Future of finance - Three technology innovations transforming the finance function
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In the digital age, finance business processes are shifting from batch to real-time, retrospective to predictive, and internally-focused to customer-centric. Innovative companies can drive growth by focusing on the revenue stream from an outside-in perspective. Learn more from OpenText at http://www.opentext.com/campaigns/rundigital/digitize-business/sap-finance/sap-finance-wod
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Future of finance - Three technology innovations transforming the finance function
- 2. Page 2 Future of finance – EY perspective Technology Three technology innovations set to transform the finance function: 1. Advanced data analytics and forecasting 2. Robotic process automation 3. Cloud and software-as-a-service (SaaS) People ► Building a smarter, more forward-looking and resilient finance function ► Challenging the assumptions about what constitutes finance talent Where from here? Context1 2 3 4
- 3. Page 3 ► 55 The DNA of the CFO series Part 1: Do you define your CFO role? Or does it define you? The disruption of the CFO's DNA. The CFO role is being reshaped by four forces: digital, data, volatile risk and stakeholder scrutiny and regulation. To meet these challenges, CFOs need to re-evaluate their own competencies, and those of their team. Visit ey.com/dnaofthecfo to learn more. Part 2: Is the future of finance new technology or new people? Preparing for the future finance function. Technological innovation is providing an opportunity for CFOs to transform their finance function into a fact-based decision center for the whole organization. But as many traditional finance tasks are automated, the profiles and skills of finance people will need to evolve.
- 4. Page 4 While automation and new technology will have a transformative effect on finance functions, people will continue to play an essential, albeit different role.
- 6. Page 6 Three technology innovations set to transform the finance function Advanced data analytics and forecasting 1 Robotic process automation 2 Cloud and SaaS 3
- 7. Page 7 Advanced analytics capabilities will transform forecasting, risk management, and management’s understanding of value drivers EY asked CFOs if they could only focus on one thing to improve Finance, what would it be? The highest rated response was: “Improving big data and analytics capabilities to transform forecasting, risk management and understanding of value drivers is a priority for the finance function” Improve ability To predict outcomes Help CFO’s better understand the financial impact of strategic and operational decisions Provide better and faster Information To key stakeholders Finance functions are mastering the processing of large amounts of data, keeping track of new types of data and incorporating them into their models as they emerge. 1
- 8. Page 8 Robotics process automation (RPA) will drive evolution in how finance is delivered 65% Standardizing and automating processes and building agility and quality into processes Combining state-of-the- art technology with process improvement 58% Respondents emphasized the importance of RPA technology as a significant priority for the finance function: 2
- 9. Page 9 RPA executes processes as humans do, at a significantly lower cost RPA People People build relationships, provide subjective judgement, deliver low-frequency and exception tasks, and manage change and improvement ► Resolve discrepancies ► Approve invoices for payment ► Manage working capital Robots deliver repetitive, deterministic, high- volume tasks efficiently ► Vendor master data management ► Process invoices and payments ► Duplicate invoice check ► Invoice/PO matching Finance Process: Accounts Payable An effective deployment plays to both robotic and human strengths: How does Robotic Process Automation (RPA) work? RPA uses software to execute business processes in a repetitive, audited and controlled manner It orchestrates existing legacy applications for transaction processing, data manipulation, response triggering and communication It does all of this with very limited human participation 2
- 10. Page 10 Cloud and SaaS technology drives analysis, reduces costs, provides greater flexibility, improves disaster recovery Cloud and SaaS value to the finance function Enhance decision making capabilities ► Drives analysis and decision-making by enabling disparate teams to more seamlessly access and analyze the same information Reduce costs ► Eliminates costly capital and operational expense associated with hosting and maintaining traditional information systems Provide greater flexibility ► Supports flexibility in provisioning of new technologies ► Improves disaster recovery as back-up solutions can be accessed remotely Cloud services provide the capacity for finance to access ERP and other systems on the web, rather than through physical servers. While Cloud and SaaS provide significant opportunities to improve performance, they will need to be weighed against the need to conform to out of the box processes and the loss of control over which and when new functionality will be rolled out to the business 3
- 11. Page 11 People
