Whether your business is in the cycle of exuberant growth or cautious preservation or something in between, finance has a role to own, enable, challenge and help execute the key decisions taken. It is perhaps inevitable, therefore, that at times finance is also perceived to slow things down, bureaucratise, complicate, use technology sub-optimally and fail to respond with the velocity that business demands.
Through the pandemic period, as we continued to partner with CEOs and CFOs to make finance functions stronger, better and faster, one realisation has been crystal clear. The opportunity for finance transformation is not just to transform finance – it is for finance to help transform the business.
Here is our pick of the top five ways to get outcomes that are fast, visible and tangible:
We worked with a large infrastructure company to digitally transform their enterprise procure to pay. It was important to avoid oversimplification, uncover the friction points first, and then the value that often lies at the point of intersection where finance interfaces with other functions. We ironed out the friction first – ease and certainty of claiming tax credit with e-invoicing; purchase order terms simplification; dealing with sub-contractors and work completion; interface between the capital projects team and finance – and worked on the value quotient, resolving the thorny issues with bank integration and online payments. The point is simple – transformation must enable the relevant ecosystem and not solve for a process.
Finance transformation outcomes, by their very nature, often come at the end of a transformation journey – whether it is P&L savings, cash released, enhanced profitability, agility in decision making, increased liquidity, return on capital employed or improvement in effective tax rate. The simple question to ask when you are starting out is: what will change and when? It is essential to push for and gain clarity on the lead indicators from all stakeholders, which then serve as a continuous guide for the effectiveness of execution on the ground.
We worked on a transformation approach for an FMCG company recently with an execution plan that any CIO would relate to, with principles of agility, collaboration and fast iteration. The weekly project meetings with cross-functional teams focused not only on actions taken but on granular and visible changes on the ground, which then helped win trust and communicate micro wins.
We all recognise that to achieve the envisioned future state, transformation ingredients – technology, ways of working, skills and enablement of an ecosystem – must come together and work. But in what mix and in which order? Leading practices and tools often focus on the end state and indeed are great confidence builders for stakeholders. However, to meet the transformation objectives of assigned budgets and the pace of tangible value realisation, the design at all times has to be fit-for-purpose.
For an engagement with a rapidly growing mid-size company, we discovered that the right answer to solve their working capital issues was not to put further pressure on stressed vendor contracts. Rather, it was to focus on better customer relationship management, digitally enable cash forecasting, put innovative financing solutions in place and relook at inventory norms.
In another case, we observed that tax transformation was symbiotic within the overall finance transformation. Resolving data flow issues as part of the transformation journey offered an opportunity to automate time-consuming manual processes and report generation for the tax function. Such industry-leading comprehensive solutions ensure that the future state of transformation helps plug tax leakages, automates reconciliations and enhances transparency, thereby generating greater value for the business.
The magic of transformation occurs in two steps: it is an aspirational reset of the Y (outcome) and a clear distinction between strategies to move the Xs (levers). When the Xs shift dramatically through the sheer nature and quantum of change in a short time period, it is often worthy of being called innovation. Improvements, on the other hand, are equally worthy but additive in nature, and reflect the experience of having solved this issue over and over before.
For an energy equipment manufacturing company, by use of rapid value discovery methods, we identified two clear value buckets within the first four to six weeks. Not only did we make distinct implementation tracks to realise benefits, the aligned investments and timelines were also commensurate with the size of the benefits.
Truth be told, we are already enamoured with digital and its potential to change the mundane transactional finance world. We also understand that the ways we work can be reimagined and generate dramatic results. Yet, when it comes to finance talent investment, we continue to look for payback models to prove to each other that this really works.
We worked with a large global technology company to look into the future and model what their finance and tax workforce would look like in size and shape, what their roles would be and what new competencies they would need. We found that in three years, 50% of the roles would have either changed or disappeared or would need significant upskilling. That finding then led to a new way of looking at competence-building and skilling plans.
Business lives and thrives in a continuous flow of decisions, actions and the resultant outcomes. Through this cycle of value creation, the ubiquitous role of the finance function is both the opportunity and challenge for transformation.