A central tenet of the Modern Finance agenda is the crucial importance of process automation and standardisation. And it’s not surprising because if you look at any medium to large business you will find multiple instances of different vendors’ budgeting, consolidation, ERP and CRM systems.
And you don’t have to take my word for it. Recent research shows(1) that 29% of large enterprises have between two and five different budgeting planning and forecasting systems across various functions and geographies, and a sizeable 43% have six or more different systems in place. And it’s the same story for ERP, CRM, BI, CPM and so on.
That’s bad news, because if you want to take an enterprise-wide view of anything, (customers, opportunities, contribution, revenue or salary costs) you have to navigate multiple ‘fault lines’ to pull the numbers together. Another piece of research(2) supports this view. It highlights a significant ‘disconnect’ between data and decision making. For example, more than 50% of companies in this survey say that metrics and KPIs are functionally siloed and do not provide necessary insight, with almost the same percentage of companies saying that the focus of analytics is on gathering and manipulating data rather than generating insights.
All CFOs have been there. It’s frustrating, time consuming and costly. The case for change is compelling – it’s the proverbial ‘no-brainer’. Yet when I asked a group of senior finance professionals gathered at an FSN Modern Finance Forum private dinner last week "what is the biggest obstacle to investing in existing finance processes?" there was a chorus of voices saying in unison, “COST!! The rest of the ‘C’ suite does not want to spend any money on internal systems”.
The injustice of it all is fascinating because McKinsey the consulting firm says in a 2013 paper entitled, “Finding Your Digital Sweetspot” that when it comes to the bottom line impact over 5 years, the rewards of pursuing process innovation and cost reductions on the inside (36 percent) are far higher than innovations from, say, customer sales (20 percent). It seems that ‘sexy’ customer-facing innovations trump unglamorous transaction and information systems when it comes to investment.
But there may be a way of breaking the deadlock. One of the guests at the dinner (head of finance systems at a major public company) explained how a cloud SaaS solution for disclosure management had allowed him to invest in an innovative new process at a very modest cost. And having demonstrated the value in a relatively short timescale (a few weeks in his case) he was able to use the initial investment as a ‘bridgehead’ to further investment and improvements. The agility of a cloud-based solution coupled with a subscription based licence had given him the much needed operational, economic and technical flexibility to effect change.
I’m not suggesting that CFOs rush out and buy cloud-based solutions on a whim and of course one example doesn’t make a robust case for change. But it does at least offer modern CFOs a glimmer of hope that where their organisations are unable or unwilling to see the value in enhancing internal systems they may be able to ‘dip a toe in the water’.
Lastly, my huge thanks to Blackline who generously sponsored the dinner and are helping us to take the FSN Modern Finance Agenda forward. If you would like to sponsor an FSN Modern Finance dinner or you are a senior finance professional and would like to be considered as my guest at one of these exclusive dinners, please let me know by leaving your details here