Corporate finance departments are constantly under pressure to help deliver growth while becoming more efficient. Doing more with less is a challenge, and the digital transformation of finance departments is often touted as the solution.
However, Gartner estimates at least 70% of finance transformation projects fail.
To avoid failures and false starts, it’s crucial that businesses are mindful when they embark on finance transformation, and know what success requires. New digital systems are often valuable tools, but alone they cannot have the desired impact. There are other factors that are all necessary if insufficient conditions.
Instead, finance transformation should be seen as a a comprehensive and ongoing process that reaches beyond the digital platform alone. It involves 4 fundamental pillars, each a unnecessary, but none a sufficient condition of transformation: processes, people, data and technology.
As the insights in the report How to win backing for your finance transformation make clear, embarking on digital change is a journey that never truly ends, as your business must constantly seek new ways to deliver value and innovate through data-led decision-making.
Successful transformations are tough, but achievable for CFOs armed with the right strategy and clear understanding of the four pillars that support each project.
1. People
Underinvestment in talent is a common reasons for a botched finance transformation. Prior experience is integral to success – skilled, experienced leaders are needed to create an appropriate roadmap and detail all the processes, pain points and potential roadblocks along the way.
No matter how effective the new technology is, if employees don’t know how best to leverage the tools, the transformation is almost certain to run into unexpected complications.
Finance divisions can make significant gains by changing the way they recruit or train existing staff, and in the way teams are organised. Improving the “people model” can be a challenging aspect of any finance transformation, but is achievable with the right leadership and thinking.
2. Process
A finance transformation brings a whole new way of working. Mapping the gap between where you are now and where you want to be involves examining current processes, workflows and software to evaluate what needs to change.
Streamlining processes is a crucial part of a transformation, as it requires the whole team on board with agreements on how the technology should work throughout.
No matter the size of the company, a finance transformation will impact processes such as;
- Running day-to-day operations
- Accuracy and efficiency of reporting tools
- Balancing workloads across the month
- Meeting industry-specific compliance demands
- The way data is shared within the organisation
- How teams communicate and collaborate
Digitising these processes can make them more efficient and effective, but experts point out the need to go beyond merely upgrading the tools used in the above. Finding ways to make the business significantly better by augmenting human expertise with technology, enabled by new processes.
As an example, digitising paper records may remove or update an inefficient working process, and the impact of this on processes would be the ability for trained professionals to search digital documents and apply analytics to gain previously hidden insights regarding the business.
3. Technology
Technology is the centrepiece of change, but alone it doesn’t constitute a ‘transformation’. Indeed, industry experts warn of the vendors who promise finance transformation but are actually selling just the technology required to upgrade internal systems.
Operations training and hiring talent with the right skills is likely to be required as part of both the implementation and ongoing usage of the new tools. It’s natural for teams to feel uncertain about what a new system will bring, both culturally and professionally, which is why effective strategy and integration of all four pillars is necessary to ensure future success.
Digital expertise and familiarity with emerging technologies are increasingly desired and expected skill sets for the modern CFO. Many advanced ERP and ERM systems today run on cloud, which can reduce system complexity and costs, and have automated features that cut risks associated with manual processes, while making ongoing maintenance and updates simpler.
Cloud accounting tools are also more flexible and capable of integrating and connecting to other systems, which is a quantum leap from the legacy, on-premises finance systems of the past.
This ability to plug into warehouse, inventory, procurement, communications channels and other previously siloed systems is a game-changer for modern finance systems, and at the heart of the drive to produce better forecasts and smarter analytics.
4. Data
The integration of people, processes and data into a single platform is the bedrock of finance transformations. Data-driven decision-making capability is the prize firms undergoing this change are chasing.
Collating and applying analytics to datasets will enable the finance office to add value and offer genuine insights to boards, but the implementation must address the need for a streamlined infrastructure that takes in all available data points.
“Few companies are doing the hard work needed to align and integrate data, which means they won’t capture the full value of digital transformation,” says Susan Hogan, finance transformation lead at Deloitte. “Those hoping for a silver bullet to solve their data problems will be disappointed. Data problems hide beneath the surface for many CFOs, some of whom don’t fully appreciate the heavy lifting required to fulfil their requests.”
Often issues stem from having accurate data but no abilities to effectively manipulate it in order to generate insights, or having inaccurate or incomplete data from the start. Long-term success can often hinge on having the skills, motivation and time to understand data and its place within the finance office and wider organisation, along with the tools to analyse what it can reveal.
A finance transformation can range from an ambitious sea change in the organisation’s operations and culture to a more pragmatic upgrade of specific capabilities. Whichever approach is taken, however, it is integral that businesses see it as an continuous initiative and address the pillars of processes, people, data and technology. Only with this comprehensive approach can it succeed.
Finance transformations can bring extraordinary opportunities for businesses bold enough to make the leap. For a clearer understanding of how to sell the project to senior management and obtain buy-in from key stakeholders, download our playbook on “How to win backing for your finance transformation“.
