The stakeholder capitalism movement has accelerated in 2021. Investors, employees, and communities are looking for companies to deliver more transparent information about how they operate and forcing the question, “Why are you in business, and what is your purpose?” This includes a company’s commitment to the environment, society, and good corporate governance, as well as how environmental, social, and governance factors impact its operations and values.
With this focus on transparency, CFOs and their finance teams are focused on closing the books and reporting results quickly, to get financial information into the hands of investors and other key stakeholders in a timely manner.
Yet speed isn’t the only consideration. While it’s unquestionably a goal of all CFOs, the quality of information that’s reported to investors and other stakeholders looking for insights into a company’s growth potential, customer sentiment and momentum, corporate purpose and values, and its resiliency in an uncertain economic environment is also a key consideration.
At Workday, we believe two key questions finance leaders should ask are, “What more should finance expect from a cloud provider, and what does true excellence really look like?”
In this Q&A, Terrance Wampler, general manager, Workday Financial Management, looks at what CFOs should be expecting from their cloud vendor, and why speed alone is not the only answer when it comes to closing the books.
What should finance be focused on when it comes to key tasks such as closing the books and filing?
Let’s take speed out of the equation for a second and focus on depth of information instead. There are several factors that determine when a company files and reports earnings; speed is one, but the substance of the report and the earnings call are a better gauge of the quality of close and overall strategic direction.
In recent Workday earnings calls, you’ll see that Workday’s leadership devotes their time to highlighting strong pipeline and bookings growth, industry and market momentum, new customer wins, key product investments such as Workday Adaptive Planning and our offerings for analytics, spend management, and employee engagement, and finally showcasing our ability to get customers live and happy. The discussion of financial performance, guidance, and analysis tends to come at the end, as part of the conversation, not the majority of it.
That veers away from the traditional route that some vendors take, which essentially summarizes financial performance and highlights customers they acquired from other vendors. One is backward-looking and does not outline the company’s strategic direction. The other is forward-looking and stresses the focus on providing innovative and transformative solutions to customers and getting them live. Finance should be devoting the balance of its time before filing to preparing remarks and ensuring it can clearly articulate its strategic vision and customer momentum. You can only do that if you are using a financial management system that provides the data that allows you to be forward looking.
From a technology perspective, I’ve heard you talk about a zero-day close. Is that an evolution that finance leaders should be moving towards?
One of the objectives of a zero-day —or touchless—close is being able to close the books quickly and have access to up-to-date information, while being able to continuously book data throughout the period. A zero-day close is the goal our own finance team is working quickly towards, along with our customers, all of whom saw the incredible value during the pandemic and beyond of being able to close the books virtually and access information anytime, anywhere.
Finance should devote the balance of its time before filing to preparing remarks and ensuring it can clearly articulate its strategic vision and customer momentum.
A zero-day close makes it sound like speed is the essence, but actually we’re talking about the importance of depth again. The way Workday handles its close relies on continuous accounting. That means having real-time access to financial statements throughout the month, not just a period end. This is only possible because Workday has an in-memory object architecture that doesn’t require batch processing. As transactions are processed, the associated accounting is immediately available in dashboards and consolidated financial statements, eliminating the need to integrate data to another cloud solution to accomplish what we do natively. Also, there is no disruption to daily operations during the close, which I think every finance professional has experienced at some point using finance systems architected on legacy thinking. That’s something a lot of our customers are doing or working towards right now.
From a finance perspective, why is “architecture” such a critical component?
Let’s look at an example. The conversation around a thick versus a thin general ledger (GL) has become irrelevant today, because modern enterprise management cloud solutions, like Workday, were designed to address the limitations that persisted in legacy financial applications.
An in-memory object data model inherently enables support for the segments needed to produce your financial statements. By its nature, an object model gives you flexibility to connect other useful attributes to your financial transactions, including customer, supplier, employee, region, or campaign information, giving you immediate access to data that supports operational and management reporting too—all without having to leave your core system of record.
Another unique aspect of this object data model: it was designed for change. As your business needs evolve, it easily supports the addition of new attributes, like onboarding an acquisition, or adding a new digital channel or geographic location. While some cloud providers might offer you “unlimited” ledgers, each ledger still is configured during implementation. It’s fixed in stone, unable to evolve as your needs evolve.
CFOs should be able to turn to one source of data to forecast accurately and get actionable insights for a multitude of analytics and reporting needs.
Finance requires a flexible and adaptable architecture that allows individual users to easily set up a new business entity or dimension in just minutes, versus having to call IT to do it for them. CFOs should be thinking about how quickly they can spin up a new business model within their finance system or complete the onboarding of an acquisition in days or weeks instead of months.
What capabilities does finance need from its system to deliver the data and insights that the rest of the organization requires?
At a fundamental level, finance should have one trusted source of data where they can transact, analyze, report, and plan. This is key! From there, it’s possible to look at how finance can provide the business with views that are tailored to their needs. For example, lines of business are able to view meaningful insights with access to transactions, such customer, supplier, and employee data.
Finance needs to be able to combine data with information from other operational or industry-specific systems to create a complete picture of what’s happening across the enterprise.
This kind of deep insight is also what allows the management team to give stakeholders visibility into not just financial performance, but into environmental, societal, and governance questions as well.
If you could paint a picture of what CFOs should be focused on and asking their provider for, what does that look like?
Let’s start with the fact that there should be no waiting for a batch process. Finance should have instant and continuous access to consolidated financial statements, planning and supporting transaction level detail. That means rich dimensionality powers the GL, and provides immediate context to the business activities and associated accounting available on-demand. That’s the only way to give finance complete visibility.
CFOs and their teams should be able to turn to one source of data to be able to forecast accurately and get actionable insights for a multitude of analytics and reporting needs. This approach minimizes departmental data silos and fosters a culture where everyone feels confident that they are working from a single, real-time source of truth.
A great example of actionable data comes from our own president and CFO, Robynne Sisco. Robynne is a huge fan of Workday dashboards and uses a number of them to run the business, from the management dashboard that gives her a company-wide view into real-time actuals versus plan; the period close dashboard, which gives her instant updates on where her teams are in the close process; and the cash dashboard, which allows her to dynamically reallocate surplus cash to pre-pay suppliers, shift investments into priority projects, or accelerate spending on key initiatives.
So while closing the books quickly is important, having the actionable information you need every day to make decisions is what CFOs and their companies really need to be successful. CFOs should also make sure that the vendor they’re choosing is aligned with their company’s values, including ESG considerations. Working with a vendor that is also focused on a broader set of stakeholders helps ensure that your goals are not in conflict.