All You Need To Know About Modernising The Finance Function

What is Modernisation of Finance Function

 

The modernisation of Finance function referes to reforming and improving the financial systems, processes and practices within a Finance organisation to better align with chaniging business landscape and to support organisation’s overall objective.

In today’s fast-paced business environment, the role of finance is evolving to meet the changing needs of the organization. With digital transformation affecting all aspects of business, the finance function must modernize to remain relevant and competitive. Modernising the finance function involves embracing new technologies, automating manual tasks, and leveraging data and analytics to drive better decision-making.

The terms “modernisation” and “transformation” are often used interchangeably in the business world, leading to confusion about their distinct meanings. Before we delve into the specifics of modernisation in this article, it’s important to clarify the differences between the two concepts.

 

Difference between Modernisation and Transformation

Modernization and transformation are two related but distinct concepts. The main difference between the two is the scope and gravity of change involved.

Modernization of the finance function involves incremental changes to existing financial systems and processes to keep up with current trends and technologies. This includes making enhancements to the current systems to improve efficiency and effectiveness while maintaining the existing framework. For example, adopting new software to automate manual tasks, implementing cloud-based financial management systems, and enhancing the use of data analytics and artificial intelligence to streamline processes.

On the other hand, the transformation of the finance function involves a fundamental and significant change in the way the finance function operates. This involves a more radical shift in the business model, processes, and technology, aimed at achieving strategic objectives. For example, moving from traditional financial reporting to real-time reporting, adopting a new financial operating model, or implementing a new financial system from scratch.

To illustrate the difference between the two, consider an example of a manufacturing company. If the company is modernizing its finance function, it may adopt new software to automate manual tasks, such as the processing of invoices. If the company is transforming its finance function, it may move from a traditional cost center model to a profit center model, where the finance function is responsible for driving revenue growth and strategic decision-making.

The Need for Modernisation

In today’s rapidly changing business environment, traditional finance operations are becoming outdated and are no longer sufficient to meet the changing needs of organizations. This is because finance operations have been largely manual, relying on manual processes and spreadsheets, which are time-consuming, prone to errors, and limit the ability to gain insights into financial performance.

Moreover, the reliance on manual processes has made it difficult for finance functions to respond quickly to changes in the market and support strategic initiatives. The lack of automation has also hindered the ability to leverage big data and advanced analytics, making it difficult for finance functions to gain deeper insights into financial performance and inform decision-making.

The need for modernisation is driven by the desire to improve efficiency, accuracy, and agility, and to provide deeper insights into financial performance. By embracing new technologies, automating manual tasks, and leveraging data and analytics, finance functions can transform themselves into strategic business partners that drive growth and support the overall success of the organization.

7 Key Areas to Modernise

As businesses evolve, the finance function must keep pace with the changing landscape. Modernizing finance processes requires a combination of new technology and updated processes. Here are 7 key areas for modernization:

• • • Automated Accounting and Reporting: The traditional approach to accounting and reporting relies on manual processes and spreadsheets. Automation and cloud-based accounting software can streamline these processes, improve accuracy, and reduce errors. Real-time reporting and advanced analytics can provide deeper insights into financial performance and inform key business decisions.
    • Data-Driven Budgeting and Forecasting: Finance teams can leverage data and analytics to improve budgeting and forecasting processes and gain deeper insights into financial performance. This can help organizations make informed decisions and respond quickly to changes in the market.
    • Enhanced Financial Planning and Analysis (FP&A): Modernizing FP&A processes can improve the accuracy and timeliness of financial information, providing deeper insights into financial performance to support key business decisions. The use of advanced analytics and machine learning can provide organizations with a more accurate and comprehensive view of their financial performance, and support informed decision-making.
    • Streamlined Procurement: The automation of procurement processes can improve efficiency, reduce costs, and provide real-time visibility into spend. The adoption of e-procurement and supplier management systems can help organizations improve supplier relationships and reduce the risk of fraud and corruption.
    • Effective Treasury Management: Modern treasury management systems can improve cash flow management, reduce risk, and provide real-time visibility into cash positions. The adoption of digital currencies and blockchain technology (restricted in some countries) can further enhance treasury management and reduce the risk of fraud and corruption.
    • Accurate Tax Management: Modern tax management systems can improve accuracy, reduce the risk of errors, and streamline tax compliance processes. The use of advanced analytics can provide organizations with a more accurate view of their tax exposure and support informed decision-making.
    • Technology-Driven Internal Controls: Adopting technology-driven internal control systems can greatly enhance efficiency and minimize the likelihood of errors in financial reporting. Automating embedded controls can be the most effective way to strengthen the internal control system.

