CFO Office – THE DATA-DRIVEN FINANCE DEPARTMENT
It is more exciting than ever to serve as CFO – and at the same time it has never been more challenging. Expectations and demands on the role of the CFO have changed markedly in recent years; from previously being a reporting function the role of the CFO has now developed as one of strategic partner. At the same time, the pace of change is speeding up as a result of digitalisation, and this imposes entirely new demands on the CFO Office to ensure that financial reporting, forecasting and simulation of business models all work seamlessly.
It is a challenge for the CFO and financial team to keep pace with developments as business models and processes change at an ever faster speed. The same data-driven technologies that change business processes also change the CFO role from the ground up. CFO Office will need to acquire new expertise to be able to handle and utilise today’s ever greater quantities of data and advanced analysis tools. This is necessary in order to be able to navigate the finance function in a technology-driven environment, where strategy and growth are constantly moving targets.
IMPROVE THE EFFICIENCY OF YOUR BUDGET AND PLANNING PROCESS
Budget and planning work should be an efficient process that generates value for the operation, something that is often easier said than done.
Today many finance departments invest more time in obtaining budget information than in actually analysing it. When the finance department requests data for planning and forecasting purposes, it is often referred to a confusing patchwork of Excel spreadsheets. Another challenge is to get business units to become involved in the budget process and to get them to feel a sense of ownership for delivery against an agreed budget.
In today’s business climate it is not sufficient to budget and make forecasts a few times a year. Companies need a planning platform where they can respond quickly by simulating and analysing the operation in real time and communicating with the relevant budget managers. With the right budget and planning tools, work routines and decision-making data in place, it is possible to work efficiently towards the set operational goals, and it is easier to change the goals as conditions change.
A COMBINATION OF BUDGET AND PLANNING TOOL AND WORK PROCESSES
A value-creating budget and planning process can be achieved by taking a holistic grasp of all aspects of the organisation and the way the staff work with budget and forecasting – the finance department, business units and staff functions such as HR and executive management. In most cases a solution consists of a combination of system support and best practice implementation for how best to tackle budget and planning work with the help of smart work processes and sound analysis models.
FROM MANUAL TO AUTOMATIC
With the right system support you can efficiently automate the compilation of your budget, and forecast data and collect all your budget and forecast information in one single system. At the same time, potential fault sources are reduced and more time is freed for value-creating work tasks such as analysis. This makes it easy for the controller to be able to offer the operation dependable data for business decisions. One example of such data is the ability to identify the most significant key performance indicators and to make the figures relevant using the specific analysis parameters that are needed to take business decisions. Much of the human intelligence that previously was person-dependent can now be integrated into budget and planning systems and processes.
CLOSER TO THE OPERATION WITH TAILORED SOLUTIONS
With the right budget and planning system and work processes in place, the finance department can work closer to the operation. In newer versions of budget and forecast solutions, there is support for predictive forecasting out of the box. The information is tailored to the recipient, so for instance a site manager gets one type of information and a purchasing manager gets a different type of information. Instead of building on complex and abstract account designations, it is better to build on parameters that are used every day, such as customers, product groups, employees or segments. What is more, information input becomes much more efficient, more easily accessible and understandable since each person only sees those parameters that he or she is expected to contribute in the budget and planning process, and they have familiar names.
BENEFITS AND SAVINGS WITH A MORE EFFICIENT BUDGET AND PLANNING PROCESS
Implementation of system support and optimisation of the budget and planning process in a medium-sized company can take anything from a couple of months to half a year. Naturally the time required is directly dependent on the pre-existing situation, level of ambition and in-house involvement, since it’s about so much more than just getting an application to work. But what actually are the concrete benefits and savings that can be expected?
With the help of predictive forecasts the finance department can use internal and also external data to identify trends. This allows the finance department to create more reality-based forecasts and provide better decision-making information. Predictive forecasts allow the organisation to predict results, identify opportunities, identify hidden risks, forecast the future and react swiftly to changes.
All companies wish they could look into the future and find the answers to questions such as “how many products will we sell in the next 6 months?” or “how much will the operation need to spend on production and distribution?” By investing in analyses that use predictive techniques, we can today provide answers to this kind of question without relying only on experience and subjective assumptions.
