This is the second in a series of three blog posts which looks at how a digital finance transformation enables a future-ready finance department - one that can use data, technology and human talent to go beyond governance to provide commercial leadership to the business. In this series I outline how a digital finance transformation enables efficient operations, smart data exploitation, strategic cloud usage, seamless user experience and an expanded role for finance

This post focuses on the benefits of efficient operations and smart data exploitation.  The first blog post  in the series titled 'How a focus on the customer can help you fight for a digital finance transformation' can be read here

Digital finance transformation enables efficient operations

Running efficient finance operations sounds like table stakes for any business today. However, many organizations still have not mastered the basics of efficiency. While the C-level agenda may include machine learning and artificial intelligence, if the finance department is limited to quarterly reporting cycles rather than real-time information, any potential business insights and efficiencies that advanced analytics could offer will come too late to benefit the business.

However, more and more organizations are beginning to outline digital finance transformation initiatives and explore what this journey might look like. In fact, according to a KPMG survey of more than 1,000 executives, enabling digital transformation was ranked as the second biggest business challenge for 2019 and ranked number one by finance and accounting professionals who participated in the survey. (source)

The fact that digital transformations are top of mind for finance and accounting teams is likely due to the relative lack of investment in the finance department compared to more customer facing areas of the business. The result is that CFOs are saddled with inefficient, resource-intensive systems and processes. Data and accounting for each source system is often manually maintained with multiple points of integration into the general ledger.  Legacy systems that are no longer fit for purpose are costly and high maintenance. A recent McKinsey Global Banking Survey found that banks spend roughly 65% of their budget on legacy architecture – a stat that is likely common across multiple industries. (source)

It’s well past time for investment in the finance architecture, both to remove the costs of legacy systems and to increase efficiency through streamlining operations, eliminating any manual intervention points, and selecting the correct tools and technologies so organizations can use resources to their maximum. This combination of classic cost cutting and a focus on automation will allow the finance department to evolve from data manipulators and cost cutters to profit drivers within the business.

Digital finance enables data exploitation

Data has become the ultimate buzzword. There is so much talk, it’s hard to know where to start. However, a recent survey from New Venture Partners shows the increase in available data isn’t necessarily translating into business growth.  At the start of 2019, only 31% of companies could be considered “data driven,” down from 37% in 2017 and 32% in 2018. Simply collecting more data isn’t helping anyone.

KPMG Financial Services Partner, Dave Fourie, summarizes the status of many of today’s finance departments. “Finance has valuable data today, but I think it’s inadequate.  The level of analysis that is possible is hindered by the lack of depth of data available and the fact that it’s so aggregated. When a question is asked, it requires a week’s worth of gathering to answer. Having a single, central source of data and trusted data stores - that is absolutely critical to be successful. But finance departments really have to invest and control data at the beginning of the process.” 

Giving finance access to a granular, real-time, centralized data source can deliver key benefits.  

Having a centralized data and accounting solution with the ability to land the data once and run repetitions across entities and GAAPs, reduces reconciliations and makes it easier to reconcile and explain changes between various KPIs.

A centralized data foundation can also enable a continuous close as required data is available real time and there is no longer a need to make up the gap between when the batch closes and the actual end of month arrives.  The ability to continually monitor the month end close, compared to a periodic close can give additional flexibility to the business and help mitigate risk.

And while it’s tempting to leap into exciting and innovative projects using tools like RPA, Machine Learning and cognitive analytics, it is essential for success that the foundational groundwork around data preparation and standardization is complete before attempting to leverage these technologies.

Prioritizing a transformation

Returning to the KPMG stat cited earlier in the article – there’s a second part that’s worth noting. .  While a digital finance transformation was noted as the biggest challenge for finance and accounting professionals, it was also seen as the top potential enabler and solution that organizations can utilize to address overall business challenges and other related business opportunities and problems. (source)