  By modernizing these key areas, finance functions can improve their efficiency, accuracy, and agility, and keep pace with the changing needs of the business environment.

  5 Key Tools for Modernisation

  The modernisation of the finance function requires a strategic approach that involves a combination of technology, process improvement, and a change in mindset. Here are 5 key tools that can help organizations modernise their finance function and stay ahead of the curve:

  • • Cloud-Based Technology: Cloud-based solutions are becoming increasingly popular in the finance function because they provide real-time access to data, improve collaboration, and reduce the risk of errors. For examples using a cloud-based accounting software that provides businesses with real-time access to their financial data and also allows users to manage their finances and collaborate with their team in real-time.
    • Artificial Intelligence and Machine Learning: AI and ML-powered tools can automate routine tasks, provide real-time insights into financial performance, and improve decision-making. Examples of AI and ML-powered tools include corporate performance management (CPM) software that leverages machine learning to improve financial forecasting and planning.
    • Data Analytics: Data analytics tools allow organizations to gain real-time insights into their financial performance and inform key business decisions. Data analytics tools like Tableau and Power BI are data visualization tool that allow users to create interactive dashboards and reports that help to identify trends and make informed decisions.
    • Process Automation: By automating routine tasks, organizations can reduce the risk of errors, improve efficiency, and free up time for more strategic activities. Examples of process automation tools include UiPath- a robotic process automation (RPA) tool that allows users to automate repetitive tasks such as invoice processing, report generation, and data entry. Also Workato – a cloud-based workflow automation tool that allows users to connect their finance systems and automate processes such as accounts payable and accounts receivable.
    • Digital Transformation: Digital transformation involves the integration of digital technologies into all areas of the business, including the finance function. Digital tools like e-signature platforms (DocuSign/ Adobe Sign), collaboration platforms (Microsoft Teams / Slack) can bring agility in the organization.

  By leveraging these tools, organizations can improve the efficiency, accuracy, and agility of their finance processes, reduce the risk of errors, and gain a competitive advantage. It is crucial for organizations to adopt a forward-thinking mindset and embrace new technologies and methodologies to modernise their finance function and remain relevant in today’s rapidly changing business environment.

  Is Business Process Outsourcing (BPO) a Modernisation Tool?

  Business process outsourcing (BPO) can play a significant role in modernizing the finance function by providing access to specialized expertise and new technologies without the need for in-house investment. BPO refers to the practice of contracting a third-party service provider to handle specific business processes, such as accounting and financial operations.

  Here are 5 benefits that an organisation can realise by outsourcing financial processes:

  • • Expertise: BPO service providers are typically specialized in specific financial processes and have extensive knowledge and experience in their respective areas. By outsourcing these processes, companies can benefit from the specialized expertise of these service providers.
    • Cost savings: BPO can offer cost savings in terms of labor and infrastructure, as companies can leverage economies of scale through outsourcing.
    • Access to new technologies: BPO service providers often have access to the latest financial technologies and software, which can be costly for companies to invest in on their own.
    • Enhanced efficiency: BPO service providers typically have established processes and procedures that are designed to be efficient and effective, which can help companies improve their financial operations and achieve greater productivity.
    • Improved compliance: BPO service providers are often well-versed in financial regulations and compliance requirements, which can help companies stay up-to-date and compliant with relevant regulations.

