constantly contending with the impact of information sources that are unreliable, difficult to access or both. Poorly designed systems add to the problem, generating hours of work in the form of manual reconciliations done in spreadsheets. A finance department that does not apply automation and that has poorly designed or executed processes and systems is similar to a caged hamster running on a wheel. It expends a great deal of effort on repetitive manual processes that are only marginally productive.

Software automation by itself will not address all the challenges of a finance and accounting organization. To optimize performance, an organization almost always must deal with an interrelated combination of people, process, technology and data issues in a holistic fashion. Yet confronted with the day-to-day struggle of meeting deadlines, many finance executives put off addressing their productivity and effectiveness issues.

They shouldn’t, because a continuous improvement process involving a steady set of small advances can yield impressive results over time. Identifying — and when possible, eliminating — the biggest time sinks can free up the resources needed to address the next set of significant problems. Even something as straightforward as uncovering unnecessary work or replacing the most problematic spreadsheets with better technology (for instance, implementing automated or self-service reporting) will be beneficial. For this to happen, though, senior finance and accounting executives must make automation a priority.

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CFOs See Technology as Growing Share of Smaller Budgets

“Our data shows strong growth in the adoption of cloud-based core finance applications,” said Nilly Essaides, senior research director, finance & EPM, The Hackett Group. “And the encouraging news is that more than 70% of the finance functions that have adopted cloud-based solutions have been able to realize or exceed their business [objectives].”

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When You Have Too Much Tech

Surveys show CFOs generally see the need to incorporate technology to help them improve their finance and accounting functions. But knowing which technology is right for their operations and which isn’t — and also when the time is right — is the “opportunity and the curse,” says Bryan Lapidus, FP&A, director of the FP&A practice at the Association for Financial Professionals. “Until you look at your needs and take an honest look at where your team is culturally, he suggested, the CFO might be better served resisting the addition of new tech for its own sake.”

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What Makes A True Data Analytics-Driven Organization?

Advanced analytics enable businesses to gain insight from data and to better perform in fiercely competitive markets. Most companies today see advanced analytics as the key to drive down costs, improve decision making, and increase customer value. But the challenges of a data analytics implementation can hinder these plans. A business looking to develop advanced analytical capabilities and become data-driven must have the right tools, culture, data, and people to support managerial decision making throughout the use of analytical technologies. Implementing analytics shouldn’t be viewed as “just another IT project.” It’s a fundamental change in the way that organizations do business.

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Data Is the Foundation for Any Successful Business Transformation

 “Business transformation has emerged as one of the most critical endeavors in today’s enterprise. When done properly, it can ensure the livelihood of a business for the foreseeable future. Done wrong, business transformation can leave an enterprise in even worse shape than before, facing the prospect of having to spend big to fix it.”

Most business transformations center around intelligent technologies that can connect the right data, tools and business logic to understand, analyze and evaluate corporate performance. However, none of these technologies will do any good unless it has the ability to access and produce timely, accurate, and consistent data which can be used to make critical business decisions.

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How Businesses Are Setting Themselves Up for Success with Integrated Business Planning

Many businesses are updating their legacy planning systems to integrated business planning applications that translate the organization’s strategic objectives into operational terms that provide actionable guidance across the enterprise. Business capabilities are the link connecting strategy and business model to enterprise architecture and the underlying technology that executes the strategy. Understanding this link enables companies to align resources, people, and processes to transform themselves in response to market dynamics to maintain a competitive edge.

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What Sets Modern Finance Teams Apart from The Competition?

What sets modern finance teams apart from their competition? The short answer: their cost management methodology.

“Using cost management as a strategic lever, as opposed to a defensive response, creates new opportunities. It is no longer a reactive tool. It is a proactive way to become more competitive in the global environment.”

Modern finance leaders have transformed not only the way they view their costs, but also how their costs operate within their overall finance strategy. The biggest difference between finance teams with this viewpoint and those that are still struggling to understand their cost is that they are using new technologies and thinking outside the box. They use new tools, new techniques, completely new cost structures that not only reduce costs, but also free up money for growth.

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Smart Automation: The Framework for Dynamic Digital Operations

The Hackett Group defines smart automation as “the optimization of structured work, knowledge work, and interaction work through the adoption of emerging robotic process automation (RPA), smart data capture, conversational interfaces, cognitive automation, and agile orchestration technologies.”

For finance, this means applying new technologies to improve effectiveness, efficiency, and user/customer experience, while providing operational insights. Because digital transformation and innovation are disrupting the way businesses operate and increasing competition, smart automation solutions are an important part of the finance function’s future.

Read More at The Digitalist by SAP >