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Grasping the importance of Finance Transformation and the significant benefits it can bring about to drive your organization's success.




Finance transformation is a strategic journey that involves tactical initiatives to assess and improve the finance function's strategy, processes, and systems. It's a process that you, as finance leaders, can steer to better align with the company’s overall strategy. It encompasses organizational change, new technologies, training, and analysis to revolutionize how the finance department handles strategy, procedures, oversight, and reporting.


At its core, finance transformation is about making substantial changes to the finance function to better align with the company's overall strategy. This can involve reorganizing the finance operating model, accounting and finance departments, financial processes, and systems. These changes can potentially revolutionize how a company manages its finances completely.


CFOs, as the finance function leaders, have the power to steer their companies toward their strategic goals. In today's digital age, these goals often involve leveraging technology. By accelerating their finance transformation to autonomous finance, CFOs can ensure they stay ahead of the curve. This transformation is crucial as businesses need rapid, accurate data to make informed decisions about pricing, products, and investor and customer sentiment.


In the dynamic business landscape, the future of finance gravitates towards greater autonomy. With the increasing digitalization of operations, finance functions are undergoing significant transformations. This shift entails the ability to execute tasks and processes without direct human intervention or physical presence. As technology advances and data becomes more accessible across various business functions, CFOs and finance leaders are tasked with reassessing the structure of their organizations, the traditional roles within them, and the locations where these activities are conducted.


However, it's crucial to note that the future of finance is not about replacing human expertise but about harnessing technological capabilities to augment it. This is the crux of a successful finance transformation. Also, transformation isn't just about technology. Vendors often sell finance transformation as updating internal finance systems without providing necessary operations training. This means businesses might spend a lot on technology without a complete roadmap for transformation. Sometimes, It is tempting to opt for "quick-win solutions" like temporary technology, which may seem more affordable initially but will likely become inadequate as your company grows. While it may feel daunting to make significant changes, opting for a simpler, cheaper solution may only offer a short-term fix and not support your company's long-term growth. These options may only provide temporary relief and won't adapt as your company expands, giving you a false sense of progress.


When leveraging the right technology and capacity-building mix for the finance transformation initiative, finance teams can anticipate several tangible improvements. These may include:


  1. Standardized finance processes and systems to minimize errors and enhance efficiency.

  2. Automation of month-end reporting, replacing the time-consuming task of manually creating a board pack with a seamless automated process.

  3. Increased automation across various business functions, leading to potential cost-saving opportunities within the department.

  4. Enhanced team collaboration facilitated by a centralized finance data hub that enables efficient teamwork.

  5. Potential for operating as a remote team, which could result in reduced costs and optimized payroll management.


The finance mission involves providing financial advice and guidance, supporting the procurement process, and managing payment disbursement. It includes handling financial operations such as loans, issuing or selling securities, and managing transactions related to goods, services, and payments.


A finance business process involves steps that transform raw data into a finalized state. This could include gathering employee expenses, submitting the information to managers and finance teams for evaluation, and obtaining approval before employees receive their payments. Financial transformation aims to streamline and align various finance-related business processes for improved coordination and efficiency.


It's important to acknowledge that finance functions must deliver a swift, dependable, and comprehensive service. The finance teams need training, onboarding, and consultation, and there is a vital 'human element,' which is often overlooked in finance transformation endeavors. This transformation involves a shift in mindset and approach, not just physical processes.


Finance Transformation Roadmap


To develop an effective finance transformation roadmap, aligning the finance strategy with the overall business strategy is essential. This involves moving away from looking at past expenditures and industry standards and instead determining the appropriate finance resources needed to support the unique corporate strategy. It's also important to prioritize services, markets, and products that bring the most value to the business. Additionally, managing expectations is crucial; rather than trying to please all stakeholders, it's important to shape customer expectations and guide them to focus on what they truly need.


 

Creating a finance transformation roadmap involves a series of deliberate actions and activities to achieve specific outcomes in a planned sequence.


First, it's important to thoroughly document the current state of your finance function, which includes analyzing processes, assessing existing technology, and evaluating the skills and capabilities of your staff.


