• Finance is shifting from a cost center to a value driver, embracing Finance Transformation, which may involve the use of business intelligence platforms and business intelligence technologies.
• Reasons for Finance Transformation include adapting to market changes, leveraging technology, and consolidating data for better decision-making, often facilitated by cloud computing benefits.
• Key elements of successful transformation include automation, data consolidation, business intelligence, and new planning approaches, such as rolling forecast-based budgeting.
• XP&A, an extension of FP&A, extends its capabilities across the organization and may involve the use of predictive analytics.
• Zero-based budgeting is a strategy for reevaluating expenses and requires regular implementation for optimal results in finance transformation.

Weak Response to Unforeseen Market Developments:

Finance teams with traditional operating models and legacy tools and systems limit themselves to a specific set of mundane tasks. This hardly gives them time to help shape the financial strategy of their business. Black Swan events like the Pandemic exposed the shortcomings of this type of functioning. For example, lack of cross-functional collaboration resulted in many failed predictions and forecasts by FP&A teams. The ability to respond quickly to external forces is also hindered in a traditional operating model.

Not having the right technology solution stack leading to Inefficiencies:

Finance spends a significant proportion (close to about 40% according to a survey conducted by FP&A trends) of their time in low value adding activities. Finance Function is also the third slowest operating corporate function, according to Gartner. To support growth and be more efficient, the Finance function must speed up its service delivery through the right use of technology and tools. Outdated technologies and unreliable data processes are major obstacles to improving performance, discovering business opportunities and remaining competitive. Therefore, in order to maximize the impact of their digital transformation, aligning it to fit the your businesss needs is crucial and requires the right solution stack and an experienced implementation partner when in-house talent is not equipped. The goal behind using technology to transform is not to replace people but to free them up to do value-added tasks. Lack of digital transformation can be expensive and leads to strategic ambiguity.

Lack of a single source for data that everyone trusts:

Managing and Modeling of data becomes difficult and unreliable when different versions of data emerge over time as spreadsheets are shared with many teams. This prevents the top management from getting actionable insights from their business data. This is one of the key pain points for Finance, which in turn affects the downstream associated activities like Month-end Close, Planning, Financial and Management Reporting and Decision-making. Businesses have quickly realized that they must drive a serious digital transformation effort to remain competitive in today's turbulent markets. However, failures in execution are common when an organization lacks the business-access to accurate and timely data from other functions of the business.

No code tools enable you to rely on just one tool to streamline processes and workflows across many departments. No more paperwork, manual data entry, or complicated systems to learn.

Low code/no code tools are showing tremendous potential in Finance functions. For instance, FP&A teams greatly benefit from no code innovation tools that automate their workflow processes and sets up proper quality assurance and financial controls. This provides and opens up immense possibilities for team members with no computer programming knowledge. No code approaches are proving especially effective within account management, data administration, and payment and subscription services. It is therefore no surprise that their implementation is becoming more widespread within the financial sector. According to recent research from Gartner, 70% of new applications developed by organizations will use low-code or no-code technologies by 2025, up from less than 25% in 2020.

Skill shortages in the technology industry have been well documented and, in terms of application and platform development, the problem has become urgent. According to Mendix's State of Low-Code 2021 report, based on a survey of 2,025 IT professionals across six countries, 77% of enterprises have already adopted low code to meet this shortage, and 75% of IT leaders say it's a trend they can't afford to miss. The research underscores that the trend towards low-code adoption is helping enterprises accelerate the pace of development by democratizing how software is being built to include business users. Low-code and no-code platforms have enormous potential across financial markets—from simple business process management (BPM) to more complex processes. They are an empowering new development for business professionals to create applications for clients, enabling them to innovate and solve problems in a way that was previously foreign and inaccessible. These platforms help drive significant efficiencies through development of solutions for various finance processes, directly impacting the bottom line.

Automation

Automating manual and redundant tasks transforms Finance from a mere 'cost center' to a 'profit center' function, raising its importance within the organization. Technology is taking the front seat in driving a transformation. As companies become more customer-centric to stay competitive, it is important for Finance teams to be part of the value creation process and provide business advisory solutions. By means of automating manual and redundant accounting tasks through Robotic Process automation (RPA) for month end closing entries , efforts saved can be utilized by Finance professionals in value-added activities It is also more cost-effective when compared to other options such as outsourcing accounting services We are moving to an interesting period, where Finance professionals will have excess time in their hands that can be utilized in building relationships, thinking strategically and to move beyond support and compliance roles. For example, in FP&A, where activities like building standard management reports are generally repetitive in nature and follow a set of systemic rules, automation software/tools and evolving technologies like AI and ML can be deployed to drive efficiencies into the process. Automation enables Finance to evolve from being trusted advisors to business partners and guide the top-management in decision making.

