Finance forum
Modern CFO challenges
The role of the modern chief financial officer (CFO) is continuously changing, writes
Francois Beyleveld, pre-sales specialist at SAP Africa.
T
he role of the modern CFO is going through a wave of
transformation as the speed of business and the prevalence of
exponential technologies push towards real-time dynamic planning
and financial decision-making. A PwC report into the role of technology in
financial services over the next few years found that, by 2020, CFOs will be
expected to make an almost limitless combination of inputs and at speed.
To enable this, CFOs will need to ensure their infrastructure is aligned with
applications, so it can scale in real time, and be able to integrate anything
from external financial data to sensor data from IoT implementations.
Gone are the days of relying on expansive spreadsheets to plan and
consolidate company finances. The modern enterprise is simply far too
complex, making traditional financial planning simply unmanageable.
The digitisation of the CFO role is bringing an end to static planning
and enabling faster and more integrated financial reporting through the
complementary concepts of dynamic planning and continuous accounting.
And at the centre of this sits a vital component in the CFO’s digital core: the
financial data warehouse.
Transformation of CFOs
Typical financial planning involves looking at historical financial
performance over the past month, quarter, or year. Predictive analytics
unlocks the ability of CFOs to look at financial and business performance
trends over multiple years and provides insight into forecasts for the year
ahead. This enables CFOs to develop smarter budgets, not just at the start
of a new financial year, but on an ongoing basis, as the predictive analytics
solution takes actual business performance to date into account and matches
that with the likely trends ahead. The result is a new-found agility that
enables CFOs to operationalise financial data insight into finance business
processes, leading to improved decision-making and a stronger bottom line.
The key enabling technology of this agile approach to the CFO role is a single
financial data warehouse that pulls together all financial and operational data
from the ERP system, as well as non-ERP data from operations, procurement,
and human resources. All general ledger information is pulled into the
financial data warehouse to allow for true end-to-end consolidation. The
financial data warehouse becomes the CFO’s digital core, creating a platform
that opens the door to the introduction of next-generation technologies,
such as machine learning, into day-to-day financial processes. With all data
consolidated in a single place, the CFO task of complying to changing
regulatory requirements — such as the upcoming IFRS17 reporting standards
for the insurance industry — becomes easier to manage. This empowers the
CFO role by enabling more calculated decision-making, providing greater
clarity on the profitability of all lines of business and each customer, while
mitigating the risk of financial loss as a result of changes in forex, government
policies, and the like. It also enables dynamic planning — one of the modern
CFO’s most powerful business tools.
How to unlock business value
How does a financial data warehouse unlock business value? One of the key
reasons for the financial consolidation process is the disclosing of financial
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results. Traditionally, this would involve waiting for the end of a financial
period before a sequence of late nights and deadlines eventually result in the
reporting being complete. With a financial data warehouse as a foundation,
modern CFOs can conduct continuous accounting that executes multiple
tasks simultaneously, to enable CFOs to soft-close the books well before the
end of the period.
By bringing all general ledger and operational data into a single data
warehouse, CFOs enable true consolidation that seamlessly delivers business
value to the rest of the organisation. Within this paradigm, CFOs become
enablers of better organisational planning that reaches beyond pure financial
functions to the realms of HR, procurement, production, and more.
Running financial planning off Excel spreadsheets limits processes to the
processing power of the user’s PC or laptop, severely restricting the business
value of running, for example, what-if scenarios. This prevents CFOs from
exploring innovative new injections into the planning and consolidation
process.
Roadmap to dynamic planning and continuous accounting
So, where should CFOs start? Not all businesses are suited to an all-in
migration to the cloud. In many cases, companies want to retain control over
business-critical data and prefer the assurance that a physical and accessible
data centre brings. To this end, modern cloud services, such as the SAP
Analytics Cloud, push BI applications into the company’s local network —
within their firewall — giving them all the benefits of using cloud services
without any real or perceived loss of control over their data or processes.
CFOs looking to enable continuous accounting and dynamic financial
planning in their organisations can automate the following capability to get
them started:
•
Create a summary plan with top management.
•
Amend the plan with what-if scenario modelling.
•
Supply data to the rest of the organisation so that bottom-up planning
can take place.
•
Review and amend plan before sending it back to executive
management.
•
Present final plan for the financial year.
•
Budget, plan, and execute.
•
Develop ongoing forecasts to ensure alignment of activities and budget.
•
Conduct ongoing what-if scenario modelling.
•
Report on actual performance versus forecasts and adjust where
needed.
Dynamic financial planning and continuous accounting are within easy
reach of modern CFOs, and do not require an upheaval of all current
financial processes or systems. By prioritising a few key practical building
blocks now, CFOs will enable better financial decision-making while also
future-proofing the financial function within their organisations, bringing
them one step closer to real-time predictive simulation and seamless
disclosure of financial statements across all end-to-end processes.
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