Next, you should visualize where you want your finance department to be in the next 5–10 years and conduct a comprehensive gap analysis comparing the current state to the desired future state. This involves setting specific goals and objectives, considering internal and external factors, and potential risks and rewards.


Evaluate different approaches and options, and choose the path your project team recommends. The transformation roadmap incorporates high-level work streams and phases, allowing incremental delivery. This strategic approach enables systematic progress towards the goals.


 

Success in the transformation of the finance function requires the following critical components:


  1. Assessing, prioritizing, and defining the scope of activities in a finance transformation plan that emphasizes key success factors.

  2. Developing a vision of the future state of finance operations, incorporating industry best practices, real-world examples, and tools to bolster your business proposal.

  3. Executing tactics that deliver tangible benefits for business collaborators.

  4. Maintaining timeliness, financial efficiency, and long-term viability of finance transformation initiatives.




This article presents a strategic and iterative roadmap for finance transformation. Transform your finance function with this four-step guide to creating your finance transformation roadmap:


1.     Establish your transformation objectives and long-term vision.

2.     Construct a foundation of your current finance capabilities.

3.     Develop a blueprint for the future state.

4.     Share your plans, priorities, and interdependencies.


The key elements of finance transformation


To maximize business impact, CFOs should prioritize refining their strategic approach, leadership, operating model, talent management, and technology within the finance function to effectively drive the enterprise's strategic ambitions.


Strategic Approach






Finance Function Strategy and Organization Design







A finance transformation strategy is essential for organizations to pinpoint the weaknesses in their finance department and determine which changes should take priority. This strategy also involves creating an operating model to support the business better and efficiently manage key finance activities.


A modern finance strategy needs to leverage digital technologies such as cloud software, automation, and data analytics to enhance the agility of planning and forecasting functions, enabling the organization to adapt to evolving business requirements more effectively.


The following desired outcomes are fundamental:


  • Improving the strategy and organization of the FP&A function

  • Enhancing forecasting capabilities

  • Developing a modern and practical finance data and analytics strategy


CFOs must also prioritize enhancing finance metrics, insights, and storytelling. These priorities illustrate the significance of timely, valuable insights and information from FP&A for CFOs.


As CFOs take on greater enterprise-wide responsibilities, it becomes increasingly important for them to enhance their personal effectiveness. This requires a heightened focus on measuring the return on enterprise assets, talent planning, investing in AI, considering environmental, social, and governance (ESG) factors, ensuring cybersecurity, and improving supply chain operations.


To achieve efficient growth, CFOs have the critical responsibility of enhancing resource allocation and optimizing costs. It is vital for CFOs to focus on maximizing returns on enterprise assets, generating ROI from significant digital investments, and reducing costs and headcount to enhance cash flow and margins, especially in challenging operating environments.


The future of finance will be influenced by new tools and methods that are different from the ones currently in use. The addition of data scientists, quick engineers, and other new roles brings a range of powerful capabilities to the finance team but also introduces new challenges related to governance and organizational structure. It is essential for successful finance transformation to develop a well-thought-out plan that maximizes these capabilities while minimizing any disruptions they may cause.


Critical inquiries that finance leaders should consider regarding their strategy are:


  1. How can we improve the effectiveness of the finance function?

  2. How effectively does the finance function execute the activities with the highest significance for internal business partners?

  3. Which external service provider solutions and vendors are best suited to assist in driving finance transformation initiatives?


Leadership


In today's business landscape, leading finance transformation is the top priority for CFOs. However, the complexity of modern organizations often hinders realizing their vision for transformation. Finance is constantly evolving, with digitization and changes in role profiles and skills taking center stage. To ensure the success of these innovations, it's important to focus on the following key areas:


Firstly, there's a need to balance finance transformation efforts across various technologies, processes, people, data, and organizational structures. Prioritizing objectives objectively, adapting to shifting priorities, and establishing strong external partnerships with providers is crucial for navigating the intricate relationships between different workstreams.


