Today’s discerning consumers have come to expect a high level of service and convenience – from targeted shopping suggestions to smart-home assistants and one-click ordering. But businesses have forged ahead with these front-end innovations without a backward glance at the back-end systems expected to support them.
Many finance functions are in desperate need of technological innovation but they’re being held back. Sometimes it’s the CFO’s own inability to make a case to the board, sometimes the difficulty in measuring returns, and in other cases the finance functions’ own efficiency – if the job gets done why spend money on it?
Why does finance need innovation?
The demand for complex reporting and forecasting has become increasingly onerous, and finance functions must collect, collate, clean and manipulate increasing quantities of data to cope with this demand. In many cases, they muddle through using outdated systems and error-prone spreadsheets, plugging the gaps with copious amounts of overtime.
According to FSN’s most recent Innovation in Financial Reporting survey, 25% of CFOs said they spend far too much time on data collection, while 23% spend too much time on cleaning and manipulating the data they receive. All that time could be much better spent adding strategic value. In FSN’s Innovation in the Finance Function survey, 42% of CFOs strongly agree they should be putting more focus on innovating in order “to drive better insights about the business”
How can CFOs convince the board to invest in finance innovation?
45% of CFOs and senior finance executives believe their approach to innovation is too conservative, lamenting that “we do not experiment or pilot new technologies”. And 34% are too afraid to make mistakes so they shelve innovative ideas to avoid errors, according to the Innovation in the Finance Function survey. But after decades in traditional finance roles, not every senior finance executive has the soft skills to lead the argument for investment.
If they are to future-proof their function, CFOs need to demonstrate the often intangible benefits of investment in finance technology, and foster business partnerships with other parts of the organisation to enhance their case for a back-office overhaul. Only a quarter of CFOs believe traditional methods of return on investment are suitable measures for innovation success in the finance function according to the survey. The immediate returns on an automation project might be manpower cost savings, but the intangible benefits might include improved customer satisfaction. Being able to measure these benefits, however they manifest, will increase the likelihood of the finance function receiving its fair share of innovative investment.
Finance – A victim of their own success
Even those CFOs who do have the skills to take an innovative idea (and a strong return on investment argument) into the boardroom confidently, are often knocked back because innovation isn’t seen as necessary.
Despite some very clear obstacles (outdated systems, data mismanagement, spreadsheet confusion), 64% of respondents to the Innovation in Financial Reporting survey said they never miss a reporting deadline. By sheer effort of will, and often a mountain of overtime, finance professionals manage to produce the growing number of regulatory and management reports required of the business.
From the board’s perspective, if the job gets done, why allocate limited resources to a process that’s already working?
The reason is that back office systems won’t be able to cope with the turbo-charged front office forever. When finance is utilising every resource of time and personnel just to produce the required reports and forecasts, there is heightened risk of failure of some part of the process. This might be regulatory (late or incorrect statutory reports), or it may even sabotage the top line sales when orders are incorrectly fulfilled or invoiced.
Finance functions are at an inflection point. Organisations can muddle through another year or two of financial accuracy through inefficient manpower and willpower, or they can take the back office forward, and get all of the business on the front foot.