Finance & Accounting Innovation Playbooks: PART 1
How to build a growth-ready financial data foundation
CAOs, accountants, and controllers are under more pressure than ever to squeeze everything they can from their financial close operations.
In rising to this challenge, teams in and around the office of the CFO are quick to reach for predictive analytics or intelligent forecasting as the areas of focus for transformation. There are a bunch of vendors out there that promise these features.
But here's the thing...
HOW you change is as important as WHAT you change.
36%
of digital finance transformation projects fail in the first year.
Benefits of transformation:
SINGLE REPORT
"We can now run a single report that pulls data across reconciliations with reports. No more manual intervention is needed."
— Fresenius Medical Care READ
3
Day Close"We've shortened our close time from seven days to three and a half. By next year, we'll have reduced it to three days."
— Finning READ
85%
Auto-Cert"We were able to test the improved approach with a block of our reconciliations. We had an 85% auto-certification result with the sample we ran that first month. That blew us away.""
— Aetna READ
Access to the actual benefits of predictive analytics or intelligent forecasting is dependent on the completeness and accuracy of your accounting data. You can't get to planning and forecasting if you don't have timely, frequent, and trusted actuals.
Actuals are the basis for (and inputs to) downstream financial operations activities. So if you aren't following best practice and don't have your actuals right, that ultra-modern forecasting or analytics tool is only giving you unreliable data faster.
The answer? A connected, stepwise (and often, guided) approach to digital change. One that helps you get a fast time to value, while creating lasting and meaningful impact.
Chapter 1
Set your digital finance transformation goals
Planning your transformation efforts in a clear and stepwise sequence is the best way to ensure success.
Don't forget about your upstream accounting and compliance activities. These activities are key to unlocking the insights and information that drive growth and improve decision-making.
The best approach here is to map out all the upstream and downstream activities in your financial close operations and understand how they contribute to the overall strategy of your business.
Although this might seem arduous, it's the vital groundwork that ensures the technology solutions you're going to employ are aligned with your long-term goals—as well as your immediate ones.
The key is “tech aligned to strategy.” That means “technologies are being harnessed to achieve some discrete goal and bring the strategy to life.” To do that effectively, understand the outcomes you want to achieve as a department.
Deloitte says:
The key is “tech aligned to strategy.” That means "technologies are being harnessed to achieve some discrete goal and bring the strategy to life."
How will you get there? And what resources will be needed?
At this point, if you’re using a solution partner (and they’re worth their salt), you’ll be able to collaboratively define which parts of the strategy will be accomplished through staff and which with technology. And order them by their importance to your business.
It's crucial that you consider the following:
What are our internal and external reporting needs?
What data is needed on revenues, profitability, working capital, and pricing to power our M&A transactions, divestitures, and other activities?
Chapter 2
Focus on mission-critical accuracy
Asking to pause operations or redo downstream forecasts because of a material misstatement or compliance issue won't go over well. So, you'll need to get very strategic about the moves you're making to maximize impact and minimize disruption. Below are the two steps we recommend you take first.
Journal entry management
There's no single 'right place' to start when creating the mission-critical accuracy that sets high-performing finance and accounting operations apart from the rest. But among other close activities, journal entries are a consistent source of errors and a drain on resources.
Not least because the act of creating, supporting, and certifying journal entries often lacks standardization and creates bottlenecks.
This leaves you with a lot of downstream headaches when it comes to the audit. What can you do about it? Centralize and automate the creation, validation, reviewing, and posting of journal entries.
To maximize impact, it's vital that whatever solution you opt for offers you flexibility and control, and is able to integrate with your ERP. That's how you can make the journal entry process as seamless as possible.
Reconciliations
Automation of reconciliations goes a long way. In fact, according to one PwC study, 30% of your accounting team's time is spent on manual reconciliations.
But outside of the time-saving benefits, automating reconciliations also helps you drastically reduce the errors in your financial data. Most reconciliation workflows involve downloading data from multiple different source systems. Then aggregating the details in a spreadsheet. Then getting medieval with formulas, v-lookups, or even color coding to match and reconcile. This makes reconciliation workflows a hotspot for errors.
