Modern Finance: The New Game Changer


Modern Finance: The New Game Changer

Today's modern finance function doesn't resemble the finance function of old. No longer content just to contain costs and keep score, modern CFOs and finance executives are leveraging their operational knowledge and analytical expertise to provide management with the data-driven insight needed to identify new growth opportunities.

The Evolving Role of the CFO

What does it mean to be a modern finance organization? To define the key attributes of the modern, technology-enabled finance function, Oracle and Accenture commissioned a new study of global CFOs and C-level decision makers by Longitude Research. The 2014 report, "Empowering Modern Finance: The CFO as Technology Evangelist," analyzes results from a survey of 975 financial executives and 300 C-level and line-of-business executives from a cross section of industries, company sizes, and regions. This includes interviews with CFOs who have sponsored large-scale transformations to understand how technology is enabling their finance teams to have a stronger impact on enterprise strategy and growth.

The Longitude Research study builds on a 2013 report also commissioned by Oracle and Accenture, "The CFO as Catalyst for Change," which found that over 80 percent of CFOs worldwide desire more involvement in setting strategy and the growth agenda. Back then, CFOs told us their desire for more strategic engagement was hampered by their short-term focus on battling costs, economic volatility, and organizational complexity. Things have changed, however, and finance chiefs are now realizing just how critical data insights have become to unlocking new value across the entire business.

Through this analysis, we identified:

The Four Core Tenets of Modern, Data-Driven Finance

  • 1. Modern CFOs are Technology Evangelists.
    Over two-thirds of respondents inside and outside the finance function (67 percent and 68 percent, respectively) agree that the CFO is a leading advocate for the transformational potential of technology. And 72 percent of finance executives believe that new technologies such as cloud, mobile, and social relationship management will change how finance is structured and run. That change is happening now: nearly half of respondents are currently using mobile apps and 53 percent are leveraging web-based systems.

    CFOs are looking to the cloud to modernize finance and are increasingly appreciative of the benefits that cloud technologies deliver. Already, two-thirds of the executives surveyed claim to be adopting a cloud-based system for core financials, with 24 percent already having implemented a cloud-based system, and 45 percent working on a roadmap for doing so.

    The more strategic finance activities—budgeting, planning, and forecasting—appear to be first in line for the cloud, with 28 percent already using the cloud to support these activities, and another 34 percent planning to move them into the cloud within the next year.

    Interestingly, only five percent of respondents cited lack of senior management support as a barrier to adopting new technologies in finance. Most respondents reported the risks associated with integrating new systems and technology as the top concern (45 percent), followed by the lack of internal skills (38 percent) and a focus on higher priorities (33 percent).
  • 2. Modern Finance Delivers Insight and Value to the Rest of the Business.
    Forward-looking CFOs are taking advantage of new data and analytics tools and techniques to deliver more value—even developing entirely new revenue streams. More opportunities await finance departments prepared to explore big data and advanced analytics.

    In the auto industry, firms like Tesco Bank in the United Kingdom and Generali Group in Italy are using big data and analytics to lower the cost and liability associated with insuring potentially risky drivers. Cars insured by these companies are equipped with tracking devices that monitor driving behavior and generate premiums based on the results, allowing finance to directly shape new products and push the evolution of the industry's core business model.

    A key element of modern finance's contribution is ensuring up-to-date data within the business. Much progress has been made in this area, with almost six in ten finance functions having access to data that is no more than seven days old. Still, 43 percent rely on business data that is a month or more old, and 59 percent report that many finance processes remain predominantly manual or paper-based.
  • 3. Modern Finance Acts as a Service-Oriented, Strategic Business Partner.
    "For me, it's about how do we add insight and value to the business? How are we always thinking about our stakeholders as a service organization?" says Ian Winham, executive vice president, SFO and CIO, Ricoh Europe PLC, a global technology company specializing in office imaging, production print, document management systems, and IT services. "How can we give them the service they require? How do we make our processes more efficient and add value? And the final one is staying abreast of technology. You've got to make sure that you're at the front end of technology and taking advantage of what that can deliver to the business."1

    Having proven their value to the business during the recession, visionary CFOs are expanding the role of the finance function into becoming an active and strategic business partner. The finance team is the group best equipped to drive the growth agenda—and the research bears this out. According to the study, finance professionals are increasingly seen as proactive collaborators. Most respondents (80 percent) judge finance to be "excellent" or "above average" in its ability to collaborate with the rest of the business. Large majorities both within and outside the finance function cited this as a strength (81 percent and 76 percent, respectively).

    "The question is how many points can the finance organization help put on the board?" says Stuart Brown, SVP and CFO of Red Robin, a restaurant chain. "You can only do that by helping the different lines of business become more effective, and so our goal is to exploit business intelligence and business analytics for better and faster decision-making and to make that a competitive advantage."
  • 4. Modern Finance Helps to Enable Maximum Operational Productivity and Efficiency.
    Modern finance leaders understand that the finance function must adapt to meet changing business needs. Moreover, they believe in the potential of technology to help deliver more valuable services to the rest of the business and improve overall performance. In fact, many finance leaders have launched ambitious transformation programs to deliver on these goals.

    CFOs continue to consolidate systems, with just over half of all companies owning five or fewer finance systems for their core financial transaction systems, and 19 percent having just one. For example, AT&T's finance organization has embraced it role as corporate catalyst, consolidating its financial processes across the organization. No small task, given that in 2007 the company had 17 applications in the accounts payable function alone. Today that number has dropped to two. Similarly, there were 50 official management-reporting systems. Now there are three, with plans to get down to just one.

    According to John Stephens, senior executive vice president and CFO at AT&T, "The beauty of the system is that it allows the talented people with analytical skills to use their time in that area, as opposed to collecting, aggregating, and assembling data. We have an efficient, effective process that does that for us, so we free people up to do what they're really good at. And we do have a very high-quality team, and they are at their best when they're able to do their business unit support functions."

    At Ricoh Europe PLC, a cloud-enabled streamlining of internal finance processes has even inspired the development of new products and services for customers. Insurance company MetLife has been able to speed up internal processes to the ultimate benefit of its customers by introducing Web-based technology to automatically calculate sales incentive payments. According to Shabbir Malik, finance director at MetLife, "The compensation is generated much more quickly and salespeople can know the details behind the calculation by using the software tools we've put in place."

    The Finance Organization of the Future
    Clearly, finance organizations are facing dramatic changes. Led by a new breed of CFO, the finance function of the future will be a radically different entity from that of the past. It will be a full-fledged strategic business partner that finds new ways to collaborate with the rest of the organization. Modern finance organizations will set the growth agenda through sharper insights from data, which are increasingly provided on a near-real time basis. How will your organization adapt?

    To find out more, read the entire report.

1. Source: Longitude Research, “Empowering Modern Finance: The CFO as Technology Evangelist,” 2014.


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