It seems that finance transformation is always a relevant issue for CFOs executives, most of whom are constantly being pulled in multiple directions throughout the day with ever increasing demands on their time. Finance function transformation promises to alleviate these issues in numerous ways:
- Creating more alignment between operations and finance
- Implementing better data management capabilities
- Allowing faster responses to emerging business/economic factors
And so on. Although finance and digital transformation sound good on paper, many struggle to pull off these types of improvements, particularly with so many of us still reeling from uncertainties faced throughout 2020 and 2021.
Looking ahead to 2022, what are the best practices for implementing these transformations in ways that help companies standardize processes, eliminate uncollected dollars, and get paid faster?
Best Practices for Finance Process Transformation
Your finance function transformation should revolve around turning finance from a mere actuarial function to a strategic force that supports decision-making. It’s all about learning how to align financial processes with operational models and creating standardized, repeatable processes that support your goals.
Specifically, there are several big improvements that companies can work on to help move their organizations towards these goals. These goals need not be tackled in this exact order, but taking them together will offer a comprehensive set of improvements to transform any finance department into a strategic partner.
Standardize Your ERP to Create More Efficient Transaction Handling
Across purchasing, A/R, A/P, cash measurement, and accounting, we rely on our ERPs for a lot. But a common challenge is ensuring that all ERP integrations and processes are streamlined across consolidating data, orchestrating forecasts, and long-term forecast modeling.
Aside from adjusting these processes internally through historical data and trial/error, consider upgrading your ERP with other solutions – such as enterprise performance management software – that can consolidate and pull data across your disparate sources. This reduces your organization’s reliance on spreadsheets, email, and other old-fashioned processes for planning while establishing a critical foundation for data management that will be essential throughout your finance function transformation.
Improve Your Budgeting Workflows
Another area worth examining is your budgeting process and where optimizations could be made. Consider your historical processes for goal setting and budget iteration and look for opportunities to reduce the number of cycles across each forecasting stage.
Your goal here is to examine the process in more detail and take a deep dive into how your data collection processes enable your ability to create rolling forecasts, manage expense planning, and handle internal workforce planning. As a best practice, start taking a closer look at your budgeting cycles and lean on automated finance platforms to do the heavy lifting in terms of data aggregation.
Automate Reports and Financial Close
The finance function is ripe for automation across reporting, accounts receivable, and more. Again, the issue here comes back to having the right data on hand and using transformative tools to accelerate your workflows. For financial close, there are several unique factors to consider across reconciliations, reporting compliance, and management of multiple currencies (if applicable).
Set up ways to standardize data collection through templates and make sure your systems are integrated to collect as much information as possible. Getting a handle on this will streamline the process while also reducing errors, making it that much easier to manage the close process.
Create and Implement Regular Rolling Forecasts
If you haven’t yet, consider implementing a more rigorous process for rolling forecasts. Particularly in the wake of economic issues seen over the past few years, accurate rolling forecasts can provide valuable insight into budgeting, risk management, forecasting, and many other parts of your finance technology strategy. While 2020 illustrated well the limitations of forecasting, it’s still vital to financial management.
Naturally, creating forecasts 6 to 12 months down the line can be difficult, but accuracy improves as you integrate more information from more sources across your enterprise platforms. It comes down to data visibility and having the right tools to create multi-dimensional forecasts – two key elements that support your overall finance and digital transformation goals.
Install Flexible Finance Transformation Technology Platforms for Better Agility
A unifying theme behind transformative finance organization best practices is the need for technology to bring things together. There’s simply no other way for executives to approach broad change initiatives in a holistic way. While each of the above improvements can be considered best practices, they may be new territory for companies without experience with forward-thinking digital solutions.
As we move into 2022, it’ll become increasingly apparent why companies are investing in data aggregation technologies and automated finance platforms. Data on pandemic-related impacts is flowing in by the day, informing our next set of forecasts and planning strategies. Companies that stay ahead of the curve with these technologies will have more information at their fingertips over the coming years, meaning more insight, agility, and resilience against market forces.
