3 key components of a world-class finance function and how to optimize them

How would you describe a world-class finance function? If you start playing with adjectives like reliable, competent, efficient, consistent and impartial, you have a vision of a trusted buddy who empowers your organisation to execute your strategy with financially savvy and timely business decisions.

To reach this vision, you need a solid foundation which rests on a few critical cornerstones. It includes a well thought out enterprise architecture, data and operating models that meet your corporation’s strategic needs. What does “good” look like to you? This is strategic. It must be relevant and serve its purpose for five to 10 years. Document all your main assumptions and arguments that support your choices as a leadership team and be prepared to defend those decisions during the coming years. Stay alert and be ready to adjust, should your strategic objectives or the world around you change significantly.

Enterprise applications and data

As a starting point, a large corporation’s system landscape may have multiple HR, manufacturing or financial accounting solutions and different technical platforms. Mergers and acquisitions may have added to the complexity. These legacy systems have different data structures and master data harmonization is, therefore, very challenging. From a financial reporting point of view, these structures require several sets of data mappings and conversions, before being able to consolidate group level financial statements or to support corporate performance management. In order to meet your vision of an efficient, consistent and timely reporting, this landscape must be simplified.

Harmonized cloud-based financial accounting and reporting solutions help you to stay current with the latest digital capabilities. Off the shelf, fit for the purpose, operative applications for business processes can be integrated into the modern and open financial accounting solutions, rather than trying to tailor-make or hardcode a single solution to serve all functions and business line specific needs.

Holistic data architecture with strong master data governance is a critical part of a successful enterprise architecture. For example, customer, product and financial master data should be shared and automatically synchronized between the operative applications. It is important to think carefully about the design and structures. They should be kept flexible for future organizational changes and leave room for adjustments. How many reporting dimensions do you need to support your management? How do you capture that data during the E2E processes? Should your products be configurable?

The benefits are clear. Harmonization brings opportunities to automate and speed up processing. It delivers reliable and consistent data for decision making. Optimizing the system landscape reduces the overall cost of maintaining systems. It reduces the need to retain technical knowledge about multiple legacy systems, updating interfaces and keeping up with the system-specific upgrades. Strong integration and harmonization also support automated internal controls and improve the efficiency of your data quality assurance.

Forming a clear vision of the future strategic digital capabilities requires expert knowledge. Having an impartial party for support during the design phase has many benefits. It gives you access to the latest trends, helps you to keep an open mind and keeps you safe from relying on inflexible dependencies. In addition to planning for the deployment of harmonized solutions, there must be a clear roadmap for ramping down and archiving the legacy systems. That is where the long-term cost savings are.

Operating model

While designing the future digital capabilities, you must also define the business processes and organisational structure to support your strategy execution.

End to end business processes, such as Order to Cash, Purchase to Pay and Record to Report are well-known. Financial accounting processes are highly regulated by international accounting standards and national accounting and tax laws. Designing and maintaining corporate wide end to end business processes that are operated in a harmonized system landscape call for a strong cross functional commitment and corporate wide governance model.

Never underestimate the change effort required to transform your complete operations from a multisystem environment with limited transparency to a transparent and harmonized operating model. What makes sense from a group point of view doesn’t necessarily seem sensible from a local country or product line perspective. Local ways of working are well-intended and deep rooted. Professional program management will help you to ensure that all key requirements are incorporated into your global design. It will also follow that the deployment does not pass through the entities as only a system implementation, but will also track the adoption of the new operating model.

Harmonized basic accounting and stabilized operations are prerequisites for productivity enhancements, such as automating cash applications and utilizing scanning and Optical Character Recognition (OCR) based processing for incoming invoices. Only after business processes are harmonized and integrated from the operative systems to financial accounting, can you see increased invoicing efficiency and optimized order to cash lead times. The full end to end business process harmonization will also form the basis for consistent data for timely reporting and will enable the adoption of advanced business planning solutions. These are excellent opportunities to improve your operational efficiency.

As previously mentioned, the harmonization of business processes across different business lines and geographical regions require global process and system design governance with dedicated business process and system design owners. These roles are responsible for the efficiency of process design. They define the related roles and responsibilities, key performance measures and own the governance of the ongoing process improvement and introduction of new capabilities in close collaboration with the key business stakeholders. This work continues after the initial development and deployment.

People

Finance function competencies have evolved from technical accounting and financial reporting to include digitalization and data analytics. This includes excelling in the end to end processes that the finance team must understand, learning to appreciate each other’s challenges and collaborating with both internal and external partners to gain continuous improvements. The finance function roles and responsibilities and required skills and competencies must be reviewed. Renewed career paths will showcase different strengths and bring new opportunities for both personal and professional growth.

Some words on transformation

When you have a clear vision of the target for your corporation’s system landscape, identified the critical business processes and required competencies, you can start working on a capability roadmap to reach the target. It is important to ensure that the whole leadership team is committed to support this roadmap. Prepare a solid risk management plan with undisputed risk ownerships. You also need a shared, cross functional ownership and governance structure to manage the shared master data and to retain the integrity of your business-critical engine beyond the initial deployment.

It is also important to recognize that the transformation program is always temporary by nature. Keeping this in mind, carefully consider who should be involved during the different phases. Ensure that your key resources are engaged and have an opportunity to contribute to their own future leveraging on their individual strengths. They will also face change management challenges. Therefore, they should have a safe environment to share and find support. Keep your organization informed and communicate at regular intervals. It is important to manage the expectations. The Finnish mentality of “let’s not fuss about this” is not at all helpful. During times of change “no news” does not equal “good news”. Engage your change leadership professionals. Communication will take time and requires dedicated resources.

In short, gain clarity on what you are striving for and ensure that your actions are aligned with your corporate strategy. You should show love and understanding for your organization, as this will not be easy on anyone. Maintain the momentum, track the progress on the preparations and try to keep to the schedule. If some countries start lagging, replace them with other ones. Don’t let anyone keep you hostage.