The use of advanced analytics in finance can help organizations to stay agile and adopt a forward-looking approach for enhanced profitability and enriched customer experiences.
Business dynamics—such as regulations, disruptive technology, and competitive growth—are changing rapidly. These dynamics are reshaping businesses, impacting everything from cost management and risk management to forecasting, planning, and service delivery models. To manage these dynamics and to understand how these are impacting business performance, finance functions need to go far beyond traditional financial reporting.
The transition of finance function from conventional practices to digitally powered mechanisms not only requires a departure from reactive responses and backwards-looking analysis but it also warrants the repositioning of the finance function for enhanced influence throughout the organization.
Although enormously beneficial, finance transformation is the toughest and this is because of the data sensitivity. The sensitivity during handling financial data is extremely high and the level of accuracy desired must conform to the highest level of precision. Unlike other functions, even the slightest error in financial entries and audit reports can have repercussions in terms of hefty fines and compliance breaches for the company.
So, it is important to be prepared adequately for the financial transformation and build the right strategy as all finance transformations have different levels of complexities and there is no one-size-fits-all template.
1) Know where you want to reach:
To accelerate the digital technology implementation within finance, it is important that the finance executives
champion and develop a technology roadmap.
This roadmap should enable them to measure progress and aid to maximize and extract value from existing technology
It should also help CFOs understand the solutions in the market, as well as what capabilities vendors are offering
and how the market is expected to evolve.
This would ensure they select the right consulting partner to accelerate their finance transformation ambitions.
2) What technology to adopt?
Advanced data and analytics are the categories where most technologies are delivering high value and where businesses should be increasing their investments. The use of cloud computing, AI/ML, and automation is expected to unleash a new era of efficiency and therefore, CFOs and other financial executives must enhance their skills to utilise these digital capabilities and derive optimized performance for both, their functional objectives, and organizational goals. This increasing influence of technology has today mandated the finance department to integrate new-age innovations in its procedural mechanisms. CFOs should work in collaboration with the CIOs and re-examine the technology infrastructure and integrate the new-age technologies.
3) Which stakeholders to involve?
The strategic value of finance lies in its ability to help other functional departments to perform optimally within the given constraints of resources. CFOs can play a lead role in helping other C-suite executives to better understand operational metrics and deliver enhanced value throughout the ecosystem. This ability to add value and deliver holistic benefits is crucial and will elevate the relevance of the finance function for the long-term sustainability of the business. Understanding operational metrics across organization will enable the finance executives to play a lead role in optimising different areas like supply chain, production, commercial operations, customer experience, etc.
This inter-team coordination may not come naturally to most of the finance teams. Since legacy standards and processes are in place, it can take time and convincing to introduce coordination between departments. Right communication is the key here.
4) What mindset to have?
An agile mindset is at the heart of financial transformation. Finance teams will need to adopt a level of agility. An agile and well-coordinated team can help other functional departments to perform optimally within the given constraints of resources. CFOs can play a lead role in helping other C-suite executives to better understand operational metrics and deliver enhanced value throughout the ecosystem. This ability to be agile will help to add value and will elevate the relevance of the finance function for the long-term sustainability of the business.
5) How to build the right team
The role and importance of finance executives specialising in the use of new-age technologies are consistently on the rise. The demand for finance talent is also high in the areas of analytical tools, technology solutions, and data interpretation. So, businesses need to have a roadmap that includes strategies for developing new skills for the finance executives, recruiting and retaining the right talent to drive the financial transformation within the organization.
6) What approach to follow?
Integration of digital technologies in finance functions should follow a modular approach. This entails organizations starting with small and discrete data clusters that are specifically about distinctive use cases such as FP&A, Meeting Compliance, Risk assessment, etc. The adoption of a modular approach will allow organizations to ensure the achievement of desired outcomes without completely disrupting the existing tools and technologies that are used by financial executives to perform their work and duties.
In this fast-changing, competitive world, the finance function must look beyond its traditional boundaries and approaches. The department must assume strategic significance and help organisations deliver more value to the target market through efficient business processes and informed decision-making. The value added by the finance executives should also transcend beyond and help suppliers, partners, and other stakeholders in the ecosystem to perform with desired deficiency and effectiveness. By delivering all-encompassing benefits, the finance department can help to take the profitability of businesses to a whole new level.
The article was originally published in CXO Today