Blog

Demand for Business-critical Insights and a Challenging Market are Accelerating Digital Transformation

Despite a challenging environment, CFOs know what they want to focus on.

Companies and finance organizations are poring over data looking for clues on where the economy and markets are headed. The multiple forces of uncertainty, recession, inflation, and political risk are reshaping organizations:

  • evolving stakeholder expectations
  • continued market risk and volatility
  • digital transformation
  • changing skills and talent needs
  • regulatory change and geopolitical risk

Nonetheless, CFOs know where they want to focus their organizations’ transformation. CFOs’ top 5 priorities, according to The Hackett Group’s 2022 CFO Survey are:

  • invest and accelerate Finance digital transformation
  • serve as a strategic advisor
  • secure finance data and turn information into insight
  • skill up and retain finance and accounting talent
  • foster a nimble mindset and enable finance agility

Invest and accelerate finance digital transformation:

CFOs have digital acceleration as their #1 priority. But a problem exists: 63% of CFOs indicate that the risk of a structural skills gap may impact their digital transformation plans. For record-to-report professionals, the timing is very good for making the case for enhanced investment. But first, companies must optimize their existing technology investments and assess the impact of any gaps that remain.

It is common for organizations to implement their technology solutions using a Day 1 / Go-Live Standard: “Let’s be functional enough to get the core work done. Later, when there is time, we will circle back and optimize”. The problem with this approach is that companies seldom circle back to optimize, or they do not do so timely or with the necessary urgency. Companies must, given the pressures they face, optimize their existing investments. It is imperative that they dedicate a team and develop deep solutions subject matter expertise.

ERP solutions are good at what they are primarily designed to do, but they lack when it comes to end-to-end record-to-report processing and management – they generally do not provide the detailed capabilities necessary to fully transform and automate record-to-report. Forward thinking companies have a robust technology roadmap that leverages purpose-built solutions, irrespective of their ERP situation.

Service as a strategic advisor:

Record-to-report professionals need to provide and enable value delivery. This can be done directly, by providing insights and reporting that goes beyond the historical, and that reflect an understanding of the business and business drivers – by providing more insightful information. This can be done indirectly by establishing proper foundational underpinnings. For example, establishing a master data management model that provides clean and comparable data.

Strategic value is provided by getting easily digestible (e.g., visual) data and insights to the right people at the right time. The record-to-report process is about gathering data, vetting it, classifying it, summarizing it, and providing it to decision makers, all while safe-guarding assets and providing controls related to financial reporting.

Most companies have, over the last 5 years, improved the operational excellence and business value delivery of their finance function and of the record-to-report service delivery model. The challenge is that internal customers have gotten more demanding in their expectations – most record-to-report organizations are getting better but not fast enough. The imperative persists: record-to-report organizations must master service delivery model decisions and alignment: technology; service design; analytics and information management; organization and governance; service partnering; human capital.

Secure finance data and turn information into insight:

It is an unfortunate reality that many of the data issues that result from broken processes fall to record-to-report to deal with. Top performing companies have a relentless focus on process quality and are quick to respond to breakdowns in process. It is imperative that record-to-report leaders be involved in organization decisions about master data management, end-to-end process ownership and reporting strategies and information management (e.g., charts of account, data lakes and data marts, tools).

In order to turn information into insight an organization must have a highly performing close and consolidation process. Many organizations are looking to improve their close and consolidation cycle time but improving is just the first step – optimizing is the strategic goal for top performing companies, who are working toward the possibility of a “touchless close”.

Improving the cycle time is an important objective and measurement, however, it is only a portion of what is important. Beyond cycle-time reduction, companies need to focus on optimizing the close and consolidation process. Optimization is more encompassing, and includes improving controls, building in agility and scalability, reducing process variability / making the process predictable, flattening the close curve, and driving skills enhancing opportunities.

Skill up and retain finance and accounting talent:

According to The Hackett Group survey study results, 61% of CFOs expect data democratization to empower citizen data scientists. However, companies of all sizes, industries, business models and levels of maturity are challenged with finding, attracting, hiring, and retaining talent of all types. There is a war on talent. For the first time, employees have the leverage over employers. This is not a short-term issue. Demographics ensure that this will continue years into the future.

The risk is real. High turnover and inexperienced personnel, whether early in their career or later in their career but new to the organization, bring uncertainty, management demands, and, potentially, control risks. At the same time, workers are demanding skills enhancing assignments or they will leave the organization. The onus falls to record-to-report leaders to create an attractive and skills enhancing environment.

Standardization and automation are imperative to process efficiency. Benchmarking data from The Hackett Group shows that leading record-to-report organizations have 21% better operational excellence than the typical company. Fresh thinking about The Art of The Possible must infuse the people, process, and technology decisions that organizations plan for, and make, and must drive the foundations necessary to provide skills enhancing opportunities. Without this, CFOs will not be successful skilling-up and retaining talent, and the company will never become an employer of choice, or even competitive in the marketplace.

Foster a nimble mindset and enable finance agility:

Accurate numbers and timely reporting are table stakes for record-to-report organizations. The focus should be on value-delivery, and process agility and organizational scalability for future demands (e.g., growth, M&A).

Companies need to be aggressive in their transformation efforts and drive to much higher levels of automation in their roadmaps, and service delivery model.

If you can’t see it, you can’t measure it. If you don’t measure it, you can’t properly assess it. If you do not have visibility, you are flying blind as a manager. Enhanced capabilities exist on close task monitoring that allow organizations to capture all that occurs during the close process –it provides real data on what occurs during the close process, when it occurs and by whom. This knowledge is integral to transformation steps and design.

Leading companies are focused on understanding the risk inherent and associated with their balance sheets. It is imperative that companies have an efficient and comprehensive mechanism for performing controls related to the balance sheet. Enhanced controls and increased visibility are pre-requisites for companies to become more sophisticated in their understanding of balance sheet risk.

Work from home agility is the new normal. Eighty-Seven percent (87%) of the respondents to The Hackett Group’s 2022 CFO Survey indicated that their organizations will be using some form of hybrid model as their permanent model going forward. Extensive automation and process digitization is foundational to the long-term success of a hybrid remote model.

Final Thought:

Digital transformation is too often assumed to be an immediate fix, but it takes effort. Finance leaders must remain laser-focused on delivering real performance improvements and adding value to the enterprise. Research from The Hackett Group indicates that organizations should focus on reducing self-imposed complexity and mastering digital transformation complexity as foundational elements to improving finance enterprise value contribution and to building the next-generation workforce.

Written By: Bill Marchionni, Account-to-Report Advisory Global Program Leader, The Hackett Group; Stephen Ferguson, Account-to-Report Advisory, EMEA Program Leader, The Hackett Group