Data consolidation

Data consolidation allows you to capitalize on all of your organizational data by breaking silos and bringing it all together to understand the financial health of your business. Cloud adoption and database consolidation is seen as a major trend where a centralized platform is set up and data from different functions are brought together for Finance teams to access and generate newer KPIs and insights that create an edge in decision-making. Cloud computing benefits in cost saving and flexibility, Cloud computing models can also contribute to streamlining the process. This is the first step towards establishing what is called a Single Source Of Truth (SSOT). SSOT is where a central platform has just one version of up-to-date information, that is accessible to all team members helping with Cross-functional collaboration. This saves time by removing redundancies and also cases of rework, resulting in better quality data by the finance teams. Cloud adoption is also a major step towards implementing Data consolidation.

Data consolidation involves extracting all your business data from disparate sources throughout your Business, transforming, blending and combining it in a single location, such as a cloud database eliminating data silos.

Here, planning processes are also unified through a single enterprise-wide platform that is accessible across operational and financial functions. Having access to real-time data also leads to better decisions as decision-makers can now see the big picture of their operations and business processes.

Analytics is all about converting data into an understanding of what it holds, for better business decision-making with the help of visualizations, reporting and predictive analytics.

With ever increasing emphasis on digitization, Finance leaders are turning towards data and analytical research and innovation in order to make more informed data-driven decisions. Hence, it becomes crucial to adopt the right analytical tools to fasten the process. Analytics is extensively used to add extra horsepower to a business's transformation drive. But, this is an area where a combination of business problem solving, data modeling, automation come into picture. More often than not, Businesses do not have the right talent pool with a predefined playbook on how to go about it. Failure in this regard can cost a business up to 1% of its revenue, according to Gartner Research.

Business Intelligence technologies relates to the practices used by Businesses to collect, process and present the extracted value from the existing information. Simply put, it's all about converting data into an understanding of what it holds for better business decision-making with the help of visualizations, reporting, predictive analytics and other features. Business intelligence platforms extensively deployed for operations and performance management, improving financial management and to understand client needs better. Business Intelligence tools underpin the robust financial analysis apparatus for businesses.

With BI and Predictive analytics, Finance teams are also more agile and continuous in forecasts and have become big-time scenario planners. They predict different scenarios from real-time data and generate insights to guide decision making. Some of the notable tools that businesses can deploy include:

Real-time analytics and insights:

Finance teams can quickly identify performance management opportunities and risk areas resulting in greater collaboration, coordinated response and better alignment of goals across teams and functions.

Analytical and Process Workflow Automation:

Deploy robust and automated driver-based financial models and process workflows resulting in real-time insights. For instance, analytical Process Automation (APA) is a technology that allows anyone in your business to easily share data, automate tedious and complex processes, and turn data into results. This powerful tool integrates seamlessly with your CRM system, enhancing your workflow automation in CRM. With such advanced analytics, anyone can unlock predictive analytics and prescriptive insights that drive quick wins and fast ROI.

XP&A - Taking the best of FP&A and extending it across the Business

XP&A takes the best FP&A capabilities and extends them across the organization. It gives the Businesses the power to work like a well-oiled machine. Linking individual departmental plans to identify the potential impacts within different departments is at the core of XP&A. It allows businesses to respond quickly. For example, if a business plans marketing launch changes, other departments adapt accordingly. Hence, it goes beyond merely linking operational plans to each other, by connecting evolving developments and business transactions to financial goals and strategic objectives. XP&A helps this framework and plays the role of an orchestrator, overseeing the entire framework.

XP&A recognises that change is constant with pivoting, course correcting and making transformation a part of everyday business. XP&A's holistic thinking helps Businesses to be more connected. This is achieved by data standardization, its timely availability and deploying automated systems. This approach is known as connected planning.

