A new global survey of 700+ senior finance professionals conducted by the Association of International Certified Professional Accountants and Oracle reveals that only two percent of finance organizations have managed to drive down their operating costs over the past 12 months. Even more alarming, close to one-third report that finance operating costs are now higher than they were a year ago.
The good news is that in the same report, Agile Finance Unleashed: The Key Traits of Digital Finance Leaders, my co-author Peter Simons and I describe how focusing on key actions within finance can ignite efficiency and cost savings, and position finance to make valuable contributions to business strategy. The Agile Finance research describes in detail a small group of “digital finance leaders”—companies that have pulled away from their peers in terms of transforming the finance function and the business. Let’s look at the steps that these leaders are taking to create an agile finance function.
A move to a digital finance function is not only an opportunity to improve efficiency and re-engineer legacy processes. It’s also a chance to more closely align the overall business with customer and market fluctuations.
This happens in two ways. When finance specialists are working one-on-one with line-of-business leaders, they are closer to the customer and exposed to more customer-related knowledge. This improves customer-centric thinking and planning.
The second way is the inclusion of external data (customer data, market data, etc.) with finance and operational data. Some digital leaders are marrying point-of-sale and other customer data with finance data, then using machine learning to understand and predict market changes.
This type of analysis and market-driven response simply is not possible with spreadsheets and on-premises ERP; using cloud applications is one thing that sets digital finance leaders apart from their peers.
This expanded role for finance requires an agile operating model, and adopting that model is another way to fast-track finance transformation.
Donald Robertson, VP and Chief Accounting Officer at Western Digital, was a catalyst for a new agile cloud model that resulted in significant benefits for his company and a 2019 Change Agents Award from Oracle. Robertson and his team created a new finance operating model at Western Digital using Oracle ERP Cloud, Oracle EPM Cloud, Oracle Supply Chain Management (SCM) Cloud, and Oracle Analytics Cloud.
The new model transformed finance processes. Purchase approvals shrunk from 16 layers of approvals to just 3-5. The company, which has grown through acquisition, was able to rationalize its supplier count across three legacy companies, from 30,000 to about 17,000. Now Western Digital is more agile and can more easily integrate new acquisitions.
The majority of leaders surveyed in the Agile Finance research (73 percent) are prioritizing creation of finance centers of excellence (CoEs), which consolidate finance subject matter expertise across large organizations into one place. The CoE specialists could be virtually or physically centralized and provide any number of finance services, such as data analytics or external and tax reporting.
CoEs demonstrate the basic premise that should be the foundation of an agile finance operating model: an emphasis on proactive service. The cloud has changed the equation for traditional shared services.
The adoption rate of cloud-delivered advanced technologies at scale is low, so exploiting these technologies creates the potential to leapfrog competitors. Digital finance leaders are aggressively deploying artificial intelligence, machine learning and other intelligent process automation technologies to achieve their goal of becoming a lean, value-creating machine—automating routine processes and optimizing value-added ones.
Digital finance leaders are using intelligent process automation to automate tasks and simplify regulatory reporting. They’re using blockchain to improve cash position through better receipt management, and blockchain-plus-Internet of Things (IoT) to track goods and reduce costs associated with recalls and damaged inventory.
These technologies inherently reduce costs and increase agility because they eliminate a significant amount of manual work and improve operational visibility. Oracle itself is using advanced technologies in cloud-based ERP to shrink process time and work, reducing quarterly manual accounting by 20 percent. The finance team can also reconcile global, intercompany accounts for hundreds of subsidiaries in 5 hours—including M&A transactions and records—in what used to take a week. As a result of these efficiencies, Oracle’s finance staff is now unleashed to focus on higher value-added activities, such as developing global subject-matter expertise in specific accounting processes or account categories across teams and developing enhanced real-time reporting for better business decision-making.
With new capacity such as this, Oracle and other digital leaders can add advanced analytics skills and tools to finance, and thus provide regular strategic guidance to the executive suite while still keeping a tight grip on asset management and reporting.