As a Finance leader, you're in a position to move Finance from reactive to proactive, becoming a more strategic partner in your organization. But undertaking this role requires rethinking how Finance works and what you and your team provide. Here's a spoiler: The value of the Finance team goes far beyond creating impeccable spreadsheets with astoundingly complex formulas.
Digital transformation is a critical factor in the evolving role of Finance. In our global survey of 500 Finance leaders, we found that organizations at the forefront of digital transformation in Finance have superior speed, agility, and flexibility compared to their peers.
If your organization is on the wrong side of the digital divide, it’s time to bridge the gap.
Transformation is no longer a ‘nice to have.’ Business leaders must be able to rely on the validity, trustworthiness, and relevance of the data used to analyze and report on end to end Planning, Budgeting, and Forecasting processes. The cost of continuing business as usual is duplication of the efforts, fragmented systems that take lots of people and time to reconcile, challenges to meeting regulatory compliance, an inability to determine where to prioritize resources, and lower stakeholder confidence.
of digitally transformed companies report they’re on the “cutting edge” of business insight
only 10% of non-transformed companies say the same.
What Does Digital Transformation in Finance Mean?
Digital transformation makes Finance data better and processes more manageable. Because it's less arduous and time-consuming to make changes, Finance can pivot more quickly — and assemble forecasts, budgets and scenarios in ways impossible on a simple spreadsheet.
Technology such as a Corporate Performance Management (CPM) platform fortifies your processes with real-time data visualization, process automation, machine learning and artificial intelligence. Because digital transformation increases efficiency and reduces manual work for Finance, your team can focus on being strategic partners who provide a measurable and meaningful impact to the bottom line.
Are you wondering where to start? It turns out there are three powerful capabilities, borne out of digital transformation, that are strong indicators of success: scenario planning, rolling forecasts and zero-based budgeting (ZBB).
We are in the era of big data, which in the context of finance means that the quality and quantity of data to analyze has increased materially. Digitally transformed finance teams are those that one, are actively automating low value, transactional activity or repetitive tasks with software, bots or ai, and two, are implementing tools that aggregate and analyze data in new and meaningful ways.
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Bridging the Gap with Scenario Planning
Every organization wants to be prepared for whatever the future holds. Scenario planning is the practice of looking into an uncertain future, with the goal of determining how to grow the business, increase responsiveness, and mitigate risks based on the most likely scenarios.
Now more than ever, the future is in flux, prompting the need for data-driven scenarios that can be reworked quickly as new data becomes available. This forward-thinking mindset combined with short-term agility pays off in significant ways. According to our survey, organizations that practice scenario planning are twice as likely to forecast a year ahead and with greater accuracy than companies that don't.
Scenario planning depends on stellar data and collaboration. For the process to be effective, you'll need executive buy-in, defined processes, and technology such as CPM software to help automate the process.
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Bridging the Gap with Rolling Forecasting
Business doesn't stand still, so why should your forecast? Rolling forecasts remain relevant longer because they incorporate the most up-to-date information while also extending the timeframe of the budget. A common approach is adding a month to the end of the forecast for every month that passes.
Based on our survey, organizations using rolling forecasts outperform those using quarterly forecasts, showing marked improvements in the ability to quickly reforecast, implement budget changes and roll out changes in less than a day.
For smaller organizations or ones with a highly manual process, the benefits may not be as pronounced. Rolling forecasts can also be a challenge if real-time data is siloed across the organization or the rest of the organization isn't on board. But if you’re able to adopt rolling forecasts, you’ll likely notice increased agility across the FP&A function.
of rolling forecasters are able to reforecast in under a week.
It's all about the future. You can't change the past. A rolling forecast and budget are an integral part of digital transformation. All businesses, regardless of size are impacted by cash flow. More businesses fail due to cash flow issues than profitability and financial reporting. The tools and skill sets are available, mindset is the biggest challenge. The future is about predictability and prescription while the past is focused on accuracy and reporting. Both are important, but predictability and prescription is the differentiator in sustaining success and remaining future ready.
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Bridging the Gap with
If the accuracy of your organizational budget is impeding its success, Zero-Based Budgeting might be right for you. Zero-Based Budgeting is building a budget from the ground up, line item by line item, based on the organization's actual needs. But starting over takes time, and the Zero-Based Budgeting process is more time-intensive – not only for Finance but also for leaders responsible for departmental budgeting. So, it's not for every organization.
For a successful Zero-Based Budgeting roll-out, you'll need engagement from the highest levels of leadership, and a hefty assist from technology. But if your organization is ready and able to commit the resources, the extra effort will have tremendous pay off throughout the year. According to our survey, your budget numbers will be significantly more accurate. And that's just starters – Zero-Based Budgeting also strengthens companies' aptitude in the other areas of FP&A.
of those using Zero-Based Budgeting can forecast revenue within ±5%, compared to just 35% of those who don’t.
ZBB requires leaders to base their budgets on business need and achievement of business strategy and goals, which in a fast growth and changing environment can be difficult to implement. The ‘start from zero’ basis results in a more disciplined and thoughtful approach to allocating funding. This can challenge leaders to rethink their processes, procedures, and ultimately their investments, which can be difficult for leaders who have never performed the function. Managing through the culture and driving the needed ZBB changes can help overcome this obstacle.
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Digital Transformation and the Transformed Finance Department
The stakes are too high to put off digital transformation in Finance. Right now, adopting new technology and Finance processes can give your company a competitive advantage. But if you wait too long, you may find your organization left behind.
Of course, digital transformation in Finance is more than flipping the switch on a new technology platform and recreating old techniques within a new system. To pull ahead, organizations also need to focus on transforming the organizational mindset and function of Finance. Here’s what digital transformation in Finance looks like:
An organization with transformed technology has immediate access to data-driven insights to help navigate current and future market challenges – and emerge victoriously. Key hallmarks of transformed technology include:
- Robotic process automation
- Real-time data visualization
- AI-powered financial analysis
For digital transformation in Finance to be successful, organizations must allow technology to shape Finance processes. Merely duplicating current processes within a new technology platform won't improve an organizations' accuracy or agility. Consider leveling up current methods as follows:
- Automate as much as possible, especially work that's mundane and repetitive
- Outline how the Finance team will add strategic value to the process
- Increase agility with rolling forecasts
- Improve accuracy with Zero-Based Budgeting
- Achieve a longer-term view with scenario planning
So how can you identify a transformed Finance department? The most important attribute is that the team recognizes that FP&A is evolving – and believes that this change is for the good. Here are other tell-tale characteristics:
- Focused on being a strategic partner
- Eager to collaborate with other departments
- Forward-looking and proactive
- Excited to leverage the capabilities of new technology platforms
- Able to present data findings in a way that makes sense to executives
- Committed to using data analysis to drive insights
Begin Your Digital Transformation
The right technology can help organizations bridge the gap between their capabilities and those of digital transformation leaders. Want to learn more? Take the first step and contact us to schedule a product demonstration.
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