ANYONE WHO HAS WORKED IN A BUDGET OR FORECASTING PROCESS KNOWS THAT IT FEATURES A MULTITUDE OF SUBJECTIVE ASSUMPTIONS, SUCH AS:
AUTOMATE FORECASTS WITH PREDICTIVE ANALYSIS
Many companies today work with rolling forecasts. Another way to create a better dialogue about how resources should be distributed and which goals should be reached is to begin working with predictive forecasts, which are based on historic data and algorithms. By using all the data found in-house in the company (and in certain cases also external data) it is possible to develop entirely automatic forecasts which can then be used as a basis for discussion when drawing up a budget, for forecasting or reviews. In cases in which a manual forecast deviates from the automatically generated one, there will be a healthy discussion about how to handle the operation and which activities are needed to get from the predictive forecast to a desired status.
In the most recent versions of system support for budget and planning, both predictive analysis and machine learning are built in. It is possible to make quite a lot of progress with this integrated functionality, but it may need to be extended with more advanced functions. Predictive analysis shows what will happen depending on past history. This is a good basis for discussion, but if you want to work more with how the prediction will change when certain activities are undertaken, then more functions need to be added. And that is where Data Scientists enter the picture!
PREDICTIVE FORECASTS CAN IMPROVE MANY PROCESSES, INCLUDING:
Find the most profitable customers; by analysing customers it is possible to identify small customer segments that are very profitable.
Group reporting and corporate financial consolidation can be complex and often result in a lot of work, but it is possible to simplify the work environment. Economists all over the country are currently working hard with meagre resources and increased demands on reporting. These demands are expected to increase in the future, and there is a growing demand for group reporting systems that make life easier for economists.
The systems currently on the market can handle the legal reporting needs of both small and large corporate groups. Certain systems have predefined ‘rule engines’, while others are tailored when the system is implemented. Corporate groups often have information in different silos – one system for the legal consolidated information and a number of others for the operative follow-up and regulation. According to system support suppliers, companies need to increase their information and modelling possibilities in the group reporting system so that they can work in a common system with a common data model and quality-assured data.
There are a number of trends in the industry, including improved process support, extended analysis potential and increased user-friendliness. What is more, technical preconditions are undergoing constant improvement. Not least, there is increasing demand to place the system in the cloud. The clearest trend, however, is that group reporting systems will support more of the closing process and accept more data that permits new types of analysis and ‘what if’ scenarios. This means that group reporting and business control will become closer to each other and this requires a new type of cooperation. There is a parallel increase in the opportunities for new insights, which in turn brings with it added competitive benefits.
WHAT ARE YOUR CHALLENGES AND HOW CAN WE HELP?
No matter whether you answer ‘yes’ to one or more of the above questions, we can help you. With our experience from linear workflows and backed by many projects over the years, we can assist you at all stages of the process, from system assessments and implementation to further development of existing solutions. We have dependable expertise in IBM Cognos Controller, SAP BPC, SAP Financial Consolidation, Unit4 FPM (Ocra) and Adaptive Insights.
Companies and organisations are often good at putting together and quality assuring their annual accounts up to and including consolidation of the figures, but when it comes to producing reports in the form of monthly, quarterly and annual accounts, for instance, there are often problems. That is when the controlled chain of data flow is broken and Word and Excel files are changed manually and cut, pasted and sent via email within the organisation.
Work on producing recurring text-based monthly and quarterly reports and annual reports that consist of both statistics and text is often a heavy and manual process, where minor errors can have major consequences. Many people are involved and late changes often create a lot of unnecessary extra work. The process of putting together the concluding reports is often called ‘Disclosure Management’ or ‘The Last Mile’.
One normal scenario is to use the previous report as a template and then key in the most recent figures and texts. This method usually creates a lot of manual work and constant checking and verification procedures, which often tends to generate frustration and increase the risk of error.
In order to automate this process, various solutions have been created under the heading ‘Disclosure Management’. With the help of these smart solutions, it is possible to link all documents that are written in different locations in the organisation to the correct source data. This may include everything from the consolidated reporting tool and finance and HR system, to any source at all. This means that all functions write their own texts but the basic data is linked and updated automatically when a new quarter has to be reported or if an update has been performed in any pre-system, thus minimising subsequent verification needs. The team behind the report can work together in a shared tool to ensure work on the correct version and proper control. They can easily link to various data sources and thus upload statistics instead of having to key them in manually.
New EU regulations about digital reporting (ESEF) mean that annual accounts for financial years starting on January 1, 2020 must be created in XHTML format and that financial reports must also be marked in accordance with a specific classification (taxonomy). This can be done very conveniently in Disclosure Management solutions. Advectas works together with some of the strongest system suppliers in this area – SAP, Certent and CtrlPrint.
In his role as CFO, Robert Casselbrant has workdays that are fast-paced and highly varied, to say the least. Robert says the role of CFO has become far broader in recent years, and increasing demands are being imposed.
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