- 12. Page 12 Priority one: A smarter, more forward-looking, better aligned, more resilient operating model Future operating model Smarter Better aligned to the business ► All transactional finance processes will be fully automated in outsourced or captive finance factories. ► Transactional information will be available sooner and will be more accurate ► Finance professionals will spend more time working alongside key internal stakeholders, challenging their strategic plans and modeling and predicting different scenarios. More forward-looking More resilient ► The future finance function will combine finance data with external information to help model and predict business outcomes, identifying the most profitable opportunities ► The future finance function will be more focused on managing uncertainty through strategic risk management. ► It will use predictive analytics to investigate the implications of strategic decisions, to plan for possible shocks, and to manage the growing threat of cyber risk. 1
- 13. Page 13 Priority two: challenging the assumptions about what constitutes finance talent Rethinking what constitutes finance talent Look beyond traditional financial analysis skills Develop better finance business partners Find digital finance talent Use alliances to go beyond what your organization can deliver alone 2
- 14. Page 14 What’s next for the Finance Function? A clear vision for the future finance function, which: ► Is aligned with the organization’s overall purpose and business strategy, ► gives finance team members around the world a common ambition, ► provides focus for efforts and investment decisions. A bold technology strategy for the finance function which builds systems and tools that enable disparate teams to share information and make connected, data- driven decisions. Invest in developing new skill sets and attracting new profiles by: ► finding or developing the new skills and capabilities required to exploit new technologies and increasing volumes of data, ► building their people’s softer skills, such as their communication and influencing skills 1. Define a vision 2. Rethink technology 3. Invest in people
- 15. Imperatives for future Finance Operations Flexible Cloud Deployment Inter- operability Embrace Digital Technology Governance & Compliance 360° view & access Digitize Financial Processes Seamless Information Flow 360 Digital Workplace Value add focused Business Centric Services Re-Imagine Service Delivery Customer Satisfaction
- 16. Integrate the moving parts When using CRM, billing and planning systems • Avoid content silos • Deliver analytical insight across application boundaries • Simplify access with minimal training • Provide self-service capabilities Digital Workplace Seamless Information Flow 360° view & access 360 Forecasts & hidden relation- ships
- 17. Integrate the moving parts Content sharing with customers is the norm rather than the exception: • Documentation received from suppliers or subcontractors • Quality inspections • Proofs of service/delivery • Expenses for recharge Information-Fueled Business Processes
- 18. OpenText Confidential. ©2016 All Rights Reserved. 18 Example Process: Opportunity to Cash Campaign & Lead Gen Opportunity & Quote Sales Order Engineering (Project) Production & Delivery Service Quote Product Information Collaterals Lead Sheets Contract Product Specification Sales Order Order Confirmation Requirements Specification Enginering Drawings Project Documentation Detailed Specification Purchase Orders Material Requirements Quality Inspections Case / Problem Documentation Customer emails Solution Description Legacy System
- 19. How to act fast and accurate and compliant Replace transactional work with agile processes • Optimize and automate: • Eliminate manual steps • Leverage a shared service organization • Measure results • Trust built-in compliance: • Segregation of duties • Contextual intelligence Order to Cash Procure to Pay Record to Report
- 20. Example: Top five value drivers for optimizing invoice-to-pay Value Driver Baseline Improvement % Estimated Benefit (Annual) Assumptions and Benefit Rationale Reduce Accounts Payable invoice processing costs related to invoice routing, exception handling, and duplicate invoices $1,799K 36.5% - 63% $602K - $1,039K Based on previous studies 40-60% of AP spend is related to invoice processing Reduce missed early payment discount rate $1,514K 40% - 50% $555K - $694K ADP estimates that average early payment discounts are in the range between 1.6% - 2% of invoice value Reduce payment processing costs for approvers $1,982K 30% - 40% $548K - $731K Based on previous studies it takes 15 minutes on average to approve an invoice Reduce cost of data entry for paper invoices $1,439K 41% - 62% $541K - $818K Based on previous studies 30-50% of AP spend is related to invoice entry Increase additional discounts due to improved vendor relations $5,311K 10% - 20% $446K - $892K Paystream estimates that 66% of companies are offered discounts on approximately 5% of their invoices TOTAL - Client $2,692K - $4,174K
- 21. Your gain. Guaranteed governance Reduced administrative costs Faster implementation Reduced legal risk and liability Reduced service center response time Real-time forecasts and closing Increased staff productivity Better customer satisfaction Reduced IT administration and storage costs
Editor's Notes
- New and more effective revenue models require very flexible systems. Selecting the right ones is not an easy task and sometimes overlooks important aspects: Many solutions include an integrated content repository to store relevant supporting documentation. Which is good. It however makes life complex for users in a different department (in this case Finance) if they don’t have access to the CRM system. The same applies vice-versa: A sales rep who cis not aware of an ongoing dispute regarding a billing will be surprised during his next conversation with the customer. Customer insights are most valuable when combining data across the full product lifecycle: From cost of sales to revenue to profitability; To analyze lost opportunities and convert them into a new opportunity at a later stage, and many more Users need insight into the customer situation in the right context: It must be simple and should not require switching to a different application. And even more general: All business partners and internal stakeholders love self-service access: To track orders, planned deliveries, payments made and disputes; to create dashboards and analysis to better manage their business,
