Imagine the following scenario: Your close process takes 4 to 6 weeks and the team is overworked due to manually intensive processes. The company’s growth has outpaced your home grown financial system, no comprehensive close schedule exists with defined roles, your chart of accounts is inefficient, and you have inconsistent data definitions. You are getting pressure because you are 20% over budget but you don’t know where to start to stop the bleeding. You aren’t clear on the main drivers of inefficiency although you know there is a lot of rework, and you need to cut costs. But how can you do that when you need all your staff to complete all the processes you’re tasked with?

This is a situation where Finance transformation might be the solution you need.

What is finance transformation?

Finance transformation is the process of helping finance organizations meet their tactical needs, optimize performance, and deliver strategic initiatives throughout an organization. It should focus on three key areas:

Operational efficiency and resource deployment. Examine whether things such as record to report and the close process, order to cash, and procure to pay are set up as efficiently as possible. Common challenges in this area can include manual operations, duplicate work or rework, a lack of resources, outdated or overly complex systems, faulty data validations, and data quality errors. Of course, it’s key to identify the root causes of any inefficiencies before you can understand opportunities for improvement.

Speed to insight and quality of decision making. Assess whether finance informs the business in the areas of budgeting, planning, and forecasting; performance management reporting; business performance analysis; and cost management and analysis. Ad hoc reporting, duplicate Excel reports, a lack of a central data source, conflicting data definitions, limited forecasting, limited analytics, and variance analysis that isn’t linked to operational drivers can all pose problems. Understanding the information needs of your business is critical to driving the financial planning and analysis side of the business.

Strategic business alignment and the use of emerging technologies. Examine whether finance is an effective partner that’s aligned with the business and engages strategically through the right service delivery model, finance organizational design, and finance talent management and that it leverages emerging technologies, such as robotic process automation and machine learning. Undefined or conflicting goals, outdated metrics, a lack of cohesive partnerships, gaps in accountability, and minimal post-acquisition planning are among some of the most common challenges organizations face in this area. By becoming better aligned with the business and leveraging the right technology, finance can help ensure organizational success.

How can you tell your organization needs finance transformation?

Several situations can result in an organization beginning finance transformation activities, whether they call them that or not.

The most common example is a transaction or a big event, such as an IPO, merger, or divestiture. In addition, the implementation of a big system—such as an ERP system—can shine a light on problem areas. These examples often result in the need for triage or rapid execution of solutions.

Another finance transformation driver is the need to optimize processes and operations. This is often revealed when your company faces performance issues, or your teams struggle to complete tasks, let alone achieve operational goals.

Finance transformation also comes into play when a new leader enters the company and needs to understand how your finance group is performing compared to what the organization needs.

In short, change in finance organizations can be driven by urgency to stop the bleeding, the need for optimization of common cycles, or the need for an evaluation of finance’s role.

The four enablers of finance transformation

Finance transformation involves cultural change, because it focuses on adapting processes to help an organization become more efficient and strategic. Many initiatives fail because organizations don’t incorporate robust change management to ensure a transformation is properly planned and carried out.

As with any process, finance transformation involves four enablers—people, process, data, and technology. All four enablers need to be deployed appropriately for the transformation to be successful and sustainable.

It often happens that an organization doesn’t understand the full importance of all four enablers and tries to compensate for one that’s lacking or failing. For instance, let’s say an organization has an inadequate integration of its billing and ERP systems. To achieve its objectives, it uses a manual process to extract reports from the billing system, send them to accounting for approval, and then upload them into its ERP. This is an inefficient, labor-intensive process that could result in the need to hire additional people. In addition, handling data manually creates a security risk.

Note that this type of problem usually doesn’t appear until overhead is significant and cuts need to be made. However, if the organization reduces staff levels instead of addressing its technology, it will cause gaps in the process, and performance will really start to suffer. If the organization decides to leverage technology instead, it could create an automated, streamlined process that’s both accurate and secure.

Although it’s relatively easy and affordable to invest in technological solutions, even the best technology won’t suffice by itself. To implement a new system, you need to assess your requirements and take the up- and downstream consequences into account while at the same time factoring in the other three enablers. Only by doing this can you attain a complete understanding of your needs and design the right solution.

Crawl, walk, run

Because it involves a cultural change, finance transformation isn’t something you can achieve overnight. Instead, it’s an organizational evolution that requires continuous improvement to make it to the next stage, much like a crawl, walk, run maturity model. And it’s often helpful to get an outside perspective to see where you are, where you need to be, and how you can get there.

MorganFranklin begins the process of finance transformation by setting up a regular, accurate finance reporting cycle that enables them to get adequate information to the decision makers who need it. By fostering a culture of continuous improvement to facilitate the streamlining of processes, organizations can become best-in-class, with the ability to determine how future business decisions will be financed and how finance can consistently be leveraged to align to the corporate strategy.

There is no question that finance transformation can result in a more strategic partnership between finance and the business, delivering greater efficiency and better business decisions.

Watch our webinar to see how finance transformation can help your organization.

You’ll learn how to:

  • Reduce the time it takes to perform the monthly financial close process significantly
  • Combine both technology and process management specifically for Finance Transformation
  • Increase engagement and maintain your focus on continuous improvement