Implementing xP&A

Evolving from FP&A to xP&A requires support from the executive team and departmental leadership. Finance must make sure that everyone understands not only their roles in these new processes, but also the benefits xP&A can provide them. It must create a plan for how it will lead the extension of FP&A across the business. By working together with other departments it can understand what data and metrics are important to both the operational performance and financial results of the organization and develop a strategy for the ongoing performance management by integrating input from key stakeholders.

Then, Finance must determine what digital tools and capabilities will enable the organization's goals. It will also be important to factor in increased data management requirements. Finally, the teams must adopt a test-and-learn approach for greater success and expansion across different functions and business units.

Reducing uncertainty with Rolling forecasts and Continuous planning

Rolling Forecasts are a type of forecasting that uses a Business's existing data to help predict aspects of business performance at predetermined intervals. In the uncertainty of the Global pandemic, the use of rolling forecast-based budgeting is expected to gain more popularity as businesses across various industries seek to minimize uncertainty and enhance their adaptability. It is used periodically throughout the fiscal year and it either serves as a supplement to the fiscal year forecast, budget and other plans, or it can completely replace the annual forecast. Such frequency of continuous planning should suit your business needs and goals while giving due consideration to bandwidth and skills of talent in-house as well as the right use of technology tools.

Continuous planning is a vision for finance and business leadership that drives faster, more agile, and more iterative planning and decision cycles. It elevates the financial IQ of the Business so that everyone is engaged in the planning and decision-making process in a more meaningful way. That means plans are more accurate, insights and course-corrections are more frequent, and actions are more immediate. This creates an edge for the business to be more competitive, innovative and value accretive – and finance is the strategic advisor at the heart of it all.

Driver-based planning

Driver-based planning helps forecasting business performance based on the key levers that are most impactful to the Business. The goal here is to focus on the factors that are most critical to driving success, then create financial models that enable teams to run scenarios based on these drivers to understand the impact on projected business results. This type of model offers a plain-language method of communicating with your stakeholders. Business leaders should critically review the top-drivers that have maximum impact on planning and direct efforts and decision-making squarely on those. For instance, a marketplace business should be focussing on their path to achieving positive unit economics in the earliest possible timeline by tracking and measuring the Life-time value of its customers and Churn more closely and create scenario-plannig.

Driver-based forecasting and planning also saves a lot of time and effort in financial budgeting and forecasting by eliminating the line-by-line approach and focusing on key business drivers. This transforms Finance from being a backwards-looking scorekeeper to a forward-looking strategic advisor.

Resetting Finance with Zero-based Budgeting (ZBB):

A way for finance to reset is for it to take a few steps back, assess the situation, and move forward. This usually is done in uncertain times when situations are overwhelming. Usually, the traditional budgeting method is such that a business makes use of prior period information and adjusts for escalations in the current plan year. This method is commonly practiced as it is less tedious, less time consuming and generally is easy for cross-functional collaboration within the Business. Zero-based budgeting, however, means looking at every component of financial models and budgeting with fresh eyes.

Business functions need to ideally start with zero and justify every dollar value of expense planned to be incurred by each of the departments. Companies usually resort to ZBB only in times when profits are decreasing and spiraling down a rabbit hole. But this is a sub-optimal approach as this may lead to aggressive cost-cutting and expense reduction, adversely impacting the business's prospects. In short, implementing ZBB when business is cornered is not a healthy strategy. Instead, companies should institutionalize it. Set a regular periodic cycle for ZBB exercise.

Finance teams should move away from legacy data management practices and focus on tech-enabled agility. This would allow companies to adapt to changing market and economic conditions, increase the speed of decision-making, identify inefficiencies and opportunities and plan for the future. Technology can strengthen the workplace culture by providing employees with digital resources that will help them cooperate and work productively, from cloud-based communication and collaboration platforms to centralized data hubs where everyone has access to the same information. But it's vital for employees to be capable of deploying these tools effectively.

Today's Finance Function which is pivoting from value stewardship to value creation, requires businesses to transform by taking the right initiatives as discussed above. Uncertain times and disruptions due to the pandemic have exposed the shortcomings of traditional business structures and operating frameworks, and showed us the importance of adaptability and agility in Finance. Many successful firms have already transformed their businesses with the right mix of technology adoption, automation, talent and an implementation strategy from an experienced partner to stay ahead of the curve. Realizing higher ROI through direct tangible and intangible impact, Finance Transformation is the need of the hour. Every business including yours should be ready to walk the journey and not be left behind.