Where do you start on the Finance Transformation journey?

In part 2 of the Finance Transformation series, we look at where to start? The focus should be on process improvements, specifically automation of manual tasks.


In part 1 of this series, we defined Finance Transformation and discussed why it is such a hot topic. Along with some additional factors, this has created a perfect storm that is driving Finance Transformation.

Often the hardest part of transformation is trying to work out where to start. There are many examples of projects failing to get off the ground due to complexity and trying to deliver too much too soon. Our view is that transformation should be approached in small definable steps; start small, think big.

A sensible and practical place to start is with process improvement. Before we explain why this is, let us look in more detail at the core processes that form the foundations of any Finance Team and practical examples of how these can be improved.

The core finance processes and examples of practical improvements

A typical Finance Team has several responsibilities. At the highest level, these can be categorised into two; ‘day-to-day accounting’ and ‘financial management’. Let us look at both in more detail.

Day-to-day accounting

For us, this describes the activity captured within your underlying finance system (or ERP). This revolves around the recording of events and is mostly transactional in form. There are three key processes:

For many organisations, especially those with millions of transactions, significant process improvements within day-to-day accounting can be achieved. This is an area that is beginning to gain more attention, especially with the advances in Artificial Intelligence.

There are a few software vendors delivering solutions for ‘Order to Cash’, especially accounts receivable, improving the process through the automation of debt collection (e.g. email sending of letters and statements) and cash allocation. They can also help you to identify and manage risk using Machine Learning (ML).

We see this mirrored within the ‘Purchase to Pay’ cycle, an example being the automation of purchase order matching. Another in this area is that of expense management, which can be a notoriously manually intensive process. Technology can be used to automate the expense claim process and the subsequent posting to ledgers, with the added advantage of putting pro-active controls on spending in place.

In respect of the General Ledger, there are solutions that use ML to calculate and post journals to underlying systems, such as accruals and prepayments. There are also technologies that help you identify transactions that may be posted incorrectly or in error, thus reducing manually intensive review.

Financial Management

Within this category, we can identify five distinct core processes:

‘Entity Close’ captures the finance system related period end close activities that precede reporting. This is an area overlooked by many organisations and one where significant time and resource can be consumed. One area of pain for many accountants is period end reconciliations – such as intercompany matching at a transaction level, bank or fixed assets reconciliations. These are all processes that can be automated using technology.

For the other processes, there are a number of common examples of improvement in practice, especially where Finance Teams are using Excel as their main tool. Moving the manually intensive ‘Group Close’ (financial consolidation) and ‘Budget, Plan and Forecast’ processes to a recognised technology solution can deliver large efficiencies without even discussing the other benefits that accrue. The same can be said for ‘Report and Analyse’, improving efficiency by providing more sophisticated tools to interrogate data and then presenting it. Another example of potential process improvement is around ‘Disclosure’, what is termed by many as ‘the last mile of finance’, assembling and distributing report books to internal and external stakeholders. This can be moved from being a manually intensive process, often performed by cutting and pasting in Excel, Word and PowerPoint, to one that is highly automated.

Why start with process improvement?

Let’s go back to why we think improving current processes is the right place to start your Finance Transformation journey. The first reason is that process improvement is the easiest to understand, conceptualise and deliver. The second reason is that quick wins can be achieved, creating early momentum and confidence to stakeholders and participants. Thirdly, and vitally important, is that this creates time for the Finance Team to get their heads above the parapet and plan further transformation.

Where do you start with process improvement?

This will of course differ between organisations depending on numerous factors. However, in our experience, the most benefit can be achieved within the core Financial Management processes. There are three reasons for this:

  1. These are the processes which consume the most time of higher qualified and (therefore) more costly finance team members. By automating these processes, you free-up the staff who will invariably identify and drive further transformation.

  2. Day-to-day accounting related changes can be heavily influenced by the underlying finance system. This can make initiatives difficult to move forward quickly without time-consuming discussion.

  3. The Finance Management processes (e.g. reporting, budgeting) are most visible to those outside of the Finance Team – thus helping to gain confidence and buy-in from the wider organisation for further transformation.

In our experience, projects that start by taking small definable steps and gain momentum from demonstrating quick-wins to the wider organisation are those that are more likely to succeed – more on this in Part4!

The role of technology

As you can probably conclude, technology plays a critical role in delivering process improvement. Yes, process improvement can be delivered without technology. However, this does impose severe restrictions on the level of improvement that can be achieved. Therefore, selecting the right technology platform(s) is a critical step in the Finance Transformation journey in order that you can achieve maximum benefit.

In conclusion

When planning your Finance Transformation journey, start with process improvements, specifically automation of manual tasks. For us this is a first level of robotic process automation (RPA) or software robotics to use the current buzzwords. Within this, concentrate on the core Financial Management processes making these as automated and efficient as possible. This is what we call “getting the basics right”. This will then create a platform and the time for key members of the Finance Team to look at further transformation.

In part 3…

We look at examples of changing the way the organisation operates (developing planning, data analysis/visualisation etc.) which help add insight and value.

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Mark White

Financial Performance Management Specialist