Five key transformation initiatives for finance organisations

In 2016, finance organisations must take a multifaceted role within the enterprise – and they must do so with more limited resources according to The Hackett Group’s 2016 Key Issues (KI) study, which is based on results gathered from executives from nearly 180 large companies in the US and abroad – most with annual revenue of US$1bn or above.

The survey findings of indicate a 2.7% decline in overall headcount and a budget decrease of 0.5%. If organisations are to meet the challenges of integrating enterprise information, establishing (and maintaining) a competitive cost structure, and taking a strategic role in the wider business, they will need to narrow their focus on vital transformation initiatives.

The data was gathered by asking executives from medium and large-sized companies about key finance issues related to achieving overall enterprise goals, as well as issues relating to overall capabilities and performance. Respondents were also asked to gauge the importance of these issues, and the business’ ability to address them.

The findings suggest that finance organisations should concentrate on the following five initiatives.

1. Improve business acumen and leadership

Within finance organisations, there’s a tendency to promote people based on their fluency in technical accounting. Outside of senior management, leadership skills are generally de-emphasised.

However, as finance takes a more strategic role within the wider enterprise these skills become more important – a sentiment reinforced by the fact that developing better business partnering is viewed as the second most important capability in the KI study. To effectively do so, employees must be able to persuade, organise, and make appropriate decisions – but there’s a gulf of 38% between this need and finance’s belief in its own ability to address it.

To improve business acumen and serve the enterprise support objectives, leadership and management skills should be integrated with the competency models within the overall finance talent management plan. The first step is to make them standard requirement for employees. These employees – both current and new hires – should be provided with rotational assignments and on-the-job learning experiences.

That said, it is worth taking a longer view: it can take time to find the right talent and to develop the right in-house skills.

2. Optimise finance processes

With limited funds in their overall budgets, finance teams must simplify, standardise and streamline wherever possible – and remove wasteful processes from the equation entirely. Happily, this is not just beneficial in terms of efficiency: previous similar studies demonstrate that when these organisations improve accounting and reporting, they gain better insights into data and governance.

It’s essential to prioritise efforts appropriately and align them with the most critical projects. Planning and performance management/business analysis (PPM/BA) is a focal point for many organisations, as is process improvement and function management; and general accounting and external reporting. Yet while maturity leaders rated compliance management as their third-highest priority, traditionals tended not to include process-based initiatives on their transformation list at all.
Given the 40% difference between world-class and peer group finance organisations, they would do well to reconsider their approach.

3. Bolster performance management capability

The study indicates a 26% gap between finance’s ability to articulate value and the perceived importance of doing so. A more sophisticated performance management capability could do much to close this gap.

When it comes to enterprise performance management (EPM), finance should lead by example. If it can show consistent excellence in terms of its execution of processes, and link this excellence with a superior ability to meet customer requirements, it will be in a better position to outline best practices. The study indicates that account-to-report organisations that focus on overall process costs demonstrate a better capacity for business partnering and relationship management than those that focus on lower-level metrics such as cost per transaction.

Companies that exhibit greater EPM capabilities can plan more rapidly, make more accurate predictions – and consequently, outperform industry peers on company financial metrics.

4. Develop a finance technology roadmap

Where existing systems yield diminishing returns, new technologies may provide better value. Yet before finance goes ahead with implementation, it must set defined objectives and have a clear idea of how customers will benefit in the present and in the future.

A comprehensible, enterprise-level roadmap should be designed to set out finance’s technological direction and express its value. Social media, cloud services, mobile and other growth areas may have much potential for the organisation, and robotic process automation might provide a low-cost means of completing complicated recurring tasks if an enterprise resource planning (ERP) upgrade is not forthcoming. Whatever decisions are made, they must be aligned with the wider business’ IT architecture and overall strategy – and naturally, they must be realistic, and take into account the tools that are available.

5. Exploit the value of data

The most mature finance teams are taking the initiative when it comes to capability: it ranks highest-ranked in their list of projects. This entails using business intelligence (BI) and analytics to find hitherto unseen value in information that has already been accumulated. Implementing the technology aligns with the operational challenge of integrating information, and it provides superior strategic insights into factors like competitive cost pressures.

Bringing this to fruition will involve concentrated efforts to understand the information needed to make business decisions. From there, it becomes necessary to contemplate solutions that protect data integrity – and from there, the need to release smaller, targeted application within a realistic time frame in order to supply essential information and build momentum and interest.

When business intelligence (BI)/analytics are properly integrated into the organisation, the finance team may see a considerable reduction in work-hours expended on data accumulation and analysis. With superior insights, it will be well-equipped to supply advice on strategy, operations, and – of course – finances.

2016 and beyond

With these transformation initiatives in mind, the overall priority for finance must be to have a sense of the business’ future direction – and the organisation’s role in guiding it. It must make sure initiatives are implemented to address key strategic gaps – internal and within the wider enterprise. It must find opportunities to create value, reduce risk, and it must place technology front-and-centre.

Above all, it must keep the long-term in mind. Finance should not be putting out fires when it should be working towards the future of the enterprise.

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