The CFO’s responsibilities have grown incredibly over the past few decades, evolving from resident bookkeeper to today’s business and strategy enabler. Executing that role requires finance functions that have evolved too, from mere systems of record to high-value functions that help the business predict and plan. Yet in many organizations, finance systems are still optimized to support outdated models. Here are five warning signs that indicate finance and accounting (F&A) functions aren’t delivering the value the modern business demands.
The CFO isn’t given the resources to meet new responsibilities.
CFOs are expected to rapidly implement digital finance and analytics capabilities that offer company-wide value. The business needs insights for planning and pre-empting external business and economic factors. However, many finance and accounting systems and procedures remain limited to risk and performance management. Systems directly related to products and services typically take priority for investment dollars. In addition, in our experience, many companies have a limited supply of talent with digital finance and accounting analytics skills. In short, the CFO lacks the tools, processes and people required to interpret finance and accounting data, develop insights and rapidly respond to drive effective business decisions and outcomes across the enterprise.
M&A activity has led to a wide variety of disconnected systems.
Multiple — usually disconnected — enterprise resource planning (ERP) systems make finance and accounting operations especially complex, costly and clumsy. The proliferation of ERP systems is a natural result of mergers and acquisitions, yet few companies define strategies and best practices to unify or harmonize multiple such systems and related reports or charts of account. Connecting these systems to get reliable data typically requires considerable manual labor and slow processes. Risk of inaccuracies goes up. Yet the risk and cost of replacing these business-critical, still-operational systems are such that many companies continue to use manual workarounds to organize their financial data.
Finance systems and operations are not truly standardized.
Because most companies forgo the risk and expense associated with connecting myriad inefficient systems, they find it difficult to standardize F&A processes and data formats because of system disparities. Subsidiaries posting customer cash receipts on different schedules and policies across multiple legacy systems can lead to inaccurate credit exposure and inaccurate cash-flow forecasts. These and other nonstandard processes contribute to additional operations spend, slow reconciliation, extend period close and delay P&L reporting. Further, nonstandard processes make it difficult, if not impossible, to quickly gather and analyze data for identifying emerging trends and risks.
Data quality is questionable.
Old and fragmented ERP systems plus disparate processes can lead to limited, incomplete and potentially inaccurate data for business users. That situation is aggravated when data architecture and reporting are not designed to make finance and accounting insights easily available to business users. When data, such as customer receivables or vendor payables information stored in different formats, is manually extracted from disparate systems, harmonizing it to ensure apples-to-apples comparisons is tedious — and may still not inspire confidence for making high-stakes decisions based on the data.
Modernization resources are minimal.
CFOs want to bring in next-generation technologies to advance finance functions and be a stronger partner with the business. However, most business stakeholders do not see investments in F&A technology as generating business value. This situation is exacerbated because many F&A organizations don’t have analysts trained to use data for strategic planning or business trend analysis to prove the worth of upgrading F&A systems. Expensive, time-consuming technology implementations are unlikely to be approved — and may be obsolete by the time they are implemented given the rate at which technology is advancing.
CFOs don’t have the time or expertise to cobble together the analytics, process redesign and new systems required to address these issues. Fortunately, platform-based strategies including prebuilt automation and advanced analytics for digital finance and accounting deliver these much-needed, modern capabilities with minimal capital investment and efficient operating costs, as we cover in our next article.