- And there is more to consider: Customers expect transparency; This implies that you need to share quite a lot of information during the order – to – cash process: Any component that’s sourced at 3rd parties comes with manuals, warranties etc. that need to be handed over to the end customer Quality inspection protocols are key in many industries Proofs of service or delivery included during invoicing reduce the risk of billing disputes And whenever expenses are recharged to the end customer (like flight costs or rental equipment) customers love to see a copy of the original invoice. Content sharing is not a one-time activity: It’s ongoing and needs to support multiple channels: A customer facing portal, an email, fax or as EDI message I mentioned the importance of self-service access and the ability to share one current version as the single source of the truth adds huge value to both the customer and supplier. You don’t want to collect the content required to share individually. We at OpenText call these types of processes “Information-fueled business processes”. It is an well-oiled machine generating trust, customer retention and recurring revenues. Let’s look at a typical example
- This slide shows a quite common situation: Corporates using a set of proven, best-of-breed applications to manage marketing campaigns and the resulting opportunities in salesforce.com, sales order, fulfillment, billing and revenue recognition in SAP; Primavera for engineering and a legacy system for subsequent service and support activities. To add complexity, the company also needs to order raw material and service for some components. Documentation is copied to SharePoint All stakeholders need to have a combined view on relevant documents, project and financial information: Have down payments been received; which confirmations have been made during RFx and final contract; Are subscription and maintenance fees paid? Collection activities are much more successful if finance knows that all acceptance tests have been passed and signed off. And service specialists will avoid risk if they are aware of delays in payment. Last not least, marketing and product specialists are keen to use profitability details to optimize their customer experience. Without proper integration a lot of manual copying and data entry activities cause inefficiencies and risks.
- This leads me to the most important aspect: How to act fast and accurate and compliant. Many employees perceive these as mutual exclusive. Which they are if you do not apply digital transformation. Digital allows to replace transactional work with agile and connected processes. Eliminating transactional thinking makes it easier to optimize the process. Arguments like “I can’t post this if I don’t know X” are no longer valid since a process would try to gather X from the right specialist and let the accountant check everything else in parallel. Data that is already known from an adjacent system (e.g. CRM) does not need to be entered again; Anything a user can do by just copying/interpreting information can be automated. This alone saves a lot of working time. Digital also allows to benefit from shared services organizations and economy of scale: This reduces training efforts and dramatically reduces cycle times since SSOs work around the clock. Any optimization needs to be validated and further improved. Agile processes are easy to adapt – this is specifically important for process owners. Analytics allow to estimate the impact of process changes based on information collected. Acting fast and accurate is possible in the digital age. But compliance is a different beast. First of all the process serves as a guard rail. Aspects like segregation of duties are part of the process DNA. But there is an aspect that really adds a lot of complexity to all processes when not properly designed: The huge set of regional regulations that multi national organizations need to know, to incorporate and to cope with. It’s not uncommon that process standardization initiatives completely fail once a roll-out to a country with complex legislation is scheduled. The contextual intelligence is key to cope with these challenges: Aspects like sending and receiving countries, incoterms and shipment details are available in the respective systems and the basis for special handling. An ideal agile process allows simple to configure variations to reflect the specific compliance rules. This would be a session on its own … A nice read about contextual intelligence: https://hbr.org/2014/09/contextual-intelligence
- Let’s look into the value drivers for a specific sub process that is typically the first one undergoing digital transformation: Invoice to pay In this example our value engineers worked with a manufacturing company to identify the cost for invoice processing, the impact of missed early payment discounts, The costs associated with invoice approvals Data entry for paper invoices The potential for additional discounts thanks to improved vendor relations and predictive payment behavior. The result is impressive in this case. --- An example calculation for a manufacturing customer with annual revenue of $510 million processing 500,000 invoices annually. Total AP spend 0.7% of revenue (40% data entry, 50% is invoice processing);
- To summarize and close: