The COVID-19 pandemic has sharply exposed the importance of technology in keeping businesses moving. As the world looks to rebound from the pandemic, many organizations are pushing digital acceleration investments to the top of their agenda, keen to ensure they are agile and resilient in the face of future disruption and challenges.
The finance function gained many new insights from the impact of COVID-19. One key lesson from the pandemic has been the affirmation that legacy technology can’t keep up with the pace of change—particularly from businesses operating with a remote workforce.
The Hackett Group report, “Looking Past Covid-19: Five Critical Messages for CFOs,” calls on finance leaders to “accelerate the adoption of cloud-based solutions to broaden access to enterprise data hubs and work tools.”
Increasingly, business leaders are turning to finance to guide them into the future, yet this requires a delicate balance between investing in longer-term innovation and supporting the business today. With an ever-increasing set of stakeholders to manage, and both internal and external challenges such as societal and environmental concerns, it’s never been more important for finance to embrace change.
Agility has become a defining characteristic of businesses, allowing them to anticipate what’s coming, act quickly when faced with change, and more decisively respond to the demands of customers, market shifts, and competitive threats. Yet, many organizations persist with static systems based on rigid data models, disparate architectures, and siloed data. They’re unable to respond to change or any sort of disruption—creating risk at a time when they need agility the most. If 2020 has taught us anything, it’s that those that don’t embrace this challenge will fall further behind. It’s no longer a question of if finance will embrace digital and the cloud, but when they’ll do so.
But, how can a business accelerate its move to digital finance? Let’s start with four areas driving value that should be on every finance leader’s radar in 2021.
One of the biggest challenges facing finance today is the wealth of data being generated and how to leverage it before it becomes stale. The danger of paralysis by analysis is all too real if the finance function cannot transform such information into actionable insights.
The truth is that companies are struggling to put their data to work, leaving a hugely valuable organizational asset largely untapped. The McKinsey study, “Designing Data Governance that Delivers Value,” found that employees spend around a third of their time on non-value added tasks due to poor data quality and availability, with those in finance spending more time on sourcing, aggregating, reconciling, and cleansing data, in addition to manual reporting, than any other group.
At the same time, IT teams are looking to simplify systems, reduce spend, and decrease the amount of effort needed to maintain legacy systems. Ever-increasing demand from the business for actionable data and insights means IT-centric processes are unfortunately becoming the bottleneck to organizational agility.
Finance leaders are being asked to provide more frequent guidance than ever before, so they must shift their focus from core financial processes to strategic partnership across the enterprise—a shift that becomes possible by accelerating digital initiatives and the cloud. Business leaders are asking for fresh insights and new ways of looking at business performance—often requiring the blending of multiple and disparate data sources. For finance, the pressure is on to turn data into action.
Legacy approaches rely on batch processing and were built to move data through a linear financial supply chain to summarize and post to a general ledger but weren’t architected to easily support change. As a result of these uncertain times, very few finance leaders plan to postpone initiatives to modernize their data management platforms. In fact, some are accelerating their timelines. This is significant, as research from The Hackett Group found that, going into 2020, 88% of finance organizations had a major transformation initiative underway, and 96% were planning on launching one in the next 12-24 months.
Finance must be able to easily ingest high volumes of operational data (from external systems), add simple or complex calculations to enrich that data, and create associated accounting when required, all with it tied directly to source transactions. This foundation of incredibly rich data will ultimately be the foundation for machine learning-enabled transactions and processes, which are fast becoming a core part of finance business-as-usual.
Decision-ready organizations have real-time insights to ensure key questions are answered at key moments. They do this because their data model has rich dimensionality—where the same source of truth can be examined from multiple perspectives. For instance, by blending financial, worker, and operational data, more comprehensive and contextual insights are surfaced that answer key questions and improve the speed and quality of decision making.
Agility has become a defining characteristic of businesses, allowing them to anticipate what’s coming, act quickly when faced with change.
As economic uncertainty and market disruption continue, agility has become a business imperative. Companies need to plan and forecast multiple scenarios and do so on a continuous basis. Businesses that still rely on manual, episodic planning via spreadsheets and cumbersome legacy systems find themselves wasting valuable time and adding to business risk. The result is an inability to pivot quickly and confidently, prepare for potential roadblocks, and recognize and seize opportunities as they arise. This has led organizations to align plans with strategy, perform more effective business analysis, and achieve more forecasts that reflect real-world conditions.
Never has agility been more critical for organizations of all sizes. Even before the global pandemic emerged, 75% of CFOs said their planning processes did not equip them to be responsive to economic and geopolitical shifts. These organizations are weighed down by annual plans that are obsolete almost as soon as they’re finished, corporate data locked into silos, and outdated planning environments that rely on email for revisions and consolidation. To survive and thrive you need the kind of agility that gives you the ability to anticipate change and plan for what’s next—or risk being left behind.
As today’s businesses deal with disruption on a global scale, managing spend has grown in importance. More organizations are seeking to reorient procurement and finance teams for value generation, risk reduction, and strategic support. To succeed, organizations must maximize supplier value and strive for stakeholder alignment. Yet, many organizations still rely on manual processes and outdated technology, while information on suppliers, contracts, and spend are often siloed between business functions and lines of business.
The disruptions and change that has occurred over the past year has required organizations to navigate supply risk, and drive value throughout the organization. This requires procurement leaders to work in conjunction with their peers in finance to drive profit, ensure business continuity, and reduce risk . Research shows that when finance and procurement are aligned, they’re better able to partner and drive better outcomes for the business. Outcomes include cost reduction, higher ROI, and broader strategic influence within the organization. However, such results will require an integrated approach and process across source-o-pay and financials.
Forward-thinking enterprises seeking greater visibility, integration, and automation in the sourcing and procurement arena are turning to cloud technology to bring together people and processes, move beyond manual methods, provide end-to-end visibility into sourcing projects and performance, and allow both internal and external stakeholders to work together more effectively and in real time. This was clear from an HBR study, “Managing Procurement Risk: Enterprise Agility for a Changing World,” which showed almost half of respondents planned to accelerate the automation of procurement processes in the next 12 months.
With new technologies like machine learning, finance has the opportunity to usher in a new era of efficiency.
The global pandemic has put the spotlight on inadequate and inefficient finance processes, requiring human intervention, and their limited visibility and insight. Unpredictable environments have shown how finance can play an essential role in helping the business weather the storms. For the chief accounting officer, this means real-time insight into performance, instilling internal controls despite remote operations, optimizing cash inflows and outflows, and becoming more customer oriented. This requires accounting and finance to move beyond a transaction focus, in favor of new ways of working.
With new technologies like machine learning, finance has the opportunity to usher in a new era of efficiency, where finance gains time back by focusing only on exceptions and areas of the business that need attention. It's a future that will provide intelligent and frictionless operations, allowing finance to work smarter, faster, and more accurately.
Prior to COVID, many finance organizations were considering a shift towards digital transformation. The difference now is that the transformation is no longer a choice for many. By leading change initiatives together with IT, finance is able to demonstrate significant cost savings through efficiency gains—something finance has been striving towards for decades. The KPMG report, “Finance in a post-COVID world,” states that “Automation has emerged as a key theme out of the global pandemic. A lot of organizations have been talking about accelerating automation initiatives so they can truly focus on value-added activities rather than ‘bean counting.”
In an increasingly virtual world, where automated processes are crucial to driving efficiency and enabling better control and resilience, accelerating digital initiatives is a key priority for finance leaders.
Learn more about accelerating your digital finance journey.