But by automating this process with the right solution, you’re able to unify data in the cloud and apply business rules to automatically match transactions and flag exceptions. This saves time and reduces risk. These are by no means the only functions you should attack, but they are two great places to start.
30%
of your accounting team’s time is spent on manual reconciliations.
– PwC
Chapter 3
Entrench a data quality culture within your team
Let's say you've followed the steps in chapter two and you're working with a solution provider that understands how to orchestrate meaningful change...
If that’s the case, you’ll have gotten a few solid wins under your belt pretty quickly. For example, you may have automated some of your key accounting activities.
It can be easy to let the satisfaction of these early wins distract you from the deeper, more holistic change opportunities available to you.
But remember, this is all about tech that’s aligned to a bigger strategic goal. Not simply using tech to automate a single reconciliation workflow, or similar.
The best way to forge towards your long-term goals is to advocate internally for a
“cleaning the river”
approach. This is where you incrementally improve upstream data quality so that it flows through the system.
In order to get this over the line, we recommend an approach founded on connected thinking…
A lot of your accounting and close activities are intertwined. They depend on one another and are connected—it pays to treat them accordingly. So, rather than looking at your journal entries or account reconciliations in isolation, think about your end-to-end accounting processes and all of the manual activities that comprise them.
Monthly accruals process
Monthly accruals involve: journal entries, high-volume reconciliations, calculations, certifications, variance analyses, and even controls certifications.
These activities are all connected. If you have a connected, single-platform approach to dealing with them, you’re able to reduce complexity and unlock a serious amount of insight in the process.
Bank reconciliations
Imagine your transformation strategy focused on finding a platform that could automatically reconcile your bank detail to your general ledger (GL) detail. It would leave only the reconciling items for your teams to review.
Now imagine that this same platform could identify your bank fees or interest income and automatically create and post the journals to adjust the GL accordingly.
But that's not all. What if those steps were automated to ensure your reconciling items are transferred to your account reconciliation, so your balance is substantiated automatically?
This level of connected thinking when it comes to solution or platform choice, opens the door to meaningful change and serious gains.
Chapter 4
Reallocate time to strategic initiatives
“BlackLine has given us the ability to automate many of our manual processes to give us time to look for new ways to innovate.”
Al Leonardo
Director of Financial Accounting Services, Aetna
Exceptions and anomalies
As you achieve greater time savings—the next stage is the strategic reallocation of time as a resource. This will be different for each business—but focus your time on two things:
Strategic initiatives and business partnerships
Chapter 5
Scale your impact across a wider range of accounting activities
Once you're getting results in one area, the ultimate goal should be to replicate those wins across other functions in your record-to-report process.
But because a lot of people start with the financial close, there’s a crucial step first. Ask yourself if you’ve really addressed the entire record-to-report (R2R) process or if you’re currently hovering around the report-to-nearly-there mark.
It's vital that you get into the weeds here. Are there hidden moments of heavy manual work behind the automation?
For example:
If your solution uses a template function to automate low-risk reconciliations, where do those templates live? If the answer is Excel, you'll still have a bunch of manual handling to do.
Once you're confident
Once you're
confident
that you've mapped the full R2R process (and you've unearthed any hidden manual work), you can start to expand your reach to other areas like invoice-to-cash and intercompany transactions.
Just don't rush it...
It's all about a series of controlled, strategic moves towards your overall organizational goals. Jumping ahead to intercompany transactions before you've addressed your full R2R process is going to be hugely detrimental.
And when it does come to scaling your impact, it’s crucial you
work with a partner
you can trust and that has the ability to accompany you on the journey.
So how can you spot the genuine ones from the pretenders?
Who are the ones that front like they offer automation of operational processes across business-critical areas?
And who are the ones that really offer it and can have the capacity to grow with your needs?
