The three pillars of finance transformation

finance transformation

Photo: iStockphoto

We’re entering a new era of finance transformation and forward-thinking businesses have strategies that are focused on how to move faster, be more responsive, less manual, and more transparent. But tackling strategy is often futile without reinventing the core first. Through orchestration, automation and managing data integrity, organisations can reduce resource overhead and improve data quality and cycle times in the financial close, as Ann Furlong explains.

Leading accounting and finance organisations are transitioning into a more analytical function and partnership role by building their business plan around three pillars: Close Process Transformation, Process Automation Transformation, and Integrity and Risk Transformation.

Executing each one of these pillars is vital to maximising the reduction in transactional processing in accounting, which Accenture predicts can be reduced by 40 per cent – with the right combination of people, process, and technology (1).

Close Process Transformation

Too often, the close process is run by gut, instinct, and collective knowledge, versus a defined, centralised, and orchestrated workflow and process. With so many people involved and mounds of spreadsheets constantly accumulating, roughly defined processes are often different, from geography to subsidiary. Collaboration remains stubbornly stuck in email and conference calls, with limited visibility into the process.

When you take a look inside top performing organisations, it’s immediately evident that they do things differently – and it’s time to take a page from their playbook.

The key to their success is clarity. Each stakeholder in their organisation has a clear perspective of what must happen at each step, when it must happen, and what it depends on. They’ve created a clear set of roles and responsibilities and have management-level reports that give visibility into the global close calendar.

Milestone tasks are in place to guarantee the correct sequence, flow, and rollup of related activities. Automatic notifications are set to warn stakeholders of pending tasks and to give management a heads-up of overdue tasks and bottlenecks. And a set of internal controls is established to reduce material risk while eliminating unnecessary controls that stand in the way of a fast close.

As a result, they can close and report, on average, twice as fast as their peer group.

Process Automation Transformation

It’s no secret that manual tasks drain accounting and finance efficiency, and those tasks continue to top most accounting surveys as the biggest challenge to achieving a lean close.  The issue often causes associated frustrations among accountants ― frequently the most talented ones who aren’t using their skills appropriately, and are instead performing repetitive work.

Typically, accounting organisations have significant manual overhead in several areas. This includes the operational areas of accounting, such as billing and collections and accounts receivable, and within the close and general accounting areas, such as journal entries, account and transactional reconciliations, and intercompany transactions.

Best-in-class organisations are, however, substantially leaner than their peers and able to reallocate their costs towards strategy. A key enabler for them is leveraging process automation at various levels within the accounting team.

Indeed, the Continuous Accounting model takes a process-first approach. By making more efficient and productive use of accountants’ time and valued work, CFOs, Controllers, Internal Audit and the accountants themselves are better able to achieve the company’s strategic objectives at less cost, with the added bonus of more meaningful work.

Integrity and Risk Transformation

Creating trust and continually keeping pace to minimise reporting, regulatory and strategic risk  the final pillar of finance transformation. Through strong automation, organisations can achieve better integrity, both in their balance sheets and in their controls. And those that invest accordingly have significantly more accurate financial reports and less resources devoted to trying to root out errors in the balance sheet.

While task management and automation improve speed and efficiency, data integrity perhaps provides the largest benefit, avoiding the organisational and professional exposure from an inaccurate filing or restatement.

Automation can also highlight transactions and balances that exceed control thresholds, while ensuring all reports can be reconciled back to the original data. Reconciliations, journal management, and revenue processes, like revenue recognition, can also be upgraded to become rule-based and as consistent as possible, backed by a strong record of corrections or adjustments and post-audit review processes.

The Foundation for Finance Transformation

Successfully navigating the path to finance transformation is dependent on building all three of these pillars, and your organisation can only be as strong as the weakest one.

First, optimise your processes to reduce risk, improve accuracy, and increase efficiency in a way that benefits the entire accounting and finance function. Then, establish a solid foundation for each by investing in the right technology that will result in the biggest boost of overall productivity. Finally, through automation, free your people to be more productive and help guide the business through planning, strategy, and analysis.

[i]Accenture: http://ww2.cfo.com/analytics/2015/10/death-digital-good-bye-finance-know/

Ann Furlong is APAC director at financial automation software provider, BlackLine. This article is sponsored by BlackLine.

Leave a Reply