WHAT IT'S ALL ABOUT...
In part 2 of this series on Finance Transformation, we discussed how to start on the journey with process improvement.
Based on our experience, we recommended starting with process automation, concentrating on making the core Financial Management processes as automated and efficient as possible – what we call “Getting the basics right”. This then creates the time for the Finance Team to get their heads above the parapet and look at further transformation.
Let us return to the definition of Finance Transformation given in Part 1 - “a change and improvement in the performance of the Finance Team”. We have looked at process improvement and shown that this can lead to significant efficiency gains. We have seen some organisations stop at this point, but this comes at the risk that the Finance Team is seen only as a ‘back office’ processing function and nothing more. To remove this risk, and deliver true transformation, we need to effect change.
We see two aspects to change. The first is what we deliver to the organisation, the second is how the CFO and the Finance Team are perceived within the organisation.
Changing what we deliver
The day-to-day accounting, Entity Close and Group Close processes (see Part 2) are well defined and formulaic. We can improve these processes through automation, but there is little opportunity for fundamentally changing what they deliver. The two processes where we can really effect change are Report & Analyse and Budget, Plan & Forecast.
Report & Analyse
This key process presents a real opportunity for the Finance Team. In our experience, the ‘Report’ part of the process is reasonably mature in most organisations i.e. access to and the delivery of data. However, the ‘Analyse’ part is where the value can be found, turning data into information by adding narrative and telling a clear and compelling story.
There are several reasons why the ‘Analyse’ process is not as mature and developed. The first is a lack of time given to the exercise, often caused by time being consumed elsewhere by manual tasks. Once these can be automated, the Finance Team has more time on its hands that can be used for analysis, adding real insight and strategic thought.
A lack of tools to analyse data and present the results efficiently and effectively is often a barrier. These tools should be able to connect to multiple data sources and enable the user to understand the data through analytical techniques such as ‘slice-and-dice’ or ‘drill-through to details’. The tool should also help with presentation, making use of visualisations such as graphs and dashboards.
There are other ways to optimise reporting to help the consumer focus on the key issues. This can be achieved through the standardisation of report layouts within your organisation. An example of how this can be achieved is given by the International Business Communications Standards, guidance that is being adopted by many leading organisations in Europe.
Budget, Plan & Forecast
Overall, this is the least mature process of all for most organisations, and yet it is the one that could yield the biggest benefit. This process has been in sharp focus during the recent crisis, exposing any weaknesses and inefficiencies.
As a first step, process improvement can have a significant effect by automating data collection, consolidation and model maintenance. These improvements, which will mainly benefit the Finance Team, can act as the foundation for the changes that can have a real impact and transform the organisation, such as:
Increasing the frequency of planning – eventually to the point of ‘best practice’ rolling or continuous planning
Devolving beyond finance - instead of it being a ‘Finance Team only’ exercise look at involving all departments, increasing collaboration.
Build a driver-based model - identifying your key business and value drivers and then creating plans based on these.
Connected planning - a model where all parts are integrated such that changes dynamically update from bottom to top and visible to all. Examples of this are an HR plan linked directly to the P&L or sales and order process planning (S&OP).
The recent events have shown that we can no longer rely on a ‘gut-feel’ approach as there is no historical narrative that supports this. More advanced planning techniques, such as using sentiment analysis or predictive analytics, are now coming under increased consideration.
Some of these changes do require a mindset shift and a willingness to partake in a higher level of collaboration. However, changes to the Budget, Plan & Forecast process have the potential to deliver the highest gain for nearly all organisations and, at the same time, raise the profile and perception of the Finance Team.
Changing how the CFO and the Finance Team are perceived within your organisation
Hopefully, the changes that we have highlighted so far above, if adopted, will help to change the perception of the Finance Team. We need to grasp the initiative and push ourselves to the front and not wait for the invitation. By leading on change initiatives, we are showing that we can be strategic and forward thinking and not just a back-office, processing function.
It is fair to say that changing the perception of the Finance Team within the organisation is an on-going and long-term initiative. Whilst the Finance Team play a part, it needs to be championed by the CFO at board level to gain real momentum.
Where to start with effecting change?
This will invariably differ between organisations. In our experience, significant time-to-value can be found within the Reporting & Analysis processes. There are three reasons for this:
Improvements here are most visible to those outside of the Finance Team.
It impacts more people in the organisation as most are information consumers of some kind.
It can be largely controlled and driven within the Finance Team.
The next step would be the Budget, Plan & Forecast process which will have the biggest impact and will require buy-in from the whole organisation.
One specific initiative that is worth a mention at this point is business partnering as it cuts across both processes. This is the practice of embedding a member of the Finance Team within operational departments to improve understanding and collaboration. It is not new, just one that is in vogue as we speak. If implemented properly, it can help accelerate change and quickly alter the perception of the Finance Team.
The role of technology
As you would expect, just as in process automation, technology has a critical role in delivering change. It is not the be-all and end-all though, we have seen many Finance Teams effect real change and quickly elevate themselves within the organisation just by creating more time to analyse. Technology can play a part in creating efficiencies around the analysis process and enable more sophisticated visualisation options. It can also facilitate self-service reporting, thus reducing the burden on the Finance Team and empowering the rest of the organisation at the same time.
For Budget, Plan & Forecast, in our opinion technology has a significant part to play as conventional spreadsheet tools will not have the breadth of functionality and capability to deliver the level of agility and adaptability required. Therefore, as mentioned previously, selecting the right technology platform(s) is a critical step in the Finance Transformation journey in order that you can achieve maximum benefit.
In summarising effecting change, start with Report & Analyse and turning data into information, adding insight and value. This could be the catalyst for business partnering as you will have the tools data at your fingertips to share with operations. By also introducing self-service reporting, you will also free up more time for the Finance Team to transform further. Use the time created to transform the Budget, Plan & Forecast process.
If you can drive these initiatives, you will be changing what you do and the perception of the Finance Team within the organisation. This, combined with process improvement, is true transformation, elevating the Finance Team to strategists and thought leaders.
In the final part 4…
We look at the journey and how to deliver transformation in practice, including why projects fail.
Financial Performance Management Specialist