Finance is Ch-Ch-Ch-Ch-Changing with the Times

CFO’s are concerned about change. And they should be: recent financial crises have spawned a growing number of complicated financial regulations. With the globalization of finance highlighting the need for uniformity in information, change is practically being forced upon the Office of Finance.

Software vendors have taken notice. Recent years have seen a proliferation of data-driven software solutions, with polished pitches promising to automate everything from data capture and delivery to financial reporting and compliance (and everything in between). Even the engineering department is getting in on finance, re-purposing data standardization tools like XBRL for use in specific financial processes.

But as Finance Managers window shop for process enforcement technology, many lose sight of larger finance goals, seeking a piece of software purpose-built to handle a specific process, department or geography. Software is a key enforcer of finance process … but it is rarely the answer to successful Finance Transformation. `

You’d think that, as a software vendor, we might want to keep a lid on this dirty little secret. But it’s true: focusing too heavily on the bells and whistles offered by any one technology package – without first creating a compliance strategy unique to your industry, your business, and your people – is a recipe for an under-utilized software installation. One which fails to provide the desired enterprise benefits. Software configuration options to support finance transformation run the gamut, from “pre-packaged” on the cloud, to fully-customized solutions. For most global finance organizations, the answer is somewhere in the “configurable” middle.

In the mid to late 1990’s, “vanilla” E.R.P. systems were all the rage. “Vanilla” offered the opportunity to get a system up and running quickly, replete with basic functionality to support rapid growth – at a time when insight to revenues and “flash” reports were most critical. But more advanced finance operations suffered, becoming increasingly complex as a result. Businesses rushed to install something, anything, that could be tagged with an E.R.P. moniker – only to discover when Sarbanes-Oxley arrived that, in the rush, they had sacrificed too many controls. The tools were under-utilized, resource planning efforts were abandoned, and the cost of those remediations was, for many, quite high.

Technology installed “for technology’s sake” can result in great process inefficiencies. Problems begin with a poor implementation, and are compounded by inadequate training or support. These systems are often ignored, or become redundant tools required to appease management. Highly customized technology often becomes very difficult to maintain, creating tension between IT and finance, or building a barrier to the necessary changes in process. These systems are then intertwined with a faulty workflow, complicating reporting and daily operations.

Many businesses look to the rapid and efficient adoption of sales automation as an example of how finance technology might be more easily deployed. But this model is flawed: while smaller, centralized finance operations with a single set of compliance standards might benefit from this “one size fits all” approach, it is rarely effective for most global operations.

Global finance is different from sales force automation. Finance is guided by a set of requirements – both internal and external – based upon a variety of subjective, but important, factors. The complexities of geography, your supply chain, business model, industry vertical, and competitive environment, must all be incorporated into your internal financial lifecycle for process change to deliver the requisite savings in time, money, and transparency. Choosing, for instance, which accounts to reconcile has a qualitative component, warranting consideration of flexible technology to support that choice. Not all reconciliation packages allow for innovative matching and exception management workflows, or allow the modeling of custom account templates to drive needed metrics.

At the other end of the spectrum, a fully custom-built solution is rarely the answer. Such systems are cost-prohibitive to install and maintain. But abandoning technology, to focus instead on re-engineering your financial processes in a vacuum, isn’t the answer either. This might result in short cuts. For example, a company might decide to localize close task management – unaware that technology can automate this process centrally.

Technology is a good enforcer. And when you’re trying to standardize processes across a wide spectrum of financial activities, technology can often be helpful in overcoming the inertia of years, sometimes decades, of established business practices. Technology can establish parameters around specific tasks, monitor inputs, track changes, and create searchable, auditable records for compliance purposes. Technology supporting the required process frameworks for finance operations, but still configurable enough to meet specific cultural and company practices, seems to be the most successful for global finance organizations.

When embarking on a Finance Transformation Initiative, the choice of tools should be an integral part of the process, not something done after the processes have been designed. Limiting your design options due to faulty assumptions about technological capabilities will undermine the effort. Here are a few rules of thumb:

Rule #1: Assume Everything Can Be Automated
Automation should provide the foundation for your initial discussion about process redesign. Invite as many diverse stakeholders as possible into the tent – including I.T. These stakeholders will come to the table with a wealth of experience, a plethora of “pain points” needing automation or management. As your diverse team of experts reworks your business’s finance tasks on paper, have them assume that a package exists to automate these onerous tasks (even if you’re not sure). Then seek out vendors with the flexibility to automate as much of your custom process as is plausible and cost-effective.

Rule #2: Assume A Risk-Based Perspective
When reworking your entire financial work flow, try to automate those areas which could expose the business to future risk, rather than automating based upon existing roles or perceived ease-of-use. Many technology vendors will offer a starting point for this sort of analysis, packages of pre-built templates, calculators, or consolidation and conversion technologies. Take these starting points, and tweak from there.

At the end of the day, you may not get everything you wanted. But you’ll have a more engaged and enthusiastic team of stakeholders, excited about implementing the changes coming down the road.

Rule #3: You Don’t Buy A Vendor, You Buy Their Tools … AND Their Vision
Software vendors are always attempting to stay ahead of the curve. Make sure you understand your vendor’s vision – it should map closely to your own. Choose a vendor with a similar philosophy, one who is willing to share their product roadmap, and help you imagine how your can achieve your desired business transformation together.

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