Article by Rajeev Mitroo, Anaplan A/NZ managing director
In recent years, the role of the Chief Financial Officer has undergone a fundamental change. Where once they tended to monitor performance and report on past results, now they've become more focused on the future.
In response to what is an increasingly fast-paced business environment, CFOs are expected to take a leading role in developing strategies and being actively involved in their execution to ensure stakeholders receive sustainable returns. Today's CFO must help to grow their organisation and help manage uncertainty.
However, while the CFO's role is becoming ever more important, there is often still a gap between the expectations of the CEO and the board as well as expectations around what they can actually deliver. As a result, many are realising they need to find ways to ensure they can have better decision support.
Changing systems and processes
Achieving better decision support is likely to require changes to the systems and processes in place within the finance department, in particular, those that support the core processes involved in financial planning and analysis (FP&A).
Indeed, it might be obvious that changes are needed. Once acknowledged, they become clear evidence that the organisation has outgrown existing processes and needs to evolve.
The eight signs that show you may have already outgrown your financial processes are;
Reliance on spreadsheets
Teams in the finance department are spending too much time manipulating data in spreadsheets and legacy planning systems. Manual processes slow down processing and create delays in provided requested reports.
The issues of using spreadsheets for anything other than personal productivity are well-documented. They weigh down core financial processes, such as planning, budgeting, and financial consolidation, and their usage therefore needs to be limited.
A lack of enterprise-grade security
With the number of high-profile cyber attacks increasing by the day, security has never been more important for the finance department and CFO. If customer and employee records are not secure, a company could be non-compliant with certain laws and end up facing significant fines.
It is widely acknowledged that major cloud vendors adhere to security and encryption standards beyond the level of which a vast majority of traditional organizations can afford. Consider adopting a cloud platform to support your finance function.
An inability to forecast quickly and accurately
Reducing the time taken to plan and forecast while also improving accuracy are top priorities for most organisations. However, finance teams are often hampered by the slowness of their existing planning solution or struggle with the increase in line item detail needed to improve accuracy.
Consider shifting to a new solution that can better cope with large volumes of external and internal data while also removing as many manual processes as possible.
A lack of real-time visibility
In the past, legacy financial systems tended to be built around batch processing which can cause delays when used for planning or financial consolidation. Not only does this compromise productivity and lengthen cycle times, it also limits the ability to run “what-if” scenarios for planning sessions.
One option is to make use of a planning solution built around an in-memory calculation engine which can help to achieve the real-time insight a business needs.
Also, the data structures commonly found in business solutions, such as multi-dimensional cubes and relational tables that have served so well for analysis and reporting, are ill-suited to dynamic modelling. More innovative solutions are needed to address today’s business needs.
No single unified source for data
Widespread use of spreadsheets in the finance department can make it difficult to achieve a single source of vital data. Although data may have originally come from a common source, such as an ERP system or data warehouse, it's likely to have been extracted at different times using differing criteria, resulting in inconsistencies.
Having all planning data securely contained in a single repository is an important step toward unifying disparate plans and delivering integrated planning so an organisation can benefit from the light-touch re-forecasting needed to be responsive and agile in today’s rapidly changing markets.
Concerns about errors
Industry research has found the vast majority of large spreadsheets contain some errors, and this can have significant ramifications when they are used to support FP&A processes.
The only way to mitigate this risk is to centralise all model building on an enterprise planning platform where rules are written in natural syntax and stored in a master repository where they can be easily audited.
Specialist expertise is needed to modify planning models
No matter how reliable a legacy financial planning solution may be, if the underlying architecture is complex and inflexible, finance teams will always be waiting on IT specialists to alter models and keep them aligned with changing business initiatives.
Today, people increasingly expect the business solutions they use at work to be as intuitive and easy to use as their smartphone apps. They want to be self-sufficient and agile, which means having a flexible planning solution that makes it easy for business people to meet their changing enterprise needs.
If they can create new versions, add new dimensions, and change business rules on-the-fly, they will be more likely to let go of their spreadsheets.
Inability to scale with the needs of the business
Many planning solutions struggle to cope with large amounts of data. This is because the architecture and calculation engines that underpin most planning systems were not designed for planning at the individual customer or employee level let alone modelling complex business rules.
It can take many hours to calculate results in most systems, and considerable patience is required when waiting for responses to queries.
If there is evidence of some or all of these signs within your organisation, it's highly likely you have already outgrown your existing financial processes. As a result, your FP&A is going to get increasingly difficult in the future. Clearly, the time has come to re-evaluate your business needs to support your planned future growth.