AI Magazine Issue 1 2018

12 Acquisition International - Issue 1 2018 Behind the transformation of the finance function lies the increasing technical skills of FDs and other professionals, as Daniel Mason reports. hat do we know about the future? Only what we can learn from the past. This truth is at the heart of the role of the finance function: to give a clear and accurate picture of an organisation’s past performance, and based on that knowledge, show possible futures. Given what the recent past tells us about the near future, this capability will only increase in importance. The current period of uncertainty does not seem set to end any time soon. We can expect continuing shocks across the political and economic landscape. And the rapid pace of technological innovation will continue to disrupt whole industries. Change inThree Dimensions What does it take to build sustainable success in this environment? For our report on the modern finance function, we assembled evidence from finance leaders, industry analysts, and our own experienced consultants. What we found was a transformation taking place in three dimensions. Three transitions that every office of finance must undertake in order to be truly future-ready. We then asked a range of finance professionals about their progress in making these transitions. This is what they said. Transition 1: From Compliance, to Smart Compliance The first shift required is to make compliance a state rather than a process. This means cleaning up data sources and automating the production of critical external reports, whether they are annual accounts or regulatory filings. This process provides a foundation of solid data for the next two transitions, and frees up the human resource required to undertake them. It also diminishes the risk of damaging mistakes, and reduces the reliance of the organisation on a small number of individuals who have the knowledge to complete the relevant filings: all too often, the processes for producing reports are contained in spreadsheets that few in the business understand. This looks to be the reality for 30 of the 40 companies we surveyed about their progress on this transition, who told us that reports are produced on spreadsheets by one or two key staff. Not only is the report production process very manual, but the sources of data from which they have to work are not trusted. 80% of respondents said that at least some data has to be verified manually before it is trusted, either with the source or by referring to other staff members. Company: Prophix UK Ltd Delivering the Future of Finance W 1801AI02 If you can improve data sources to the point that they can be trusted, and automate the production of critical reports, you can be assured of compliance at any point in time. Paper trails are clear and unambiguous. There’s no fear of the unexpected call from a regulator. Auditors can walk in at any time and have access to everything they need. And M&A activity can be accelerated. Transition 2: From Reporting to Operational Intelligence With confidence gained in data quality and time freed from the production of external reports, the forward- looking finance function can turn attention to the business. The transition to operational intelligence is about enhancing the finance function’s capability to support other functions across the organization with data-driven answers to key business questions. Currently, this capability is limited by multiple factors. There is often a lag in the availability of good performance data, meaning analysis is a long way from real time. Resources are often scarce in finance, limiting the willingness to offer additional support to those in sales, marketing or operations. Even where there is the willingness, the skills are often lacking, both for the analysis itself and the communication of the results. There’salso the issueof tools.Overhalfofrespondents still rely on spreadsheets and presentation software to produce reports. None can offer data in an interactive format to users beyond finance, allowing them to create their own models. Where good tools exist, skills are the issue: more than a quarter of respondents said only a single individual has expertise in the reporting system. One example of the type of analysis that could be valuable is profitability. Here, less than half of respondents can produce analysis with any level of granularity that might support decision-making on a departmental or product level. Transition 3: From Planning to Foresight In too many organisations, planning and budgeting has become a time-consuming and often adversarial process that adds little real value. Though almost half of respondents said that planning was now a ‘collaborative process’, the rest described it as ‘top down’ (40%), ‘an uncomfortable dialogue’ (7.5%) or ‘a battle’ (5%). Over half of the respondents said the process takes too long, with 10% saying it takes more than three months of each year.