A recent Accenture/Oracle report reveals that more than two-thirds of CFOs, finance directors and their direct reports firmly believe that the CFO is a strong evangelist for the role of technology within the finance function. Nevertheless, this same report shows that just 20% of the C-suite believes their finance organisations have adopted leading-edge technologies at this point. Why is this?
The Pressure is on
According to the Accenture/Oracle report, there are two main reasons for this situation. First, finance professionals cite a perceived risk associated with integrating new systems and technologies. Next, these same executives describe a perceived lack of internal skills required to improve technology.
The pressure is always on the CFO to monitor the financial health of the company. There is simply no room for error and all risk must be managed. The trouble is, all too often, this pressure keeps the focus on manual execution of finance processes. This is particularly evident in the most profoundly challenging task of corporate accounting and finance, the financial close.
For the last two decades, corporate finance groups have improved the close process in certain areas, specifically group consolidation and, more recently, disclosure management, commonly called "the last mile." This effort has resulted in a dramatic reduction in the overall time to close. Nevertheless, there are still many parts of the close that could be better. Much of the manual and repetitive work of the corporate financial close remains at the entity close level, distributed widely across locations and hidden in business silos.
According to Deloitte: "Organisational challenges, including insufficient infrastructure and a high percentage of manual controls, persist." PricewaterhouseCoopers sums it up neatly: "Leading firms spend over 50 per cent of their analyst effort just getting the numbers right." Most companies devote at least two-thirds of all of the time and human effort of the close to entity close tasks at the heart of the organisation. At many companies, these activities make up the undiscovered mile of the financial close.
Time to Change
Leading CFOs know that this situation has to change. They key to that change is finding what these activities have in common. Virtually every manual step hiding in the core entity close processes of the financial close share these characteristics:
- They are frequently repeated
- They continually require human intervention
- They expose the organisation to risk from human error, irregular execution and/or lack of documentation.
These three qualities make such manual steps excellent candidates for automation. Automated processes have a long and celebrated history on the factory floor and in other areas of business. Today, leading finance professionals have discovered how automation can help them, too. Ernst & Young explain the important dual benefits of this approach: "Automation of existing processes in the form of IT integration or automation of manual procedures and controls increases the speed of the process and reduces the risk of financial reporting errors."
It's a Revolution
But what about those perceived risks of "integrating new systems and technologies" and having the right internal skills to be successful? Today, automating the back office doesn't require complex integration projects or special skills to deliver. Information technology has now, finally, risen to meet the demands of corporate finance without these perceived risks.
In fact, many companies have already implemented financial close automation to completely transform back office finance from a tedious, time-consuming set of tasks to an efficient process that provides transparency and insight for better control with less effort. These changes have delivered rapid and measurable results—quickly and without changing what the finance team does. The teams have only changed how they get the job done—with significant results.
For example, a large, multinational electrical engineering firm automated a full 97% of their critical financial close processes. It reduced a list of more than 1,000 separate manual tasks down to just 30. The company saved time and money even as they made sure that every process runs with complete standardisation every time.
In the same way that the industrial revolution led a change from reliance on slow, manual effort, to building streamlined, automated assembly-line processes, we now face a back office revolution in finance. Automation dramatically reduces the effort and cost of the financial close process, while it provides the machinery the CFO needs to meet the constant challenges of their role. There's no other way to ensure absolute quality and consistency with less manual effort.
As it turns out the real risk isn't in implementing automation; rather, it's in hesitating to adopt this revolutionary wave of positive change and continuing to rely on error-prone manual work at the heart of corporate accounting and finance.
Financial close automation frees finance and accounting teams away from the pressure of risky, repetitive and time-consuming manual work. By automating processes at the core of the financial close, CFOs can be more confident the numbers are right. Automation is completely scalable, too, and can adapt to snowballing amounts of data—without fatigue or the risk of deviating from standardised practice.
Innovative CFOs know that process automation can power the finance department as never before. But the journey away from complexity and repetitive work and towards more detailed analysis and strategic importance has only just begun. Just like the industrial revolution of many years ago, the back office revolution of today is set to deliver profound results. Top CFOs know this and are already charting the course for the future.
By Neil Kinson, vice president EMEA, Redwood Software