The Five Levers of Finance Transformation

A structured approach to help you meet the challenges and reap the rewards of transformation in a fast-changing market.

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The time for transformation is now

With fierce competitive pressure and an increasing need to do more with less, organisations have to accelerate change by:

  • Aligning operating plans with strategic plans, and considering business outcomes, not just service level agreements (SLAs) and delivery.
  • Standardising and automating processes, moving from manual processes and paper-based activities to best practices, group policies and business rules.
  • Ensuring quality, control and compliance by documenting and measuring end-to-end process performance, and measuring results.
  • Reducing costs and working capital by reorganising decentralised operations, and focusing on business outcomes.
  • Improving efficiency and effectiveness by introducing a platform for scalable growth, as well as eliminating long cycle times, hidden bottlenecks and overloaded resources.
  • Focusing on end-to-end process governance, improving change management and adapting to meet evolving business goals.

The good news is that the finance transformation journey is not just about reducing cost, managing risks and improving quality. It’s also about value generation by maximising business outcomes. Focusing on the following five levers will help you achieve true transformation.

1. Service delivery models

A global operating model requires the strategic alignment of people, processes and technology, and finding the right balance between domestic, nearshore and offshore workforces. Companies must also decide how best to focus on their core business, and if using partners to deliver and support non-core functions can lead to greater value creation, scalability and speed.

New markets, new challenges

Entering new regions and markets represents a key challenge for organisations as they learn to deal with new business regulations, languages, currencies and cultures. But what’s worked in Europe and North America or elsewhere can’t simply be dragged and dropped into these new markets. One size doesn’t fit all, and the process of adapting is hard, especially if working with vendors or customers with less technical sophistication. Accessing a global talent pool isn’t always easy, either. Hiring talent can be challenging, especially in geographies where there’s high turnover – the exact opposite of what organisations are used to. Compared with a traditional 5 to 8 per cent, turnover could be as high as 15 to 30 per cent in new geographies. Yet, ramping up resources in new geographies may not be necessary if companies are investing in next €generation technologies such as software as a service (SaaS), business process as a service (BPaaS) or robotic process automation.

Core or non-core activities

Finance organisations should evaluate if they need to perform all of their non-core services for their organisation, customers and suppliers. With limited resources for the back office, CFOs need to assess how to get the greatest value from investment in finance processes, technology and people. Many CFOs search for the right balance between insourcing and outsourcing. They should ask themselves whether they need to employ people to perform basic, transactional processes like accounts payable, or outsource and take advantage of the expertise, scale and technology of an F&A business service provider. Organisations must find the right service delivery model that supports their business and operational strategy. It must factor in the complexities of global delivery, the impact of next generation technology and strategic alliances.

2. Policy and process enablement

Policy and process are key enablers to value creation. Organisations committed to finance and accounting transformation need to know how to achieve current best practices. To break down siloed thinking, executives need champions who are focused on end-to-end process optimisation and ownership. At the moment, there’s often a significant gap between best practices and reality. Functional leaders often optimise just their silo, which creates challenges upstream and/or downstream. So they’re actually sub-€optimising because they’re not taking an end-to-end view. For example, Source-to-Pay needs to be optimised for Procurement and Accounts Payable. The problem is that these two processes have potentially conflicting needs. A global process owner can take a look at the “greater good” of the whole process. When considering processes and policies, it’s important to consider an organisation’s “maturity scale”:

  • Chaotic, with poor process governance and intense manual work.
  • Reactive to alerts and events, with functional silos and low automation.
  • Dynamic, analysing trends, predicting and preventing issues, and understanding cross-department needs.
  • Transforming, with automated and integrated processes, and implementation of market trends.
  • State-of-the-art, with processes integrated with strategic goals, and a constant drive to innovate and set the pace.

The maturity level can be determined by looking at an organisation’s service performance, key performance indicators, degree of  best-practice adoption, industry or region-€specific requirements, full-time employees, use of global talent, technology deployed and overall costs.

3.   Technology

This is the key area to watch. Technology in the F&A arena has seen a huge amount of change at a very rapid pace, and is constantly evolving. Previously, technology decisions had a shelf life of five to eight years. Now, those decisions are constantly disrupted by new technologies and startups, niche software companies that challenge the established order – starting with Enterprise Resource Planning (ERP) systems.

The challenges with ERP

Post Y2K, ERP became the key core Finance asset, but we’re now seeing the emergence of a whole new breed of cloud, SaaS and BPaaS-based tools wrapping around ERPs, or even replacing these traditional systems. The problem with ERP systems is that they were built for historical data, not for real-€time business insight, productivity or ease of use. In a smartphone-tablet “app-filled” world, those features have become table stakes, even for business applications. If core technology platforms are not intuitive, easy to use, and focused on business insights, they won’t resonate with today’s leaders and workforce. CIOs, CFOs and CPOs know that there are big gains to be made if they get their technology strategy right, but they have to move past the idea that an ERP is the only solution. Those days are gone, and pursuing that path is typically costly, time-consuming and often misses the mark. Clearly, a more flexible and adaptable approach is needed. This can be achieved by complementing ERP systems with process enablement.