  By outsourcing financial processes to a BPO provider, companies can free up internal resources to focus on higher-value activities, such as strategic decision-making and business growth. Overall, BPO can be an effective way for companies to modernize their finance function by leveraging the expertise and technologies of third-party service providers.

  8 Key Steps to Plan & Execute a Modernisation Project

  Modernizing the finance function can be a complex and challenging task, but with careful planning and execution, it can be a rewarding experience that drives significant benefits for the organization. Here are 8 key steps to consider when planning and executing a modernization project for the finance function:

  • • Define objectives: The first step is to define the objectives of the modernization project, including the goals and benefits the organization hopes to achieve. This will help guide the planning process and ensure the project stays on track.
    • Set up the project team: Form a project team that includes key relevant and skilled people from Finance leadership and operations, and from other functions like Technology, HR and Communications. Effective project management is essential to the success of the project. Appoint a project manager who is responsible for ensuring the project is delivered on time, within budget, and to the required quality. The project must be sponsored by CFO himself having presence of CXOs from Technology and HR in the Steering Committee.
    • Conduct an assessment: Conduct a comprehensive assessment of the finance function to review current processes, systems, and technologies, as well as the organization’s future business needs. This assessment should help identify the areas that require modernization.
    • Identify the scope of modernization: Based on the assessment, identify the scope of modernization required for the finance function. This may include upgrading technology, streamlining processes, enhancing data analytics, and stop-doing or outsourceable tasks.
    • Choose the right tools and methods: Primarily, 5 tools or methods can be considered to execute the scopes of modernization. They are – (i) reorganize the functions and stop low-value adding tasks to optimize agility (ii) bringing additional module to existing systems (iii) implement IT tools for end-end process automation (iv) Implement Robotic Process Automation-RPA and (v) Business Process Outsourcing. However, the main moto of the team should be “to automate whatever is possible to automate”.
    • Develop a roadmap: Based on the results of the assessment and scopes, develop a clear and concise plan of action, including timelines, budgets, and resources. The roadmap should outline the steps required to implement the modernization project and the expected outcomes.
    • Involve stakeholders: Involve relevant stakeholders in the modernization project from the beginning and throughout the planning and execution process to ensure their buy-in and support.
    • Change management: Develop a clear plan for managing the change process, including communication, training, and support for stakeholders to ensure a smooth transition.

  Being a vital support fucntion for business it is important to invest right resources and ensure adequate management focus in this kind of modernisation project. By following these key steps, organizations can ensure that the modernization project is delivered successfully and yields significant benefits. 

  5 Steps to Manage Employee Anxiety during Modernisation

  The fear of losing one’s job can be a significant source of anxiety for employees, particularly during periods of organizational change, such as modernizing the finance function. Employees may be worried that their jobs will become redundant, or that they will not have the skills or knowledge to adapt to new ways of working.

  Here are 5 steps that organisation can take to handle employees’ enxiety:

  • • Communicate clearly and transparently with employees about the reasons for modernizing the finance function and the impact it will have on their roles. This can help to alleviate uncertainty and provide reassurance that the organization is committed to supporting employees through the change process.
    • Provide training and support to help employees develop new skills and knowledge that will be required in the modernized finance function. This can help employees to feel more confident and prepared for the changes ahead.
    • Create opportunities for employees to provide feedback and input into the modernization process. This can help employees to feel more engaged and invested in the process, and can help to identify potential issues or concerns before they become major problems.
    • Be open to exploring alternative work arrangements, such as flexible working or job sharing, to help employees adapt to the changes. This can help to alleviate some of the stress and anxiety associated with potential job loss, and can provide employees with greater control over their work-life balance.
    • Provide support and resources for employees who may be affected by job loss, such as career coaching, resume writing, or job search assistance. This can help to ease the transition and provide employees with the skills and knowledge they need to find new employment opportunities.

