FSN’s 2018 “Innovation in the Finance Function” research confirms the crucial role that innovation plays in finance function success. The study, assembled the views of more than 1,000 senior finance professionals globally, and reveals that not only do innovative finance functions reforecast the enterprise more swiftly and accurately but they also close the books more quickly, which is a key measure of finance function effectiveness.
The contrast between those that embrace innovation and the “laggards” that don’t even discuss innovation is very marked. 30% of truly innovative functions (defined as early adopters of technology, that have an active culture of innovation, make time for it, reward innovation and play an active role in innovation across the enterprise) can close the books within three days, compared to just 17% of laggards. Equally, striking is the fact that 55% of true innovators can forecast revenue to within plus or minus 5%, compared with just 31% of the laggards.
But the true innovators also enjoy more subtle advantages, and chief amongst these is the luxury of time. Previous FSN studies specifically around planning, budgeting and forecasting PBF) show the importance of process standardisation and automation as well as manging data in a unified environment, rather than being vulnerable to data scattered across the organisation in different databases and data sources. As more finance functions strive to transition from their traditional roles steeped in financial stewardship and good governance to a more strategic role, it is the availability of time that makes the difference to their contribution. Innovation around core financial processes, for example, migrating to modern PBF systems in the cloud, liberates the time that finance functions need to devote to business partnering.
Although technology plays a vital role in innovation and finance function success, it’s not the whole story. The survey shines a light on the behaviours that characterise true innovators in the finance function. In almost half of all organizations, cultural failings and in-house politics block the path to change, but innovative finance functions are not easily derailed by in-house politics and cultural barriers. They embrace innovation and do not punish failure. In fact, they see early failure as part of the learning experience.
People top the list of ingredients for successful innovation in the finance function. 87% of senior finance professionals say they need people capable of implementing change, for example, an “Innovation Champion”, i.e. someone to manage and drive the processes and technology that will effect change. Lamentably, 45% of CFOs and senior finance executives cited a lack of technology-savvy talent in the finance function as an obstacle to innovation, yet only 18% of truly innovative organizations cited lack of technology-savvy talent as a stumbling block to innovation.
Incorporating innovation objectives into personal appraisals and a dedicated budget for innovative ideas are also drivers of change, and this goes to the heart of cultural buy-in for innovation across the organization.
But leading CFOs also know that innovation must be driven from the very top of the organization, permeating the ranks from senior management downwards, instilling a culture of innovation and tying it to personal development goals.
The good news is that success breeds success. Innovative finance functions attract innovative people. Almost 90% of senior finance executives would relish the opportunity to lead a truly innovative project, and 73% would even change organizations to be more involved in innovation.