Measuring The Impact of Finance Digital Transformation

This interview is taken from an episode of the Spend Culture Stories podcast. In this episode, Nilly Essaides from the Hackett Group chats with us and discusses what digital transformation looks like for the finance function, how tech will impact future work and what the trends look like for 2020 and beyond, and why usability of tools is even more important now in this day and age.

About the Podcast:

Your company culture might attract talent, but your Spend Culture will make or break your company. Spend Culture Stories is a podcast that helps finance leaders learn the tactics, strategies, and processes to build a proactive Spend Culture. Learn how to pick the right tools, implement the most efficient processes, and how to develop the right people to transform the Spend Culture of your organization for the better.

Measuring the Impact of Digital Transformation in Finance

Nilly Essaides is the Senior Research Director – Finance at the Hackett Group. Nilly is experienced with writing, webcasts and meeting facilitation, and speaking on issues ranging from FP&A to finance transformation to Treasury Management. As Senior Research Director,  she’s responsible for the Finance, EPM and Financial Operations Practice’s research agenda to support Hackett’s leading finance advisory practice. 

Prior to the Hackett Group, Nilly led The Association for Finance Professionals (AFP)’s FP&A practice, including all content initiatives, from editorial to educational conference sessions.

In this episode, Nilly chats with us and discusses what digital transformation looks like for the finance function, how tech will impact future work and what the trends look like for 2020 and beyond, and why usability of tools is even more important now in this day and age.

Speakers: Nilly Essaides, Senior Research Director, The Hackett Group

Featured Quotes:

Q: What are some of the current gaps in the market for finance technology when it comes to accessibility and usability?

Usability is a huge issue and even more so, although not only because of the introduction of a whole new generation into the workforce. So, increasingly we see younger millennials coming in to finance and expecting to have the same technology experience at work that they have in their private lives. And that’s not how finance systems had been designed. In the past, they were kind of clunky and not very user-friendly. And that must change because, otherwise, they’re going to leave. If they go into your environment and it’s really low tech, they’re going to look for a different environment.

Millennials move through jobs more quickly and more of the things they look for is that savviness, that experience. So, I think applications need to be set up from the start by vendors to run on mobile devices, for example and using things like drag and drop capabilities.

And there’s got to be a modernization or an update of the customer experience through whatever it is that is the front-end interface to the user. But it’s not just about millennials. I think it’s going to be a lot easier for everyone. Increasing demand to work with these technologies. If technology is simpler, cleaner, user-friendly, we will see existing workers and older workers adjusting much more rapidly.

Q: So, digital transformation normally can mutually work when there is buy-in from both the company and executives. Buy-in, as sure you probably know, it’s usually something that is really challenging for a lot of organizations. So, from your experience, how do you think you could get the whole company on board with a new solution pioneered by finance?

You really do need to look at digital transformation as a major transformative event, just like finance has looked in transformation in other aspects in the past. Transformation and change are hard for a lot of employees and staff to accept and as well as senior management.

So, a couple of things that finance can do to make it more likely that it gets the support it needs and the transformation is successful is to increase its visibility or perhaps commend its status within the organization where finance is often viewed as a control and compliance.

You can do that by highlighting success stories, incidents, in which finance has added value to the business and providing insight in strategic meetings and management decisions so that both management and the company has a much whole financing greater value and estimate. And I think that’s very important because when they come up with a new idea, let’s digitally transform, it’s going to work better. There’s going to be better support.

Q: What Does the New Role of the CFO Look Like?

From our research, we see the role of the CFO changing quite dramatically and demand from finance stakeholders for Finance to play a much more strategic business value-add role. And in our data and experience with clients, there’s certainly a shift in the focus for finance from being a number-cruncher, control-type function into one that is more strategically focused and therefore, has an impact, is a catalyst for transformation and change for the enterprise.

Q: So, a really interesting topic we’re playing around at Procurify is getting all your employees to think like CFOs, to kind of be these finance partners within an organization. How do you think an organization can do this and how can finance support this initiative?

