When thinking about digitally transforming your finance operation, CFOs should start with what’s big and broken and fix that before moving on to other things, former Oracle CFO Jeff Epstein said in a Tesorio webcast.
Epstein recommended that CFOs ask their team and the people outside the finance function who work with them which processes are working well, which are working poorly, which are large and which are small. A large process is one that involves a lot of people and consumes a lot of time and resources.
Armed with that information, CFOs can create a matrix listing big, poorly working processes in one quadrant, big, well-functioning processes in another, small, poorly working processes in another, and small, well-functioning processes in the last quadrant.
“So, when you think about finance transformation, pick one of the large, broken processes, and fix that one first,” Epstein said. “Don't try to do 10 things at once. If you can just make some progress on [one] thing that people have been frustrated with for a long time, you can get a lot of credibility in the company and build your process improvement muscle from there.”
For many CFOs, the process improvement team is a group brought together for the purpose. But if your organization is large enough, with sufficient resources, few things are better from a technology standpoint than having an in-house business systems team. This is a permanent team, with people hired for the purpose, to work with the CFO on selecting, and improving, finance function tech tools.
Greg Henry, CFO of Couchbase, has a three-person process improvement team, which he suggests pays for itself by improving the functionality and efficiency of the suite of tools — accounts payable, accounts receivable, cash flow management and so on — that surround the enterprise resource planning (ERP) system.
“We have a small, three-person team out of 650 [employees] but get tremendous value out of having people inside the company to help us evolve and create efficiencies without having to get consultants or new tools,” he said.
A Gartner poll found 93% of finance professionals feel there’s alignment within their organization on what the finance function should look like by 2025 from a technology standpoint, but only 39% feel their digital transformation efforts are having the impact they want.
Some possible reasons for the disconnect: CFOs put in a tool to automate a function, like accounts payable, but it doesn’t do it in a way that aligns with other organization processes — doesn’t show the impact on cash flow, for example — or, more abstractly, works against company values.
“If you’re collecting from customers in a way that’s repetitive and blunt, does that show your company believes in empathy?” said Carlos Vega, Tesorio CEO.
For all intents and purposes, ERP systems, which serve as the backbone to finance and accounting organizations today, have become commodities, Henry said. Whatever system you have, the technology has evolved to the point where it can be expected to function well.
Where much of the value-add comes from today from a technology standpoint is in the specialized applications that surround the ERP, and that’s where finding out where the pain points are, or bringing in a business systems team, can make a difference in how well the CFO tech stack is adding value to the broader organization’s business goals.
However you go about assessing how well your applications are working, there’s one rule of thumb you should follow no matter what, and that’s to implement your solutions not for what you need today but what you’ll be needing in another year or two.
“If you know that in a year or two you’re going to open an entity in Canada or in the U.K., because you’re going to expand your market, then choosing a tool for AR or AP that wouldn’t work globally is going to create a situation in which you’ll have to choose a new tool in the future,” said Sarah Spoja, CFO of Tipalti. “You might not need all that functionality today and might not pay for it all today, but does it scale? Can you add that module for procurement when you want it, or to go global when you need it? Otherwise, digital transformations will feel like band-aids that you have to keep replacing.”