Secondly, managing organizational complexity is a significant challenge in finance transformation. Developing comprehensive programs that provide holistic solutions rather than isolated fixes is essential. For example, as finance moves towards digital processes, creating a highly scalable organizational structure will require new ways of working to break down team, project, and location-specific barriers. This demands smart coordination of efforts across teams, roles, skills, and spans of control, along with enhancements in finance technology and process harmonization.


Thirdly, to successfully navigate change and transformation, CFOs must support their leaders with robust governance structures, clear responsibilities, and a proactive approach to change management. Additionally, they must prioritize and reprioritize intelligently, assess organizational redesign opportunities comprehensively, and maintain an always-on approach to managing transformation.


Operating Model


Advances in technology and data are reshaping finance by allowing for better performance tracking and reimagining the services finance provides. When it comes to autonomous finance, companies should follow general principles such as decision rights, talent considerations, organization structure, and performance measurement.


When many organizations undergo finance transformation, they often prioritize technology and organizational design over other crucial aspects of the operating model. It's important to equip your finance leadership team to consider the entire operating model when implementing autonomous finance initiatives.


Each company and function has a unique operating model shaped by factors such as business context, talent, regulatory environment, and history. This diversity means that while the components of an operating model are applicable across the board, there is no one-size-fits-all approach for autonomous finance.


Most companies should integrate foundational principles into their operating model to successfully transition to autonomous finance. To facilitate effective finance transformation, it's important to consider various aspects such as working methods, decision rights, talent considerations, organizational structure, tools, financials, performance, sourcing, alliances, and places.


  • Working methods involve collaborative and transparent approaches to work, informal workflows, and team customs, focusing on methodologies like agile and lean.

  • Decision rights address who makes decisions, how they are made, and dispute resolution.

  • Talent considerations focus on the competencies, skills, and profiles needed for executing work within the new operating model.

  • Organizational structure defines the key roles, reporting relationships, and collaborative networks involved in the finance transformation.

  • Tools encompass the assets, applications, and functionalities teams use to fulfill their responsibilities.

  • Financials cover how the transformation will be funded, budget allocation, planning and monitoring, cost recovery or pricing, and investment alignment with strategy.

  • Performance management ensures effective execution of the strategy and ongoing operations.

  • Sourcing involves the approach of outsourcing and partnering with third-party service providers.

  • Alliances encompass necessary partnerships and creating value from them.

  • Finally, places define the global locations of key people and assets.


In the evolving landscape of operating models, it's crucial to consider designing principles that align with the following key themes:


  1. Transformation of finance teams: Finance teams will start functioning more like technology teams. It's important to adopt design principles that leverage the best practices of technology teams, preparing for a future in which most teams will be responsible for aspects of technology deployment, customization, and ongoing management.

  2. Increased role of machines: Automation is already extensively used for routine tasks, and machines will increasingly be capable of making judgment-based decisions and providing more prescriptive advice to humans. This shift will lead to machines playing a larger role in decision-making processes.

  3. Growing need for technology expertise: A greater demand for technology expertise will no longer be limited to corporate IT or finance IT teams. While deep engineering or software development expertise may not be immediately necessary for most teams, this requirement will likely change over time.

  4. Advantages of corporate financial center: Design principles should address the growing comparative advantages of the corporate financial center. This shift will likely be accompanied by a narrowing of the comparative advantages of regional teams, driven by advancements in technology and standardization.


Organizational Change and Talent


Many organizations need more investment, resources, and planning to expand their capabilities. Finance needs talent with nontraditional technical skills and teams to manage automation, AI, and robotics. Stronger capabilities in real-time data and analytical tools are needed for decision-making.


In the rapidly evolving world of finance, the leaders of tomorrow expect their teams to possess advanced skills that enable them to provide expert guidance to business partners and effectively serve stakeholders in the digital landscape. These essential skills include a strong grasp of business operations and expertise in digital technologies such as robotic process automation (RPA), machine learning (ML), and natural language processing (NLP), as well as the ability to solve complex problems. These capabilities are imperative for finance professionals to excel in judgment-based tasks and navigate the increasingly automated nature of transactional work.