I think the CFO today as I was just saying are thinking much more broadly, are thinking much more strategically. So, thinking like a CFO to me means looking at the bigger picture, looking beyond your own function, your own business, your own role, and understanding how you fit within that enterprise structure and achieving the enterprise objectives.

The other part of it where Finance can really support, CFO-like thinking across functions and businesses is by taking on a more disciplined approach to planning. So, it keeps a constant eye on generating shareholder value.

For example, finance can work with business leaders, show them how their plans align with the overall enterprise objectives of achieving the targets.

The other thing finance can do is create a greater understanding of the cost-benefit ratio. So, putting in place cost management methodology, like zero-based budgeting, that really surpasses the actual benefits of investment. So, it’s a more disciplined approach, a more sustainable approach. Everybody has clarity and visibility into what their expenses and what their investments are doing to the overall company.

Q: Sometimes when it comes to spending on behalf of the company or when it comes to current expenses, there is this question of whether the control should come from the top down or whether it should be shared within the company. So, how should someone balance accountability and control versus freedom and accessibility of this data and these controls?

There’s certainly a very fine line that you have to walk because you want your business to be innovative, creative, respond quickly to changes in the very fast-changing environment, and the evolution of new competitors almost overnight.

But you don’t want managers allocating resources, I’m going to say something, I actually don’t like when other people say willy Nilly.
But I think it’s very appropriate in this case. You don’t want a culture of spending where there is no accountability.

So, one effective way, I think, to balance these two seemingly contradictory trends is adopt a different planning mindset and budgeting mindset and forecasting mindset by the finance organization. For example, we see companies, organizations at the leading edge of financial planning, establishing a rapid deployment team to activate what is set up as a standalone of emergency forecasting process when something big happens.

So, we see that happening more and more and that contributes to agility which is really where you want to be if you want to succeed in this current business environment.

Q: For organizations that are not ready yet to take the big jump towards maybe something like robotic process automation (RPA) or technologies such as AI, what other ways could they do to kind of automate their entire processes?

So, the first step is to optimize what you’ve got and then modernize what you have or eliminate things that are no longer working or look for a new solution where there is a need with whatever you have is not working as well.

So, I think using cloud-based solution is perhaps the first and most important step to setting yourself up for future from some transformative change through technology because we create the platform to which you can easily bolt on all kinds of things. You can embed A.I. in it, you could put a robot on top of it with a much more flexible platform.

So, I think that’s probably the first step before you dive into some more advanced technology. Although RPA is kind of new, it’s not exactly new, it’s always been around and it’s very quickly implemented and produces quick benefits. You don’t have to be a rocket scientist to do it. You need to use some kind of external help to transfer this knowledge. So I think RPA is not really a farfetched move yet for finance. It’s really right there at their fingertips.

Q:  think one also very important thing that a lot of people care about is the ROI. I know you mentioned this a little bit that some organizations, they get frustrated when they implement some sort of vendor solution and they don’t really see the specific cost savings yet. So, I’m curious from your perspective, how can one really measure that kind of ROI of an effective finance solution and what key indicators do you usually use?

We look at that very carefully because as you said, as I said, the costs, immediate dollar and cent savings may not be as apparent until you really scale up. But one of the things you can look at is the quality of processes and whether or not that has improved. We did this analysis end of last year where we used, we have a pretty extensive benchmarking database of hundreds of companies and thousands of finance benchmarks. We used that and applied the filter that really discerns who is technology-enabled, highly technology-enabled, low technology enablement and measures the difference in process quality and effectiveness between those populations.

And what we found is the highly technology-enabled finance organization also had more effective processes and those can be measured quite easily with metrics like cycle time, metrics like error rate, metrics like the percent of the time the staff spends on hands-on collecting and compiling data versus analyzing it. So, these are three indicators of how you can assess the effectiveness results of your automation project.

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