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Building a Business Case for Financial Transformation

  • By Nilly Essaides
  • Published: 8/22/2016

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There’s constant pressure on the CFO from the CEO to do better. To Innovate. To transform the finance organization into both a leaner and a more forward looking analytics hub that provides insight and foresight to the enterprise. CFOs today must:

  • Interpret numbers instead of reporting them
  • Deploy enabling technology to automate low-value work
  • Scout for business and growth opportunities
  • Work effectively with big data to turn their teams into the brains of the organization
  • Act as true partners to the CEO, business leaders and board of directors.

Defining the ROI for transformation

Transformation sounds great in theory, but to get finance to literally go beyond its form – not an easy feat – executives need to see a strong business case and a tangible payback. After all, finance is all about the ROI.

Here are some reasons finance can wrap its head around to help drive change:

  • Manage competitive disruption. Today’s business environment is rife with competitive threats. The cost of not transforming the finance function into a “fast-thinking” forward-looking brains of the enterprise is the opportunity cost of falling behind, of becoming irrelevant by not being able to foresee competitive threats and not having an action plan of how to deal with the potential impact of such pressures on the financial health of the corporation.

     

  • Streamlining processes. Obviously, there’s the dollar and cents savings that come for streamlining processes using technologies and breaking down internal silos: among intra-finance processes and duplicate financial processes that occur in different parts of the organization. For example, in many organizations, forecasting processes occur at different places in the company. Merging these disparate processes into one, using a single technology platform can save enormous resources in terms of systems and time. It eliminates duplicate entries of data and the need to reconcile discordant information, or the need to later argue about which number is right. It creates a single version of the truth.

     

    Even within finance, things can be improved. Often the processes of budgeting, forecasting and planning happen in isolation at different time frames. And operational and financial planning occur in different cycles and levels. By synching up these processes, companies can get rid of redundancies. What’s more important, they can discover efficiencies and improve the quality of the end product.

  • Eliminating waste and freeing up strategic time. New technologies are enabling the finance function to automate low-value work and free up executives’ time to focus on strategic thinking, developing partnerships with the business and advising management on how to drive growth. The payback is smarter decisions (faster growth, higher investment returns) while lowering operating expenses.

     

  • Looking forward. Finance and FP&A today are shifting their focus from yesterday to tomorrow. From what happened to what’s going to happen. Transforming their mindset from that looking at historic data to looking to the future is key to helping the business stir forward. Using techniques and technologies, like driver-based modeling and predictive analytics, finance is remaking itself and producing faster, more frequent and -- most important --- more accurate forecasts. It’s giving management the one thing that matters most: time to pull business levers to affect future financial results. The payback is higher sales. Wider margins. Lower cost of operations.

     

  • Changing the mindset. There’s no transformation of the financial organization without a transformation of the financial skillset of executives. The latest Deloitte CFO Signal Survey indicated CFOs expect to embark on a wide range of efforts to improve the performance of their finance teams before the end of 2016. While foundational finance skills remain a must, to transform finance into the “A Team” of the future, executives must possess business acumen, diplomacy skills, intellectual curiosity, technology savvy and a degree of comfort with ambivalence: they have to be OK making decisions without 100% of the information. One can argue that the return on soft skills is soft. But it also means being able to move fast and grab windows of opportunities. Not all business cases are based on cost savings.

     

  • Building an analytics hub. The biggest challenge for CFOs today is to transform finance into the analytical hub of the organization and leverage big data to drive smarter business decisions – both in terms of cost cutting but more importantly, in giving the business units advice on how to market, sell, develop and grow their operation. That’s how finance fits within the digital enterprise. Finance needs to funnel big data from all corners of the organization – and outside it – to leverage its unique central viewpoint and bring the information together and run it through predictive and other advanced analytics models to come up with causal relationship that explain what business initiatives are really moving the needle, what steps the company can take to improve results, what its customers are doing and are likely to do. Digitizing finance has a huge payback. It’s allows companies to stay competitive in a digital economy. It eliminates unnecessary costs.

Is finance transformation worth the effort? That may be the wrong question. The question is can companies afford not to transform their finance function and remain relevant now and going forward.

Developing an Effective Predictive Analytics Capability
On June 26 - 27, discover how the application of predictive business analytics is relevant to all financial functions. Explore practical case examples and identify ideas and actions from leading businesses that have successfully implemented these analytical processes.
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