CFOs must take a proactive approach to equipping their teams with digital finance skills. They must look beyond immediate needs and redefine the digital value proposition of finance to attract and retain top talent for a digital enterprise and ensure the success of an autonomous finance function.


Retaining digital finance talent and cultivating core digital competencies within their teams can give CFOs a significant advantage. This advantage enables finance teams to enhance efficiency, swiftly generate high-quality insights, and effectively support enterprise digital transformation and optimization initiatives.


Technology


AI has evolved from a vague, futuristic idea to a clear, accurate, global opportunity. However, as technology increasingly takes center stage in the thoughts of business and government leaders, there needs to be more connection. For instance, while most CFOs agree that they should be accountable for realizing the value of digital investments, only a few would consider themselves proficient in doing so.


Finance organizations are not adapting to AI as quickly as other administrative support functions. We can identify four common types of AI use cases within finance.


Process automation: Using AI capabilities to improve how existing automation tools, such as RPA, process information more effectively.


Anomaly and error detection: Identifying and reporting errors and unusual data points in large datasets, like internal claims, expenses, and invoices, using AI.


Analytics: Improving financial forecasts and analyzing results to make better decisions.


Operational assistance and augmentation: Using AI to make decisions in operations that mimic human judgment, often using generative AI.


It is essential to take the following steps to advance your technology goals:


  1. Develop a comprehensive technology roadmap: Companies must align their budgets with the evolving landscape due to the rapid expansion of new finance technology capabilities. Finance teams should articulate a strategic, multiyear vision for their tech ecosystem, incorporating innovative capabilities within a modular strategy. The CFOs should communicate this through a prioritized and purposeful roadmap.

  2. Increase involvement in technology initiatives: As your team takes on a more active role in shaping its technology strategy, enhancing collaboration and partnership with the CIO is essential. The finance organization should also focus on advancing technology skills, roles, and processes to drive successful technology initiative planning, delivery, and outcomes.


The Advantages of Transforming Finance


Embarking on a finance transformation can yield numerous benefits for a business. Streamlining operations and improving financial processes can lead to cost reduction, faster business processes, heightened efficiency, minimized errors, and the provision of user-friendly data and reporting systems.


Cost reduction

Companies can uncover cost-saving opportunities across various departments by automating and streamlining business functions. Additionally, the ability to conduct business remotely presents the potential for reduced operational expenses, such as lower wages and improved payroll planning.


Faster and efficient business processes

Finance transformation involves optimizing and accelerating operational processes to improve efficiency and speed. This includes ensuring that these processes are well-coordinated and supported by the right technology platforms. By streamlining workflows, organizations can minimize costly bottlenecks that slow down financial processes and provide customers with a smoother, error-free experience.


Error reduction and operational efficiency

Automating and standardizing finance processes and systems can help organizations significantly minimize errors and enhance operational efficiency. By establishing a single, reliable source of financial data, organizations can further diminish errors and eliminate any potential confusion among stakeholders.


Productivity

By establishing a centralized finance data hub, teams can collaborate more effectively and exploit remote work opportunities. This approach can potentially enhance productivity and efficiency when coupled with streamlined processes. Furthermore, automating time-consuming tasks can liberate finance team members to concentrate on projects that deliver greater value.


Data reliability

Organizations are currently dealing with rapidly increasing amounts of data coming from various sources, such as their internal systems, websites, and external platforms like social media. By leveraging new and advanced technologies, finance transformation aims to gain a deeper understanding of this data. It also seeks to provide the necessary time and tools for thorough analysis in order to determine its accuracy and reliability.


 


Published by


Strategic Finance Consultant ✅ ACS SYNERGY ✅ At ACS, we help growth seeking businesses with Finance Transformation, Accounting & Finance Operations, FP&A, Strategy, Valuation, & M&A

Finance transformation is a strategic journey involving assessing and improving the finance function's strategy, processes, and systems. It's about making substantial changes to better align with the company's overall strategy, often leveraging technology. This shift entails the ability to execute tasks and processes without direct human intervention or physical presence. It's crucial to note that the future of finance is about harnessing technological capabilities to augment human expertise, and transformation isn't just about technology.

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