The changes produced by the automation of repetitive, manual finance and accounting processes have set the stage for remarkable developments ahead: more insightful financial forecasts, vastly improved resource allocation, and extraordinary workflow efficiencies.
These advances are being called Modern Finance. They are occurring at the same time that the CFO function has metamorphosed to become highly strategic. They are changing the definition of what it means to be a corporate accountant, moving the position closer to that of a financial analyst. Most important, they are giving all-sized companies the tools to more effectively align their financial strategy with their business strategy.
The future of finance and accounting is linked to adoption of these cloud-based technologies. Already, these tools are providing organizations with enhanced visibility into the vast array of complex transactions at the heart of all businesses. They’ve resulted in faster financial closings, greater confidence in the accuracy of financial figures, worry-free financial statements, and far more assured regulatory compliance.
This is Modern Finance “now.” What is “new” and “next” is paradigm busting. “There is this amazing journey underway for finance and accounting executives, where they are getting away from the mundane, tactical stuff that has absorbed their time and effort forever, and moving toward functional excellence,” says Brian Sommer, ERP industry analyst at finance technology research firm TechVentive Inc. “The CFO is at last becoming the strategic business partner that CEOs have longed for.”
Assuring this partnership is technology. By digitizing financial data and automating traditional finance and accounting tasks, organizations make this gold mine of information searchable. Powerful algorithms make sense of internal data sets in relation to each other, and these are added to the immense array of external macroeconomic, geopolitical and competitive market information on the Internet. The result: CEOs can plot smarter strategies to be expertly navigated by their CFOs.
“To do this, companies need access to the variable data sets that are stored in provider cloud systems,” he says. “These emerging capabilities will change the role of accountants from validating the accuracy of the numbers to making sure the CEO is creating the right business decisions.”
Sommer is far from alone in this view. Chris Iervolino, a research director at Gartner, cited the improvements in finance and accounting efficiency that have already been achieved by automating manual processes like account reconciliation. But he is especially excited about what these digital tools offer companies in future.
“Cloud-based reconciliation tools have enhanced efficiency and improved visibility into workflows across the business,” he says. “They also have the potential to provide new analytic capabilities; this seems to be where these automated reconciliation tools are headed. This will help the CFO guide and support more organization-wide initiatives. As the role of the accountant evolves, their specialized expertise will be put to more strategic uses.”
YESTERDAY’S FINANCE & ACCOUNTING
This is undoubtedly good news to many accountants stuck in the trenches performing manual tasks like account reconciliations, transaction matching and variance analyses. As the pressure intensifies to close the books each month, these tasks become excruciatingly burdensome and anxiety-ridden, given that senior executive leaders are raring to access the financial data to possibly make adjustments in strategy and tactics.
When uncertainty about the accuracy of a journal entry arises, accountants must dig through a mountain of spreadsheets to prove the balances are correct. Without an automated system attending to this chore, there’s simply no visibility into the underlying data. Literally thousands of multi-line-item spreadsheets must be analyzed, a Sisyphean effort challenged by the different ways the spreadsheets were created and used across the business.
These complex workflows make sorting out a single version of the truth an exercise in frustration and futility. All the while, accountants are aware that a fast and error-free closing is critical to the organization’s bottom line, compliance responsibilities and reputation. As the minutes tick away to close the books, no time is available to do anything else.
This is not Modern Finance. “You’re taking time away from these human resources when they can be adding value, doing things like revenue forecasting, cash flow management and determining where the profits are in the business,” says Nick Castellina, research director at Aberdeen Group.
Robert Ployhart, Bank of America professor of business administration at the University of South Carolina, equates the above to “Staring at your feet while you’re walking, versus looking down the street at where you’re going and what lays ahead.”
He says “Automating rote manual processes, assuming this is available for a particular business function, is a `no brainer.’ You liberate intellectual assets to apply their expertise to more beneficial purposes. Accountants can’t do that when they’re plugging in numbers. There’s this tremendous opportunity at hand to enable them to become strategic thinkers, in ways that weren’t possible before.”
TODAY’S FINANCE & ACCOUNTING
The use of cloud-based software to automate finance and accounting processes has become a competitive differentiator. Boards, shareholders, analysts and other stakeholders have come to expect more refined forecasts of business performance and more rapid identification of growth opportunities and related risks.
Many businesses have yet to realize these emergent expectations. “There are many dysfunctional companies still stuck on spreadsheets and out-of-date technologies,” says Sommer. “This is unfortunate because functionally excellent companies are where things get really cool. They’ve shifted to (using) cloud accounting and finance workflow management tools, where manual processes remain for exceptions only. This fosters greater collaboration up and down the value chain – or what I call the `automation everywhere’ business organization.”