Innovation is constantly on the lips of business leaders. We live in an environment where costs have been cut to the bone, price control is slipping from everyone’s grasp and growth rates are in low single digits. Against this backdrop, innovation offers a way of breaking out of the pack, delivering superior returns and gaining market share. According to FSN’s Innovation in Financial Reporting Survey 2018, the best performing businesses don’t just invest in innovation, they ensure a balanced approach between customer-facing innovation and finance function innovation. Yet the survey found that nearly half (49%) of finance functions are losing out in terms of attracting investment. Instead “most of the innovation has been in customer-facing processes first (for example, CRM, Web analytics, Digital marketing, Social capability, chat) with back-office finance systems trailing behind,” according to the CFOs and senior finance executives surveyed. Only 28% of businesses take a consciously balanced approach.
But the pursuit of an entirely customer-centric approach is severely misguided. What the rest of the C-suite may not appreciate is that spreading digital innovation and ensuring that finance and operations are on the same page benefits the entire organisation.
Finance functions that are early adopters of technology win out in three principal ways:
1. They deliver superior performance
Finance functions that have an active culture of innovation, make time for it, reward it, and play an active role in innovation across the enterprise drive undeniable benefits that accrue to the organisation as a whole. They forecast more accurately, reforecast more quickly and close their books faster.
2. They attract and retain the best finance talent!
88% of CFOs say they would relish the opportunity to lead a truly innovative project, with 73% going as far as to say they would change organisations for the opportunity to be involved with leading-edge innovation. Innovation introduces vigour and sets a positive tone for years to come, ensuring a succession of finance leaders. Success breeds success!
3. They ensure the entire business thrives
Finance functions that share the innovation mantle with their customer-facing colleagues have a much healthier outlook. They are less troubled by cultural failings and inhouse politics, they are less risk averse and can more easily make a business case for change.
Despite the overwhelming benefits of a balanced approach to investment in innovation, 11% of finance functions rarely if ever discuss innovation and a further 54% say they would like to be more innovative but rarely get the time, funding or support from the rest of the board to invest in finance process innovation.
Unsurprisingly, finance functions that do not pay attention to innovation fret that they are unable to best serve the rest of the organisation and, more worryingly, that this shortcoming is jeopardising the success of the organisation.
Innovation doesn’t have to mean the very latest leading-edge technology (AI, Machine Learning, Data Science etc). The survey found that for the largest cohort – 35% – innovation meant relatively small steps in automation and integration rather than wholesale change to something completely new. The range of innovative activities described by these survey respondents was extremely diverse and included the automation of tasks in the monthly close; a move to self-service accounting; remodelling the accounts payable process; and for a few, the implementation of time and expenses management.
For another 20% of CFOs and senior finance executives, innovation meant the implementation of a new ERP system (either in the cloud or on premise) and for a further 19% it was investment in analytical applications that deliver better insight.
On this basis, innovation is within the grasp of every finance function. The challenge for the modern finance function is to make the case for change…….and quickly.