CFOs around the world increasingly recognize that the standards for their finance functions’ responsiveness and credibility are being raised, and that yesterday’s processes and solutions will no longer be able to deliver information that provides a competitive advantage.
To regain this advantage, leading-edge finance chiefs are acting to make sure that the financial planning processes and systems of tomorrow will deliver “instant insight” — based on highly credible data that enables corporate teammates to act confidently, decisively, and correctly.
The clear desire for instant insight was a key finding of a recent global CFO Research survey of more than 300 senior finance executives from companies with more than $500 million in annual revenue. The survey, sponsored by SAP, sought finance executives’ insights into how well the current systems and processes their companies use for financial planning and analysis (FP&A) are able to support management’s need to keep up with an accelerating flow of information.
So, what will the finance function of the future need to look like as it adapts to the pace of decision making in a fast-changing, global business environment?
Instant insight allows managers across an enterprise to dynamically plan in the moment — that is, to develop instantaneous responses to business changes using up-to-the-minute data sets of any size at any time. Nearly all survey respondents (94%) agree that, over the next two years, the ability to dynamically plan “in the moment” will become much more important for their companies in allowing them to react to a fast-changing business landscape. In addition, almost all respondents (93%) expect that, in this environment, their finance functions will feel increased pressure to provide managers with instant access to financial information.
For a CFO and a finance team, delivering in-the-moment insights first requires processes and systems that seamlessly access all the data, quickly, with total confidence that data is complete and correct. Without this certainty, the swelling flow of information seen in many organizations poses the danger of overwhelming historical decision-making processes and overloading information systems.
In the survey, a director of finance for a large U.S. manufacturer highlights the challenge at hand: “We have lots of high-quality data being managed in silos in the different functional areas. This data is supported by good logistics and financial systems. However, all this data was telling us different stories depending on its origin (sales, logistics, finance…). We lacked a single story of what was happening.”
The survey also confirmed that business managers are increasingly reliant on their companies’ finance functions for the most current and credible financial data, as well as the most insightful financial analysis. In the survey, finance executives describe a future environment in which they are required to work more closely with other managers to provide analysis that is based on the most current and the most credible financial data. Nearly 9 out of 10 respondents (89%) say that, over the next two years, they expect pressure will increase to boost the confidence of decision makers in the credibility of the data they use for decision making.
Interestingly, respondents are split between having too little data (32%) and having too much (30%). (See Figure 1, above.) In addition, respondents indicate that, to some degree, they find themselves sacrificing data quality in order to share financial analysis with managers more quickly. More than 6 out of 10 respondents (63%) say that the need to get financial analysis into management’s hands quickly means that the data is not as accurate or reliable as it could be.
Respondents also recognize that there must be a commitment to improving the manner in which instant insights are shared. One way to share data with functions across the business is through visualization tools. Most respondents (87%) expect that their finance functions will be called on to provide insightful and interactive visualizations of financial information.
One of the biggest obstacles finance leaders say their functions are grappling with is the amount of manual intervention required by their current systems. The more time finance professionals spend in making sure that data generated by different information systems matches up and is credible, the less time they have for working with business managers to provide high-value financial analysis.
As the controller of a large U.S. company in the transportation industry explains, “[The lack of an automated] financial planning and analysis tool means manual, time-consuming processes to produce budgets, trends, and forecasts.” With manual processes comes the need to devote more finance resources to transactional and compliance activities, leaving fewer resources available for higher-value analysis. Finance leaders most often identify the increasing complexity and volume of reporting and compliance requirements (32%) and the day-to-day requirements for transactional activities (31%) as the biggest hurdles to making strategic contributions.
Other respondents report that one of their biggest obstacles is that the information tools they are using simply are not up to the task. Many see their current financial planning systems falling short of the demands they expect will be placed on them: nearly 9 in 10 respondents (87%) believe that the processes and systems they currently use for FP&A will require substantial improvements in order to support the need to dynamically plan in the moment.
Another factor weighing down finance’s ability to deliver timely and accurate data is the data migration process. Respondents recognize that they could improve both data quality and the finance function’s responsiveness by reducing the need for migrating financial data from one system to another. So, for example, nearly three-quarters of finance executives (74%) say that improving the ability to share data seamlessly between ERP and financial planning systems would also provide greater assurance that planning data conforms to actual data. The implication is that, with more-integrated systems, finance could spend less time on manual tasks and validating data, and more time analyzing the data to contribute business insights.
Respondents are optimistic that integrating ERP and FP&A systems can clear many of the communication and analysis roadblocks that prevent instant insight from being realized. More than three-quarters of respondents (76%) view close integration between systems as a way to increase collaboration among users.
An equal number (75%) view close integration between systems as a means of improving the usefulness of financial data by allowing greater flexibility in and customization of financial analysis. Other benefits include boosting responsiveness to rapidly evolving business conditions (72%) and improving the ability to develop a “single version of the truth” (70%). (See Figure 2, above.)
In sum, the survey confirmed that making wider and more effective use of financial data in a fast-changing environment is capturing more and more of the CFO’s attention. While it appears that the path to achieving instant insight will require finance to focus substantial attention on this goal, at least the path appears reasonably well marked.