You already know that finance is not just about the bottom line anymore.
The successful finance teams of today function as partners with their business rather than a department of the enterprise. Yes, you are still responsible for the bottom line; only now, the bottom line must come with data-driven insights based on analytics and predictive modeling.
In fact, a McKinsey study found that CFOs and FP&A professionals are moving toward a model where 80% of the analyses they perform will “focus on prescribing future courses of action” or financial forecasting.
To perform at this level as a finance professional, you must be ready to embrace financial transformation. By streamlining processes and systems through the implementation of financial technology (FinTech), your team can act as partners with the business and fully participate in what we know as modern finance.
What Is Financial Transformation (FT)?
Finance transformation helps executives align their strategy with their mission by streamlining the processes and systems of the finance functionaries.
According to a study by economists at the University of Baltimore, The Economic Impact of the FP&A Role in the US, the average FP&A employee spends more than 75% of their time gathering data and administering the process, leaving just 25% for providing value-added analysis to the business.
So, as the CFO and finance roles evolve, financial transformation also means a digital transformation that will radically “shorten procedures such as the budgeting cycle, and automate entire processes.” This, in turn, allows for the financial functionaries of an organization to design and implement the financial changes the organization needs (and spend more than 25% of the time doing it).
Why You Need to Embrace Financial Transformation
Ultimately, the aim of financial transformation is an agile and cost-efficient organization. Finance transformation is not only good for the longevity of an enterprise, but it also highlights the value of finance as a function (i.e., job security).
Sometimes, a financial transformation involves the adoption of technologies, like corporate performance management (CPM) systems. Or it can lead to a variety of other changes, like shortening a budget cycle, implementing new accounting software, or aiming to reduce overhead costs. Regardless, modern financial teams are expected to do all of that and assist the non-FP&A functions of an organization in making better, well-informed business decisions.
Financial Transformation IRL: Somerville, MA, Water & Sewer Department
The city of Somerville, Massachusetts, automated and streamlined its FP&A processes to help decision-makers and, at the same time, uncovered hundreds of thousands of dollars in revenue for the city.
Prior to the transformation, the finance department longed for automation and agility but was bogged down in manual systems and processes. For the director of the finance department, Alex Marini Lessin, embracing a financial transformation was an easy choice. He wanted “a snapshot of top-line numbers and the ability to keep tabs on up-to-date financial conditions…to quickly pull numbers and give them to decision-makers such as the mayor and his team.”
Somerville’s journey to automation underscores the impact of FP&A functionaries when they can spend less time crunching numbers and more time partnering with the decision-makers.
3 Types of Financial Transformation
Depending on the needs of your enterprise, there are different approaches to consider before starting your journey toward a financial transformation.
1. Close Process Transformation
The close process usually involves many people and even more spreadsheets. Yet, “financial closing is a crucial aspect for any business’s success. During the close process, the finance department busies itself with ensuring that discrepancies are reconciled to provide more accurate financial statements that reflect a company’s actual financial state.”
If your organization struggles with end-of-month or end-of-quarter financial closings, you probably need a close process transformation. Some of the benefits of automating and streamlining these processes are:
- Real-time reporting – Financial automation software gives you dashboards that display critical information, like real-time data that allows your business to make better decisions. Transforming the close process makes closing smoother.
- Error reduction – Close process transformation/automation means fewer manual errors; remember, spreadsheets are only as accurate as the information received.
2. Process Automation Transformation
If the overall slog of manual work slows down your FP&A team, then a complete process transformation is the way to go.
Repetitive manual tasks like consolidation, billing, collections, and accounts receivable, and more specific tasks such as journal entries, account and transactional reconciliations, and intercompany transactions slow you down.
This is where financial process automation comes in. For example, Datarails automates Excel-based consolidation processes.
Datarails adjusts to you and your team. The platform eliminates the pesky task of merging all the different Excel spreadsheets you work with, allowing your employees to spend more time on tasks that matter.
- No more manually merging spreadsheets. Tedious copy/paste be gone.
- Automatic data aggregation reduces manual spreadsheet work by over 75%.
- Automated consolidation saves time, and that time can be dedicated to value-added work.
Process automation is excellent for aligning strategy and resources and frees up the team for business partnering and working with stakeholders.
3. Risk Transformation
Automation improves data integrity, which, in turn, minimizes risk.
Embracing new technology and financial transformation because of exposure from an inaccurate filing or restatement is called risk transformation. Bottom line, making processes as rule-based and consistent as possible makes it easier to back them up with automated corrections, adjustments, and review processes. Risk transformation is all about mitigating risk and, at the same time, developing a competitive edge. The bigger the enterprise, the more data you generate and the more vulnerable you become to costly mistakes and risks.
The objectives of risk transformation are to combat and then differentiate to create solutions that keep your enterprise fiscally responsible, alive, and thriving.
Gain a Competitive Edge with Datarails
TL;DR: Here is what you need to know about financial transformation:
- Finance is evolving. Rising expectations of the function mean that finance leaders must find ways to deliver more while maintaining stricter controls and keeping up with a changing and turbulent environment.
- A successful finance transformation involves understanding which type is perfect for your enterprise (close, process, or risk transformation).
- By embracing financial transformation, your FP&A team can channel their efforts toward more value-added tasks like strategy and analysis.
- Finance transformation is not only essential but also necessary. Aligning finance with business strategy is the best way to ensure that the executive team gets all the information they need to make the best business decisions for the organization.
You can level up with Datarails. Our enterprise-class FP&A solution empowers each finance professional to deliver actionable, data-driven insights independently.
CFOs, accountants, and FP&A professionals love working with Datarails because it reduces inefficiencies without having to change how you work in Excel. Datarails also strengthens the connection between finance and operations to drive better organizational decisions.
Want to learn more about how Datarails can help facilitate your financial transformation?
- Learn more about automating your budgeting and forecasting, financial reporting, or financial closings.
- Play around with our dashboards to see how they can work for you.
- Or read more use cases to see how embracing a financial transformation can impact an entire organization, not just your FP&A team.