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Does your organization need finance transformation?

Imagine the following scenario: You’re unable to close your books within 20 days — even though your finance function is overstaffed and, because of this, 25 percent over budget.

You aren’t clear on what is driving the inefficiency and you need to cut costs — but how can you do that when you need all your staff to complete the various processes you’re tasked with?

In situations like this, finance transformation can be the solution you need.

What is finance transformation?

Finance transformation is the process of helping finance organizations meet their tactical needs, optimize performance and deliver strategic initiatives throughout an organization.

Nintex Promapp® partner MorganFranklin, suggests focusing on three key areas:

1.  Operational efficiency and resource deployment

Examine whether things such as record-to-report and the close process, order-to-cash, and procure-to-pay are set up as efficiently as possible. Common challenges in this area can include manual operations, duplicate work or rework, a lack of resources, outdated or overly-complex systems, faulty data validations, and data quality errors.

Of course, it’s key to identify the root causes of any inefficiencies before you can understand the opportunities for improvement.

2.  Speed to insight and quality of decision making

Assess whether finance is informing the business the way it needs to in the areas of budgeting, planning, and forecasting; performance management reporting; business performance analysis; and cost management and analysis.

Ad hoc reporting, duplicate Excel reports, a lack of a central data source, conflicting data definitions, limited forecasting, limited analytics and variance analysis that isn’t linked to operational drivers can all pose problems. Understanding the information needs of the business is critical to driving the financial planning and analysis side of the business.

3.  Strategic business alignment and the use of emerging technologies

Examine whether finance is an effective partner that’s aligned with the business and engages strategically with it through the right service delivery model, finance organizational design, finance talent management, and leveraging emerging technologies such as robotic process automation (RPA) and machine learning.

Undefined or conflicting goals, outdated metrics, a lack of cohesive partnerships, gaps in accountability and minimal post-acquisition planning are among some of the most common challenges organizations face in this area. By becoming better aligned with the business and leveraging the right technology, finance can help ensure organizational success.

How can you tell your organization needs finance transformation?

There are several situations that can result in an organization being involved in finance transformation activity, whether they call it that or not.

  • The most common example is a transaction or a big event like an IPO, a merger or divestiture. In addition, the implementation of a big system — like an ERP system — can shine a light on problem areas. These examples often result in the need for triage or rapid execution of solutions.
  • A second category of drivers of financial transformation is the common issue companies face where they realize there is a need to optimize processes and operations. This is often revealed when there are performance issues or you’re simply struggling to complete tasks, let alone achieve your operational goals. That’s a warning sign, too.
  • A third way companies get involved with financial transformation is more strategic and maturity focused when a new leader comes into the company and needs to understand how finance is performing compared to what the organization needs. In short, change in finance organizations can be driven by the urgency to stop the bleeding, the need for optimization of common cycles, or the need for an evaluation of the role of finance.

The four enablers of finance transformation

Because finance transformation involves adapting processes to help the organization become more efficient and strategic, it involves a cultural change.

Many initiatives fail because organizations don’t incorporate robust change management to ensure the transformation is properly planned and carried out.

Finance transformation, like any process, involves four enablers: people, process, data, and technology. All four enablers need to be deployed appropriately for the transformation to be successful and sustainable. It often happens that an organization doesn’t understand the full importance of all four enablers and tries to compensate for one that’s lacking or failing.

For instance, let’s say an organization has an inadequate integration of its billing and ERP systems. To achieve its objectives, it uses a manual process to extract reports from the billing system, send them to accounting for approval and then upload them into its ERP. This is an inefficient, labor-intensive process that could result in the need to hire additional people. In addition, because data is being manually handled, there’s a certain security risk involved.

Note that this type of problem usually doesn’t appear until overhead is significant and cuts need to be made. However, if the organization reduces staff levels instead of addressing its technology, it will cause gaps in the process — and performance will really start to suffer. Now, if the organization decides to leverage technology instead, it could create an automated, streamlined process that’s both accurate and secure.

Although it’s relatively easy and affordable to invest in technological solutions nowadays, even the best technology isn’t sufficient by itself. In order to implement a new system, you need to assess your requirements and take the up- and downstream consequences into account while at the same time factoring in the other 3 enablers. Only by doing this can you attain a complete understanding of your needs and design the right solution.

Crawl, walk, run

Because it involves a cultural change, finance transformation isn’t something you can achieve overnight. Instead, it’s an organizational evolution that requires continuous improvement in order to make it to the next stage — much like a crawl, walk, run maturity model. And it’s often helpful to get an outside perspective to see where you actually are, where you need to be and how you can get there.

MorganFranklin begins the process of finance transformation by setting up a regular, accurate finance reporting cycle that enables them to get adequate information to the decision-makers who need it. By fostering a culture of continuous improvement to facilitate the streamlining of processes, organizations can become best-in-class, with the ability to determine how future business decisions will be financed and how finance can consistently be leveraged to align to the corporate strategy.

A success story

One example of a success story is a multinational telecom company that redesigned an end-to-end procure-to-pay process by automating invoice validation, as well as the accrual process. This resulted in a 20 percent savings in unnecessary operating costs, which amounted to $70 million per year.

Clearly, finance transformation can result in increased efficiency, more informed decision making and a more strategic partnership between finance and the business.



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