The current state of finance systems in many organisations is significantly undervaluing the finance function and the expanding role of the CFO. According the FSN’s latest research the Future of Finance Systems, most finance systems are able to deliver the basic functions like financial stewardship, regulatory compliance and control, but only half manage to provide the information needed for CFOs to play an active role as board advisor and strategist. A mere 42% say their finance systems enable them to be effective business partners and less than a third say it allows their company to accurately predict performance.
The shortcomings of a legacy finance system can be far reaching. At the most basic level they will restrict the automation and standardisation which are the most pressing priorities for CFOs looking to improve their finance systems. And if those baseline necessities are missing, there is really no opportunity for finance functions to provide the added value and insight that can transform a business.
Value creation is grounded in the strategic insight modern finance systems can generate from the broad and deep well of data within them. This data includes historical financial information that can be used to detect patterns and predict performance, and a wealth of non-financial data that can shed light on market changes, trends, and the accuracy of forecasts and plans. And that’s just the start. Artificial intelligence and machine learning are enabling companies to search and manipulate data that would have been impossible a few years ago.
Having that insight is the most important tool for the new generation of CFO who is taking the lead in providing strategic information, being a business partner, and applying their knowledge to be agents of change. Without it, they will flounder, so why aren’t more companies recognising the necessity for finance systems change?
It’s a familiar refrain – time, money, politics. Senior finance executives complain of too little time to devote to change and they are thwarted by the office political landscape which has for years given more credence to customer-facing applications.
Change comes from the top
But CFOs themselves are not blameless in this legacy inertia. The survey found that 40% of senior finance executives struggle with the technology available to them, and 30% of finance functions don’t have a good understanding of the solutions available in the market. Invariably they don’t have time to investigate their options because 45% are too busy.
There is of course some truth in their dilemma. The cloud has opened up a huge market in finance systems, and in many areas, there are too many options or a lack of understanding. For example, 32% of CFOs think there is far too much choice in the reporting market, and a third admit to not knowing enough about what is available in the Corporate Performance
But ignoring the problem or complaining in 46% of cases that there is nobody willing to tackle legacy systems won’t help. Replacing legacy systems and improving finance efficiency will ultimately save time, and money, while enabling finance to become business partner and strategist to drive the company forward.
However, if most of the investment is going into customer-facing systems whilst neglecting the core financial processes there is a real danger that the back office will not keep up, limiting the bandwidth for critical change and new business models. Bluntly, there is no point making wondrous offers through a website and wrecking the customer experience, because of invoicing errors, failed deliveries and lack of inventory.
So, CFOs need to become more familiar with the finance solutions in the market and more assertive with the rest of the board to press home the considerable business risk of not investing in finance process innovation. FSN’s research finds that only 12% of investment in innovation is finance inspired compared to 50% for customer-facing systems.
The good ship ‘finance’ is listing considerably to one side and CFOs need to redress the balance before it tips over irretrievably.