By Gilles Bonelli, Associate Principal, The Hackett Group

Gilles Bonelli, Associate Principal, The Hackett Group

World-class finance organisations – according to “Raising the World-class Bar in Finance Through Digital Transformation”, a new research report from The Hackett Group –  demonstrate efficiency and effectiveness levels far superior to their peers.

At the highest level, they operate at 45% lower overall cost than their peers. They also spend 24% less time collecting and collating data, enabling them to spend 75% more time on analytics.  They enjoy error rates that are 66% lower and they pay invoices within terms 95% more often than the rest. In addition, they are much more likely to emphasise financial and non-financial KPIs in their performance scorecards, with 85% using a more mature performance scorecard that incorporates talent development.

In achieving these results, technology plays a key role, Yet world-class finance organizations actually spend 61% less on technology than their peers. This is because world-class finance organisations use fewer systems, which are better integrated. In addition, these finance organizations are leading the way in implementing digital transformation, implementing integrated cloud-based applications, advanced analytics, robotic process automation, and other next-generation technology.

Digital transformation is a high priority for all finance leaders today. The Hackett Group’s 2017 Key Issues Study showed that 97% of finance leaders surveyed think digital transformation will have a step-change impact on organisational performance; 91% believe it will significantly affect their service delivery model.

The potential for digital transformation to improve efficiency and business effectiveness is significant. The Hackett Group’s research has found that typical finance organisations can lower process costs by 35% through digital transformation, enabling them to bring process cost to levels close to that of world-class finance organisations.

To successfully implement this strategy, The Hackett Group recommends that finance organizations focus on digital transformation in these five key areas.

1. Modern digital architecture

Modern digital architecture relates to the integration of information flows, software applications and infrastructure within a business. Where finance is concerned, this is largely about transactional systems, linking to the ERP layer, data warehouse layer, and data marts layer (including, planning & consolidation software), and finally any data presentation layer (i.e. analytics layer).

Where new software are being implemented, cloud-based options are being considered as they are often more cost-effective, and easier to implement

Managing data quality emerges as the critical success factor of modern digital architecture, and therefore should be addressed thoroughly by any modern digital architecture.

1. Smart automation

Increasingly we also observe that resource-constrained organizations may turn to smart automation, specifically robotic process automation (RPA) tools to undertake routine, repetitive activities, and specialist applications to manage non transactional finance processes.

Robotic process automation replaces time-consuming human labour with machine labour. The finance team sets predetermined rules for a task, and through RPA, the computer follows these rules to perform it, as a human being would through a logical sequence.

Cash application, for example, can now be conducted automatically: the robot identifies remittance advices according to specific keywords and reformats them according to requirements before posting them to the general cash ledger. The finance team can then focus on more important activities that require human intervention.

1. Analytics-driven insight

The decision-making capacity of the finance function is being enhanced by big data and advanced analytics. The combination of data and the right tools makes it possible to create more accurate predictive models, and can also automate the gathering of historical data, segmented external data, and publicly-available operational and financial data, which can all be factored into the analytical process.

The application of advanced analytics to credit management,  for example, can provide companies with better information regarding the likelihood of customer default. Using this capability in tandem with recovery rate and exposure assumptions, creditworthiness can be established easily – allowing finance teams to make more informed lending decisions.

1. Cognitive computing

Cognitive computing relates to self-learning systems that employ data mining, natural language processing, and pattern recognition to imitate human behavioural processes. The use of cognitive computing in connection with the work of finance functions is limited, but is gaining traction. For instance the ability to detect correlation between potential business drivers and outcomes, is already being used by some advance organizations in order to improve the quality of their financial forecast, with the dual benefit of removing human bias and driving a more efficient process.

1. Digital workforce enablement

Digital workforce enablement encompasses tools and platforms that boost knowledge creation and distribution – as well as the transfer of knowledge required to use those tools and platforms effectively.

Using social media and other communication tools, the organisation can foster cross-functional global collaboration which transcends hierarchies. The use of these tools is often related to the emergence of “tribes,” groups of engaged individuals across teams, tasked to contribute to solving both strategic and tactical challenges that impact the enterprise. Creating a nurturing, open, environment that is conducive to teamwork and aligned to company priorities is also the priority of crowdsourcing tools, for example, which make it simple to gain rapid insights when urgent questions need to be raised.

These five considerations should be prioritised carefully as part of any digital transformation roadmap for finance, and readers should feel free to contact the authors of this article to discuss them further.