We envision a digitally enabled finance function that leverages the cloud for its systems and uses advanced analytics and artificial intelligence to provide strategic insights for the organization’s leadership. These capabilities are supported by organizational agility and a modern, flexible workforce.
Many finance organizations still have a long way to go to reach this goal. But the disruptions caused by COVID-19 have only underscored the urgency for finance organizations to move toward this vision.
Since the virus outbreak, finance, like every other part of the business, suddenly had to work remotely in response to stay-at-home orders. This change greatly complicated critical tasks, like finalizing monthly and quarterly financial reports usually performed by centrally located staff. While many finance organizations were able to complete a “virtual close,” their ability to analyze data and its impact on the business was hampered. But with cloud-based tools and systems, automation, and advanced analytics, they could have run a multitude of forecasts and scenarios.
While COVID-19 was a major unexpected event, disruption is everywhere and occurring at unprecedented speed in today's market. We’re seeing new business models, changing customer and employee expectations, the convergence of industry models, rapidly developing innovation, and new regulatory and social demands, to name a few.
Finance is ultimately affected by every one of these disruptions, and because of them, the expectations of finance will drastically change. To address these disruptions, finance organizations will need to pursue an agenda that includes adopting new processes and technologies which will help guide the creation of the finance of the future.
The CFO agenda
This agenda is built around six interrelated pillars:
- Strategy and value management: Finance must continuously balance how it preserves, protects, and creates value for the enterprise. That means preserving and protecting value by increasing speed and quality of delivery, mitigating risks, and maintaining compliance. while creating value by enabling strategy and innovation and leading enterprise performance through profitability and cost management, business planning analytics, resource planning, and optimizing working capital.
- Extreme automation: Finance will need to transform its organization so that every day, transaction-oriented activities are automated as much as possible. These technologies will include robotic process automation, artificial intelligence, advanced analytics, and ultimately augmented reality, blockchain, and quantum computing.
- Data strategy and governance: Finance will need to establish a foundational data strategy and culture to drive and deliver desired business outcomes. Finance also will need to invest in its data structure and architecture and analytics. This includes an enterprise-wide data ecosystem integrating multiple sources: automation to increase the speed and quality of insights, and data delivery tailored to optimize the employee and customer experience.
- Organizational agility: Finance will need to modify their organization to be more agile, flatter, and easier to work with—for example, continuously transforming their service catalog, delivery model, and workforce to meet changing requirements.
- Modern workforce: With these changes in technology and organization, finance will have to recruit new talent with modern skills and competencies, such as analytics and higher-level programming.
- Risk and compliance: Finally, the CFO agenda demands a transformation of risk management that supports—rather than hinders—innovation.
To be sure, finance functions face challenges as they work to become digitally enabled. Many are facing budget constraints and are unable to move forward with plans to replace legacy systems. However, these concerns need to be weighed against the increasing costs to maintain these older systems and the fact that digital transformation will drive performance and lower costs. Additionally, implementing this agenda will require a culture change, and some may be resistant to this new way of thinking.
Nevertheless, the CFO is becoming a strategic influencer, if not a strategic leader, in many companies. Having digitally-enabled insights will only enhance finance’s ability to provide key data and information to guide leadership toward decisions that add value and spur growth.
- Here are some questions to get your thinking started about your journey toward the future of finance.
- How can we increase the focus on value creation for the enterprise?
- How are we utilizing digital solutions to enable profitable growth?
- What key business questions do we struggle to answer quickly?
- How does our data strategy enable the needs of the business, our customers, and our teams?
- What operating model changes are needed to adapt to changing requirements quickly?
- What critical skills and competencies are needed to elevate finance’s role?
The economic challenges brought about by COVID-19 may make some organizations hesitant to invest in digital finance transformation. But experience has shown that companies that prepare during a downturn are better positioned to succeed when conditions turn positive. So, business, as usual, is no longer an option. The time to begin making changes is now.
Case study: Refining profitability data
A consumer-products company was able to gauge their overall customer and product profitability, but they couldn’t drill down by individual product, customer, and geography.
We worked with the company to restructure their underlying data to redefine what they meant by customer, product, etc. We put standards in place to drive that consistency and changed their technology platform.
With these changes, they were now able to determine their P&L by customer, product, and geography. That allowed them to identify specific metrics, like their top 10 customers or bottom 10 customers, and provide their sales teams with data they could use to negotiate better deals with their customers. This kind of data analytics can enable finance to better work with the CEO and COO to make decisions that can drive the organizations profitability.
Case study: Automation
While doing its monthly close, a financial-services company posted journal entries up to 13 times in 13 different places across all its platforms.
Working with the company, we revised their journal-entry process so that when each entry was posted, it contained all of the data required to support reporting around regulatory, legal, and management requirements, and that all of the data was capture at one time, eliminating the need for repeated entries.
We also discovered that their investment traders weren’t as careful as they needed to be when recording their transactions. We helped the company install an anomaly-detection program into the trading system. Now, if an investment product that never trades in lots over 10,000 was detected in a transaction of 100,000, the system was able to catch and correct the entry before it went into the data supply chain. The final piece was to automate the submission to the gap reporting system.