By John O’Rourke, Vice President, Host Analytics
What’s on the mind of CFOs as 2017 gets underway? Just as you’re curious, we were too, so here at Host Analytics, we asked CFOs and financial professionals across a variety of industries about their biggest concerns and the impact of the latest industry shifts, regulations, and market trends on their business. To accurately gauge the current pulse of financial professionals today when it comes to financial performance management processes, we tapped into the research experts at Gatepoint to issue a survey. Below are some of the key findings.
The Impact of Business Shifts on Finance
One of the first questions we asked was, “What changes to the business would strain your current financial performance management system?” In response, half of the survey participants cited mergers and acquisitions. This was followed by rapid growth and hiring at 37 percent, expanded product or service lines at 27 percent, international expansion at 20 percent, and preparing for IPO/VC funding at 13 percent.
The responses to that question reveal three key points about the state of financial performance management systems today. First is the increasing importance these systems play across the company and not just in the finance department. While it’s easy to think about financial performance management systems as solely for finance, the reality is that every function needs to plan, monitor and manage their performance. To do this, and effectively and accurately make strategic business decisions requires insight into the performance across the organization. This brings us to the second point, which is the expanded role of CFOs, whose responsibilities now extend well beyond the office of finance and impact decisions made across the C-Suite. Third is the mix of technologies that are currently being used to support the business. Considering that activities designed to help an organization grow with regard to M&A or an infusion of VC funding, are expected to strain current financial performance management systems, this begs the question of what systems and tools are actually in place.
From our findings, it wasn’t surprising to learn that spreadsheets remain ubiquitous as 64 percent of the survey respondents use them to support their financial performance management processes. However, given the limitations of spreadsheets, it also wasn’t a revelation to discover they’re used alongside another financial management platform by 58 percent of the survey participants.
Top Requirements of Financial Performance Management Solutions
Given that spreadsheets and financial management systems co-exist in the finance department, survey respondents were asked, “What improvements would users like to see in their financial performance management systems?”First and foremost was to reduce their reliance on spreadsheets for accounting and financial processes, according to 48 percent of participants.This was followed by more self-service reporting capabilities, greater functionality to support growing business complexity, and improved accuracy of plans and forecasts.
What these responses add up to is the growing need for flexible financial performance management systems that enable financial professionals to more easily tackle traditional finance activities as well as support the larger needs of their organizations. This explains why “minimize paper-based manual processes” and “greater confidence in accuracy of financial and operating results” also made the short list of top responses.
When it comes to selecting a financial performance management system, financial pros shared their wish list of requirements. In a multiple-choice question, with more than one option available, participants shared their top requirements for a financial performance management system.They were:
- Ease of use: 60%
- Reporting capabilities: 58%
- Data visualization/dashboards: 50%
- Ability to import/export data to/from other applications: 45%
- Scalability: 37%
- Predictive analytics: 36%
- Mobile capabilities: 20%
The data also shows that adoption of cloud-based solutions are on the rise as the survey results show that 79 percent prefer a cloud-based or part-cloud, a.k.a. hybrid platform while only 20 percent opted for a solely on-premises solution and one percent cited outsourced financial management services as their preferred approach.
Cloud-based EPM Is the Way Forward
Recognizing that spreadsheets and other make-shift approaches to financial performance management systems can’t address all the needs of the evolving finance function, CFOs will be investing more heavily in upgrading to true enterprise performance management (EPM) solutions.
Based on the Gatepoint survey results, 26 percent of respondents plan to replace their financial performance management software within the next two years.
While existing business conditions, anticipated changes, and the evolving role of finance is driving the demand for EPM solutions, there are also external factors that will create a spike in demand. These include the new revenue recognition rules set by the Finance Accounting Standard Board (FASB) that go into effect later this year, as well as influences such as Brexit, changing tax rates, and changing oil and commodity prices. These factors will accelerate the need for greater transparency into financial processes as well as more comprehensive, purpose-built planning and forecasting solutions to help companies deal with the new complexity.