Our insider tip: the devil’s in the architecture. If a solution isn’t fundamentally built to scale and the provider doesn’t have a track record of innovation—tread very carefully.
Which leads us to our next point…
Chapter 6
Avoid these pitfalls when choosing finance and accounting solutions
SaaSifying your spreadsheets
Some organizations believe that adopting a cloud-based workflow automation solution will solve all their problems.
But if you don't strategically map out and account for inefficiencies, bottlenecks, or interdependent steps, and make a plan to address them, all you're doing is moving your errors to the cloud.
The key is not to underestimate the importance of best practices. Following best practices is how you reduce the amount of resources it takes to ensure accuracy. It's the cornerstone of meaningful change.
Thinking too small
Adopting the first solution that offers you some exciting benefits is a recipe for the kind of fragmented digital change that adds complexity. Before you make a buying decision, make sure any new solution you are assessing can help you hit both your future goals as well as your immediate ones.
Will the solution be able to grow with your business? Does the provider have a full suite of solutions that you can explore should your needs change? If the answer is no, be very wary. It's likely to put you in a spiral of complexity where you have a different vendor solution for each of the areas you want to create impact in.
Underplaying integration needs
The breadth of capabilities a solution can offer is vitally important. Equally important are the integrations it has. When you’re choosing between providers, make sure the solution they offer can integrate seamlessly with your current ERP setup and your data sources.
Remember, the goal here is to create impact in one area, then scale that to create a ‘compound advantage’. That’s not going to be possible if your solution has limited integrations.
Don't confuse an ERP with a financial operations solution
ERPs are great, but they can't give you the agility of a focused solution unless they're heavily customized. And heavily customized ERPs are a huge headache when update time comes around.
There can be a cultural element of 'we have this at home already'. When that's being said in relation to ERPs, proceed with caution.
Chapter 7
Benchmark potential solutions against industry leaders
So what should you look for when seeking out a finance and accounting solution?
At BlackLine, we've helped a lot of businesses build growth-ready financial data foundations. From our experience, the key criteria by which we think you should benchmark any solution you choose are:
Centralization
You need a solution that can act as a central hub that synchronizes across ERPs in real time to validate master data, post entries, and retrieve booking confirmations. Anything less, and you'll likely need to support it with other solutions to bolster its capabilities.
Journal expertise
At a more granular level, you need to ensure your solution of choice can systematize journal entries with configurable rules and dynamic workflows. This might include routing for approvals based on amount thresholds and roles or auto-certification of reasonable entries.
This is integral for you to be able to improve your strategic output as it allows teams to reserve their time for nuanced journal analysis.
Stepwise change
The most crucial element is a solution that allows you to create meaningful change in a stepwise fashion. The ability to get a fast time to value in one area of change and then scale that impact across more accounting functions, is absolutely fundamental.This is how you can orchestrate the kind of 'no regret transformation' that turns your finance and accounting operations from a cost center into a value center.
KEY TAKEAWAY #1
Make sure you have tech aligned to strategy
Think big, start with what's achievable, understand what your organization's goals are, and hunt for solutions that can make them a reality.
KEY TAKEAWAY #2
Achieve mission-critical accuracy
Address error-prone processes. Two good places to start are journal entry management and reconciliations. Remember, if you don't sort out your data quality issues, you're just getting bad insight faster.
KEY TAKEAWAY #3
Stay the course
Demand the quick wins, but don't let them make you forget your long-term goals.
KEY TAKEAWAY #4
Reallocate your resources meaningfully
For the best results, ensure your teams refocus their time on two key areas: exceptions and anomalies, and strategic initiatives and business partnerships.
KEY TAKEAWAY #5
Scale your impact
Make sure you've addressed your full R2R process before you scale, choose a partner that's built to scale with you, and don't forget to check their track record for innovation.
KEY TAKEAWAY #6
Get smart
Don't just SaaSify your spreadsheets. Think of your full journey and which partner can support you on it, make sure solutions offer the integrations you need, and don't confuse an ERP with a dedicated finance and accounting solution.
One last thing
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