Process enhancement technology

Process enhancement technology is focused on a specific process area – for example, accounts payable, expense reimbursement or the Procure-to-Pay platform. The applications are agnostic and complementary to a company’s ERP. They integrate best practices into the standard application, improve productivity and bring core analytics and reporting that are not easily achieved with the ERP system. Most process enhancement technology is also cloud-based and can be purchased on a SaaS or BPaaS basis. Converting a capital expenditure into an operating expenditure can be very beneficial to back office functions that have to fight for investment against customer-facing, core processes. Process enhancement software developers often have the luxury of starting fresh. They do not have to drag older software platforms and versions to create the next generation of software. Instead, they:

  • Start with a blank sheet of paper.
  • Have a more narrow, but deep focus on a process or sub-process.
  • Develop robust applications that cost less than customising an ERP system or adding disparate repositories, databases, and home-grown tools to the ERP.
  • Design solutions that are user-friendly, with a look and feel that resembles consumer apps, rather than standard business-to-business applications.

The tech challenge: Are you ready?

Organisations often make big investments in technology that don’t reflect best practices. Instead of pinning all of their hopes on an ERP system, they should look at cloud and SaaS-based solutions. ERP systems are still necessary, but should be kept as thin as possible, with the focus placed on agile, leading-edge technology. CFOs, CIOs and CTOs need to embrace cloud solutions, which is where true finance transformation will occur.

Robotic process automation

The other key technology trend facing finance and accounting organisations is Robotic Process Automation (RPA).  A solid RPA strategy is a must for organisations that want to enter the next phase of touchless processing. Whenever possible, companies should invest to eliminate the root cause of exceptions and manual effort. However, replacing legacy systems can be time consuming and expensive. Using RPA technology to address ongoing symptoms can be beneficial for companies to continue their transformation. For example, in Accounts Payable (AP), the best approach is to have a clear digital strategy for eliminating paper vendor invoices, accompanied by the right technology and best practices and policies. But if a company can’t achieve that vision, then applying RPA technology to tasks like data entry or process exceptions might be the next best strategy. Careful consideration of short-term wins versus longer-term technology investment should be balanced. No one answer fits everyone, but understanding the power of RPA and having a clear technology strategy is critical.

4.   Data and analytics

In a world of big data, there’s certainly no shortage of metrics. But measurement without vision and strategy means you end up with lots of data and little insight. Organisations need to decide what they’re trying to achieve with analytics, and understand that this is not an additive process where you measure everything. Measurement should bring focus. Without a measurement strategy, you risk overloading users with data, cause ”analysis paralysis,” and create data warehousing and analytics projects that become costly and never influence the right behaviour. To help define analytics strategy and guide analytics programmes and investments, some companies are moving to master data Centres of Expertise. These COEs pull analytics out from processes, and bring key master data experts to guide the company’s strategy. Historically it’s hard to extract data for analytics, so data warehousing and cross functional/process analytical programmes are important. However, as companies embrace next-generation process enhancements, often these new software applications have significantly improved process level analytics. Standard reporting and analytical dashboards are part of the core product. CFOs and CIOs need to watch the impact of analytics at the process level on corporate-wide analytic programmes and tools.

5.   People and talent

The one constant is change and, in the end, having the right people and talent is key. Helping your employees navigate through new service delivery models and technology options requires a strategy that’s in lockstep with your vision. Constantly analysing your workforce is an important step, and change management is a big part of this. How do you help people embrace and manage through change? As you move toward broader global strategies, global teams, and the use of third-€party service providers or other alliance partners, roles and responsibilities can become muddled. But leadership and management may not be willing to give up their past roles, responsibilities and decision rights. This can put programmes at risk. One change in particular is too big to ignore, because it will fundamentally change the way you operate.

Enter the millennials

The arrival of the millennial workforce brings with it a whole new paradigm. Millennials have strong opinions and job-hop frequently. They don’t like and won’t embrace old-school technology, so in the very near future, business apps must be more like consumer apps. They’ll also have to offer strong mobility functionality because the millennial workforce challenges the old office desktop paradigm. Companies that don’t deploy cutting-edge technology won’t attract and retain top talent. It’s important to remember that millennials will be the decision makers in less time than you think, so the time to adapt is now.

Transformation starts right here

Transformation requires a radical rethink of the ways in which people, processes and technology can work together. And these five key levers give you a comprehensive approach. Now is the time for action – for finance and accounting transformation. Those who seize the moment and transform will see significant gains. Those who don’t may not get a second chance. Talk to us

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