More than two decades after ERP systems first appeared in the business landscape more than half of all CFOs say that they spend too much time on transaction processing. That was one of the startling conclusions from FSN’s research “The Future of the Finance Function Survey 2016” conducted among the 46,000 members of the FSN Modern Finance Forum on Linkedin.
So how is it possible that over so many years of progressively more sophisticated and comprehensive automation of core financial processes that CFOs still feel shackled to transaction processing?
At first sight the finding seems at odds with the broad success of ERP. For example we know that successive generations of ERP systems have driven down average transaction costs. But most of that success has been around the ability to cope with ever increasing volumes of transactions as companies increased the scale of their operations and broadened their global reach. These days businesses face not just huge volumes but enormous complexity as well.
And it is this complexity that may be driving CFOs over the edge. For example, we know that sorting out an errant transaction takes 80 percent more time to process than a straight-through transaction that is processed correctly first time. So, where is the complexity and what can CFOs do about it?
The complexity lies in at least three areas, namely; digital business channels; the focus on customer-centricity and lastly, the inability of legacy ERP systems to cope with the increasing variety of transactions.
Digital business
Businesses find themselves with a massive choice of channels-to-market brought about by the explosive growth of e-commerce and, in recent years, social media platforms as well. It means that ERP systems have to interact with a variety of sales platforms and sources of data each with their own set of protocols. Adding to the picture of complexity is the variety of new payment channels, especially for consumer-facing businesses.
Customer-centricity
The drive to treat each customer as an individual has piled complexity on an already convoluted sales process. Customers are given the widest possible choice of product configuration (sizes, colours, styles, delivery dates, rewards) all of which add to the burden of recording transactions.
Legacy ERP is difficult to change
Legacy ERP systems were designed for a more certain and less complex era. They are relatively inflexible and very often cannot keep pace with change, without bespoke modifications supported by application specialists and consultants. The delays mean that companies cannot respond quickly enough changes in consumer behaviour, business models and competitor activity.
Time to call change?
It is difficult to see matters improving with legacy ERP and high levels of variability, but businesses can certainly help themselves, by;
- Standardising transaction processes and the technologies that support them, i.e. settling on fewer ERP systems
- Making a conscious effort to reduce sales complexity. Is there a new trade-off between consumer choice and control?
- Moving to more agile cloud-based ERP platforms which help to accelerate process standardisation and increasingly have inbuilt capabilities for configuration that do not require bespoke modification to meet modern needs.
There is no panacea, but if the Modern Finance Function is to successfully transition to a more strategic and advisory role than it must remodel old and ineffective transaction processes that remain such a distraction and take so much time.