Finance transformations involve a change in a finance organization’s objectives, people, processes, data and technology to support the needs of a business. These transformations typically take one or more of the following forms: strategic, efficient, or informed.
- Strategic: Includes integrating with the overall organization objectives, setting up a team for success, and harnessing the power of emerging technology.
- Efficient: Includes improving operational efficiency and resource management.
- Informed: Includes planning and forecasting future performance, evaluating and analyzing past performance, and identifying reporting process improvements.
Despite best efforts, many finance transformations do not succeed. Here are some reasons why and things to consider as you plan for a significant change.
1. Lack of Strategic Alignment
An organization’s finance strategy should support and enable its business strategy, and finance transformation initiatives should subsequently align to the finance strategy. Think of it like a funnel. First comes the organization’s strategy then the finance strategy and, finally, finance initiatives. For example, a finance team within an organization that has acquisitions as part of its strategy would do better acting as a business partner (finance strategy) that supports merger and acquisition efforts (finance initiatives) instead of focusing most of its time and resources on compliance activities.
2. The Talent Struggle
Finance organizations do not always have the right talent with the right skills in the right roles. As businesses evolve, employee skills must evolve, too. A finance organization undergoing a transformation must continuously evaluate the skills, capabilities and needs of its team and put in place the right people. This can be done via training, hiring additional resources, or transitioning resources to more appropriate roles. Equally important is creating an environment which facilitates fresh thinking and meets the needs of today’s diverse workforce of Millennials, Baby Boomers and Generation Xers.
3. Inability to Leverage Technology in the Right Way
Digital finance, blockchain, machine learning, artificial intelligence, low code appification…CFOs and their organizations are bombarded with modern technology that promises to solve all their issues. Given that most CFOs are faced with several challenges—from struggles to get the right data to manual, paper-intensive transactional processes—it’s easy to jump on the bandwagon with whatever new technology presents itself.
However, before investing time and money in a new technology, first determine the root cause of your issues to determine whether a given technology will solve those issues. In addition, will the technology help or hurt efforts to eliminate silos and integrate systems? Does the implemented technology address data management issues? What is the new technology’s impact on the business, customers, and vendors?
4. Chasing the Wrong Things (Costs, Not Value Creation)
Finance organizations should look beyond costs and focus on value creation by growing the business, helping determine strategic direction, and providing insights that drive decision making. The problem with a cost-cutting focus is that you can only squeeze so much out of an organization. Yet the potential to grow a business can be limitless. The right questions can provide insights into many areas. Do you know which geographies, business segments, product lines, customer segments, and channels are profitable or unprofitable? What should the company divest or add?
5. Lack of Continuous Innovation
Years ago, innovation was viewed by most organizations as exclusive to R&D, and finance and accounting gurus could just focus on the numbers. In a world of constant innovation, however, this attitude no longer holds. To remain competitive, finance organizations need to partner with technical and operational partners to constantly bring innovative solutions to the table and evolve beyond repetitive or repeatable tasks. Problem solving should be iterative, and a fail-early-and-fast mentality needs to be prevalent.
There is some value in thinking like a child, seeing things with fresh eyes, and asking why, what, and how. Why do we manually process so many invoices? Why do we spend hours every month manipulating data to complete reports which we are inaccurate, with information that’s already yesterday’s news? How can we automate our manual invoice processes? Should we leverage robotics? How can we be innovative and bring new ideas that drive value to the business? What are the benefits and costs? What are the risks?
Done well, finance transformations can make your business more efficient, effective, and profitable. Don’t jump right in. Be sure to take the time to plan and think through the best way to get where you want to go.