What is finance transformation?

As a practice, it is suitable for finance teams seeking to streamline, simplify, and optimize their systems through a shift in their approach. Initially, finance transformation describes strategic initiatives that are aimed at reenvisioning the finance function to align with the overall company strategy.

Finance transformation may consist of the restructuring and implementation of the finance operating model, accounting and finance organizations, and accounting and finance processes. It may also involve enhancing financial capabilities, replatforming of finance and accounting systems, and creating a synergy between relevant technologies and suitably skilled teams.

Digital finance transformation is an end-to-end augmentation of strategy, operations, processes, methodologies, business practices, and talent, all combined to deliver more streamlined cost-effective results.

Even though the effort and scale of work that is required to run a successful finance transformation may seem daunting, it is a step that organizations cannot afford to miss in today’s competitive landscape.

Finance transformation strategy helps organizations identify the weaknesses in their finance organization and prioritize the changes that need to be made and define an operating model to support the business and better manage key finance activities. A modern finance strategy must help the organization make the best use of digital technologies. Such as cloud software, automation, and data analytics to create a more agile planning and forecasting function and adapt with evolving business demands.

The execution of the finance mission is to offer financial advice, guidance and support of the procurement process, providing pay support and disbursement. Certain operations are purely financial: loans, issue or disposal of securities. Others are the consideration for an operation covering goods and services or a distributive transaction, leading to a transfer of payment means or a credit.

A finance business process is a sequential set of tasks that takes a set of data to a finished state. For example, this could involve collecting employee expenses, passing that information to managers and finance teams for review, and getting it approved until the employees get paid. A financial transformation can help disparate finance-related business processes that are run in a smooth, coordinated way.

Many organizations have started to expand or develop capabilities but need more investment, resources, and planning in these areas. Finance needs to develop talent with a higher level of nontraditional technical skills, and have teams that can manage the proliferation of automation, AI, and robotics. Stronger capabilities that use real-time data and analytical tools for decision making are needed.

Advances in technology and data have redefined what’s possible for finance. Comprehensive data makes it easier to connect performance across the business. The goal is not simply to automate for efficiency but also to rethink the services that finance offers and how it can add value to the business.

There is no identical operating model to follow when it comes to autonomous finance and companies shouldn't seek to replicate others. However, there are general principles that all companies should follow and incorporate. These include; decision rights, talent considerations, organization structure, performance, sourcing, among others.

Organizations can create a finance transformation roadmap by taking a set of actions and activities and achieving outcomes in a planned sequence.

First, document the current state of your finance function, including process analysis, technology analysis, and the present state of your staff analysis: competencies and capacity.

Then envision where you want your finance department to be in 5–10 years. Conduct a gap analysis of your current state versus the wanted state. Compile the goals, objectives and wanted outcomes, considering internal and external factors, including risks and rewards. Evaluate alternative approaches and assess the options. Select the path that your project team recommends.

Typically, the transformation roadmap is composed of high-level work streams and phases so that incremental delivery is possible.

A successful finance transformation can positively impact the business on a day-to-day basis. It can lower costs, speed up business processes, increase efficiency, reduce errors, and offer easier-to-use data and reporting.

Automating and streamlining business functions can help ensure cost-saving opportunities across departments. And opportunities to conduct business remotely means potentially lower wages and better payroll planning.

Finance transformation includes driving efficiency and speed in operational processes, ensuring that they are aligned and running on the appropriate technology platforms to support improved business processes. A more efficient workflow will also reduce costly bottlenecks that can slow the financial process and also give customers a better, error-free experience.

By automating and standardizing finance processes and systems, organizations can avoid errors and increase efficiency. In addition, having a single source of truth for financial data can further reduce errors and any confusion from stakeholders.

Implementing a centralized finance data hub improves collaboration across the teams and offers opportunities to operate remotely. Combined with improved processes, this can increase productivity and efficiency. Separately, the automation of time-consuming tasks can free up finance team members to focus on higher-value projects.

Organizations are experiencing exploding volumes of data from internal systems, websites, and external sources such as social media. Using emerging technologies, finance transformation can provide a better grasp of the data and the time and tools to analyze what it actually shows and if it is trustworthy.

Many organizations struggle with poorly integrated data. Business stakeholders either cannot find the right data or cannot trust the data that they find. They try to fix this problem through labor-intensive tasks ranging from writing custom programs to global replace functions. Finance transformation can address data management challenges by applying the following emerging technologies.

RPA is a form of business process automation technology that uses software robots to automate tasks performed by humans. In finance, RPA can use machine learning and automation capabilities to speed up time-consuming tasks such as payroll and invoice processing.

AI-enabled technologies allow companies to manage their data challenges while augmenting and enhancing human expertise. These technologies drive new problem-solving techniques that improve productivity and open up new ideas.

Decentralized ledgers create an immutable record of transactions across many internal departments or external partners. The properties of blockchain can lower costs. Using blockchain in the accounts payable workflow, for instance, addresses the root cause of high invoice processing costs while reducing invoice exceptions and payment delays.

The cloud presents an opportunity for the finance organization to create an infrastructure that is scalable, flexible, faster to implement and ultimately more cost effective. Unlike traditional, on-premises financial systems and data warehouses, leading cloud solutions were built from the ground up with today’s requirements in mind: to deliver embedded analytics based on leading processes to the user in real time.

Advanced analytics can help companies derive new insights from their data to answer tough business problems, uncover patterns, optimize decision-making and enhance the customer experience in invoice-to-cash processes.