The Ledger

A digital finance blog

The Ledger

Posted by Amanda Steward

Building the foundation for the future of finance

This is the second in a series of three blog posts which looks at how a digital finance transformation enables a future-ready finance department - one that can use data, technology and human talent to go beyond governance to provide commercial leadership to the business. In this series we outline how a digital finance transformation enables efficient operations, smart data exploitation, strategic cloud usage, seamless user experience and an expanded role for finance 

This post focuses on the benefits of efficient operations and smart data exploitation. The first blog covered the value of focusing on the customer benefits when fighting for investment in the finance function.

 

Digital finance transformation enables efficient operations  

Running efficient finance operations sounds like table stakes for any business today. However, many organizations still have not mastered the basics of efficiency. While the C-level agenda may include machine learning and cognitive analytics, if the finance department is limited to quarterly reporting cycles rather than real-time information, any potential business insights and efficiencies that advanced analytics could offer will come too late to benefit the business.  

However, more and more organizations are beginning to outline digital finance transformation initiatives and explore what this journey might look like. In fact, according to a KPMG survey of more than 1,000 executives, enabling digital transformation was ranked as the second biggest business challenge for 2019 and ranked number one by finance and accounting professionals who participated in the survey. (source)

But digital transformations were also ranked as the number one solution to address top business challenges around data, systems complexity and compliance!

Digital transformations can have big results. A large, North American Health Insurer recently underwent a digital finance transformation in part to address inefficient, resource intensive systems and processes. Data and accounting for each source system had to be manually maintained, and multiple points of integration into the general ledger limited transparency.  The transformation allowed the organization to retire $2 Million worth of legacy systems, significantly reduce month end close times, and increase automation – all resulting in greater efficiencies.  

Historically, ‘efficiency’ has meant removing costs. While that’s still important, true efficiency in the age of digital finance also extends to streamlining operations and selecting the correct tools and technologies so organizations can use resources to their maximum. Smart automation will allow the finance department to evolve from data manipulators and cost cutters to profit drivers within the business. 

To return to our Health Care client example above, in addition to streamlining their systems usage and increasing automation, they also gained the ability to trace changes in source system transactions to movement in KPIs and reports. With a more accurate picture of the business, they were able to release extra reserves to be invested in key initiatives, rather than having to hold them due to lack of confidence in their forecasting capabilities. 

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Digital finance enables data exploitation 

Data has become the ultimate buzzword. There is so much talk, it’s hard to know where to startHowever, a recent survey from NewVenture Partners shows the increase in available data isn’t necessarily translating into business growth.  At the start of 2019, only 31% of companies could be considered “data driven,” down from 37% in 2017 and 32% in 2018. Simply collecting more data isn’t helping anyone. 

KPMG Financial Services Partner, Dave Fourie, summarizes the status of many of today’s finance departmentsFinance has valuable data today, but I think it’s inadequate.  The level of analysis that is possible is hindered by the lack of depth of data available and the fact that it’s so aggregated. When a question is asked, it requires a week’s worth of gathering to answer. Having a single, central source of data and trusted data stores - that is absolutely critical to be successful. But finance departments really have to invest and control data at the beginning of the process. 

Putting in place a solid data foundation can be a challenging initiative for finance – one that requires rethinking many of the processes around data integration and standardization.  But a finance department with access to granular, real-time, centralized data source is equipped to deliver value to the organization.  

Recently Mark Aubin, Chief Innovation Officer, NA at Aptitude presented alongside Andrea Dwyer from FM Global and David Fourie from KPMG.  During the presentation, Andrea spoke about the need to address their dependence on legacy, home-grown systems. Workarounds were used to deal with currency limitations and other accounting requirements and the legacy systems also lacked the data transparency required for audit purposes.  

After selecting the Aptitude Accounting Hub as the core accounting hub and subledger for their finance transformation, they are now moving towards one globally consistent accounting system with the ability to land the data once and run repetitions across entities and GAAPs. Now Finance can view daily balances on a dashboard that gives them access to relevant analytics and red flag reports and eliminates inconsistencies between reporting periods. The ability to move to a continuous close also means they will not have to make up the gap between when the batch closes and the actual end of month arrives.  Being able to continually monitor the month end close, versus a one-time, periodic close will give additional flexibility to the business and help mitigate risk. 

While it’s tempting to leap into exciting and innovative projects using tools like RPA, Machine Learning and cognitive analytics, these two examples show that the foundational groundwork around efficiency, automation and data preparation must be complete before moving onto these important projects.   

Interested in reading more on this topic?  Visit our digital finance transformation page, where you ca also download our full white paper- From governance to guidance; the finance department's digital journey. 

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