  By handling employees’ fears about losing their jobs in a proactive and supportive manner, organizations can help to ensure that the modernization of the finance function is a positive and rewarding experience for employees, and can help to build trust and loyalty within the organization.

  6 Key Benefits of Modernisation 

  Modernisation of the finance function has the potential to bring significant benefits to organizations both strategically and operationally. Here are 6 key benefits you can expect from a modernised Finance function:

  • • Improved Efficiency – Modernisation of the finance function can lead to improved efficiency in key finance operations such as accounting, reporting, and budgeting. This can be achieved through the implementation of modern technologies and systems that automate manual processes and reduce the risk of errors.
    • Enhanced Data Analytics – Modernisation can also lead to the integration of data from multiple sources, allowing for improved data analytics and decision-making. This can help organizations to make informed decisions based on real-time data and insights.
    • Increased Accuracy and Transparency – Modernisation can also lead to increased accuracy and transparency in finance operations. This is achieved through the implementation of modern technologies and systems that reduce the risk of errors and increase the visibility of data.
    • Better Resource Allocation – Improved data analytics and decision-making can also lead to better resource allocation. Organizations can use real-time data to make informed decisions on how to allocate resources effectively and achieve their strategic goals.
    • Increased Flexibility – Modernisation can also increase the flexibility of finance operations. Organizations can use modern technologies and systems to respond quickly to changing business needs and make adjustments as needed.
    • Improved Stakeholder Relationships – Finally, modernisation of the finance function can also lead to improved stakeholder relationships. This is achieved through increased accuracy and transparency in financial reporting, which can help to build trust with stakeholders and enhance reputation.

  Modernisation of the finance function has the potential to bring significant benefits to organizations, both strategically and operationally. By improving efficiency, enhancing data analytics, increasing accuracy and transparency, and improving stakeholder relationships, organizations can achieve their strategic goals and gain a competitive advantage.

  5 Key Roles of the CFO in Modernising the Finance Function

  As a key member of the executive team, the Chief Financial Officer (CFO) plays a crucial role in modernizing the finance function. The CFO should take a proactive approach to ensure that the finance function keeps pace with the evolving business environment. Here are the 5 key roles of the CFO in the modernization process:

  • • Setting the Vision – The CFO should take a leading role in championing modernization by setting a clear vision and goals for the finance function. They should communicate the vision to the finance team and other stakeholders, and provide the necessary resources and support to achieve the goals.
    • Driving Innovation – The CFO should encourage the finance team to explore new technologies, processes, and practices that can improve the efficiency and effectiveness of the finance function. The CFO should foster a culture of continuous improvement by promoting innovation and experimentation.
    • Selecting and Implementing Technology Solutions – The CFO should be involved in evaluating and selecting the technology solutions that best fit the needs of the finance function. They should work with other stakeholders to ensure that the technology solutions are effectively implemented, and provide ongoing support to ensure that they deliver the expected benefits.
    • Managing Change – The CFO should play a key role in managing the change associated with modernization. They should engage with employees to understand their concerns, address any issues that may arise during the modernization process, and provide guidance and support to ensure a smooth transition.
    • Measuring Success – The CFO should be responsible for measuring the success of the modernization project and reporting on its outcomes. They should use key performance indicators to track progress, evaluate the impact of the modernization on the finance function, and make any necessary adjustments.

  By championing modernization, driving innovation, selecting and implementing technology solutions, managing change, and measuring success, the CFO can help to ensure that the finance function evolves to deliver maximum value to the organization.

  Conclusion

  Futuristic CFOs are constantly striving to keep up with the changing business environment and maintain competitiveness in the market. The traditional approach to finance is becoming outdated (or already outdated), and the emergence of new technologies and innovative practices can significantly improve the efficiency, accuracy, and agility of finance processes. With the rapid pace of technological transformation, the need to adopt new technologies and business models will likely become more frequent. To drive the finance function more effectively, it is crucial to build a finance team with future skill sets capable of handling changes in the future. However, modernization is a continuous journey, as unpredictably rapid technological progress may require a major transformation at any time.