Over the past few years, many articles have been written in the media, and in this blog, about the evolving role of the CFO and the Finance organization from back-office scorekeeper to strategic advisor and business partner.
But is this evolution really occurring? What percentage of CFOs have successfully made this transition? And what are the barriers they face?
A recent “Future of the Finance Function” survey and report published by FSN found that the role of CFOs and Finance is over-hyped and that many are bogged down in traditional Finance processes. Specifically, the survey revealed the following:
- 52% of CFOs believe they spend too much time on Transaction Processing
- 42% of CFOs believe they spend too much time on Management Accounting
- 32% of CFOs believe they spend too much time on Statutory Reporting
The results of this survey indicate that Finance doesn’t have enough time for value-creating activities, such as strategy development, innovation, business partnering, process improvement, and performance management. The study also highlights that Finance teams bogged down in transaction processing and basic reporting don’t spend enough time developing the skills of their staff.
The key takeaway here is that process standardization and automation are key to breaking free from the traditional CFO role. Those Finance organizations that have invested in these areas have more time available for value-added analysis, to focus on enterprise performance management, to make better use of technology, and to make better, faster decisions.
Reducing the Drudgery
So what processes and technologies can Finance organizations leverage to break out of this cycle? Here are a few ideas:
Automate transaction processing – Organizations need to make sure they have an adequate Financial ERP solution in place. The system an organization started with as a small business may not be keeping pace with the size and complexity of the company now. This includes processes such as integrated Purchasing and Accounts Payable, Billing and Accounts Receivable, Fixed Assets, and General Ledger accounting.
Organizations also need to make sure they have an automated and accurate Payroll system in place that integrates into the accounting system. Having all of these processes automated and integrated eliminates manual work and the need to reconcile information between systems.
Reduce reliance on spreadsheets for management accounting – While financial accounting refers to the summarizing and reporting of historical financial results to external stakeholders, management accounting is focused on planning and control processes and the decision-making needs of internal management. Organizations that rely on spreadsheets and email for management reporting, budgeting, planning, and forecasting end up spending too much time and effort collecting and consolidating information, reconciling data, and fixing errors.
Packaged enterprise performance management (EPM) applications for modeling, planning, forecasting, and reporting can automate data collection and distribution of management information – and can streamline these processes so that more Finance time and resources can be allocated to value-added activities.
Streamline statutory reporting – Statutory reporting refers to the mandatory submission of financial and non-financial information to government agencies. Each industry has its own regulatory reporting requirements (e.g., banking, manufacturing, energy & utilities, etc.), and each country has its own accounting guidelines (e.g., US GAAP, IFRS, etc.) that govern financial and statutory reporting. Creating these reports typically requires pulling together data from various internal systems, formatting the reports, and developing the accompanying textual commentary. This is another area where reliance on spreadsheets, documents, and email can bog down the process and impact the accuracy of the results.
Packaged EPM applications for financial consolidation, reporting, and disclosure management can ease the pain of financial and statutory reporting. These applications and tools can integrate financial and non-financial information from various sources, consolidate the data according to the applicable accounting guidelines, ensure the right controls and audit trails are in place, and improve the accuracy of the results.
Think of the Possibilities
So what happens when an organization has the right Financial ERP system in place for automated transaction processing, EPM applications for agile planning and management reporting, and EPM applications for streamlined financial consolidation and financial and statutory reporting? Here’s what happens:
- Standard business processes are accelerated
- Errors are reduced or eliminated
- The books are closed within a few days after month-end or quarter-end
- The budgeting cycle is shorter, and more frequent forecasts can be created
- Financial and operating results are available sooner to internal management
- Finance staff have more time available to spend on value-added activities
When organizations do this right, the drudgery of Finance and Accounting is reduced. More time can be spent on strategic planning, managing vs. reporting performance, and helping line of business executives to better allocate resources and evaluate new business opportunities.
To learn more about how EPM and ERP systems can work together to automate key processes and make Finance more productive, check out our white paper “Best Practices ERP and Enterprise Performance Management.”