What is Financial Transformation

Financial Transformation

Financial Transformation is important to make a system better. Finance isn’t what it used to be, and that’s a good thing.

While this has always been an essential component of a financially sound enterprise, leadership is now looking to finance for its unique perspective and strategy and skill set for growth.

In other words, finance helps drive a wide range of decision-making, providing a sense of direction for the growth of the organization.

We define transformation as the combination of people, process, technology and data changes to deliver dramatic improvements in overall performance.

The main point is performance improvement, which is not just a cost reduction. Many cost reduction efforts are wrapped up in change casing for a variety of reasons.

Traditionally, changes happen because Organizations evolve over time and are either not designed for results or are not actively managed against those results.

A change program allows the organization to create an operating model that clearly aligns to certain outcomes: mission/goals, stakeholder needs, or measures of efficiency and effectiveness (cost or operational).

Would actually be a successful FT attempt more consistency will result in the CFO being able to execute a culture of continuous improvement (CI) that will reduce the frequency of upheavals that result from most FT efforts.

What is Finance Transformation

Finance transformation describes a strategic initiative aimed at redesigning the finance function to align with the overall company strategy.

Finance change may include the restructuring and implementation of finance operating models, accounting and finance organizations; accounting and finance procedures; financial capabilities; and the re-staging of finance and accounting systems.

These changes may be intended to revolutionize the way an organization manages its financial operations and related processes, internal controls, and financial reporting.

Financial Transformation Definition in Simple Words

In simple words financial transformation is the re-platforming of finance and accounting systems accounting and finance processes for benefits.

Financial Transformation Process

Finance leaders struggle to balance the increasing demands for finance function support with the reduction in finance work budgets.

As a result, 85% of finance teams are currently undergoing or planning a finance change. However, only 30% of finance transformation initiatives provide predictable benefits to the business.

What is the Effects of Financial Transformation

A motivating factor for many finance transformation efforts is productivity and cutting costs. The best way to begin evaluating areas that need improvement is to benchmark those metrics that are critical to financing operational efficiency.

Finance Transformation Initiatives

Keep finance transformation projects on time, on budget and sustainable.

Evaluate, prioritize and scope activities to create a finance transformation roadmap.

Implement strategies that create value for business partners.

Build a futuristic-state design with best practices, case studies and tools to support the business case.

Importance of Financial Transformation

Organizations strive for change for a variety of reasons but they often fail to link the approach to change with the root cause of change.

Over the years the goal of finance transformation has focused on reducing the cost of finance work as a whole and the cost of processing individual transactions.

This has prompted CFOs to finance spending as a percentage of revenue, an industry benchmark.

The standard target being used, CFOs across industries are being asked to reduce this ratio to 1% or less.

To achieve this, they focus on developing systematic solutions and termination of certain services.

• System solutions – these are usually costly endeavors that affect the wider organization.

These big efforts are cumbersome and are rarely seen as a success. Termination of Services – To meet the target, CFOs have had to resort to saying no to their clients. As one can imagine this affects customer satisfaction and in turn CFO tenure.

Instead of focusing solely on reducing the cost of finance work, we would recommend introducing structured FT efforts to better align finances to the core needs of our clients.

As a result, the results of the FT effort must be directly linked to those requirements. For example, if the organization requires high-level business services and analytics, the finance function will require a more complete strategy than cost reduction alone.

Here the organization wants to reduce the cost of transaction processing to redeploy that expense towards providing an analytical center with better capabilities.

This organization must then revisit target performance metrics to accommodate new services offered and thus exceed 1% of benchmark revenue.

Ideally, the finance function should identify leverage points so that the bundle of services demanded from their stakeholders is lower than the services that were purchased ala carte, but still exceed the traditional 1% benchmark.

More about Financial Transformation

More of a significant overhaul than a complete revamp, finance is building on its traditional roots to combine governance-oriented responsibilities such as accounting, budgeting and auditing with functions devoted to strategic thinking and planning.

This is a more involved role for finance, which uses advanced analysis, pricing, employee satisfaction, customer and demand planning, and other dynamic aspects of operations to provide leadership with more accurate and far-reaching insights.

Naturally, this new approach is not random or without a specific purpose or origin. The market itself is driving this change, now requiring a sense of agility and adaptability to meet the needs of a highly complex and ever-changing environment.

From the rapid influx of business ventures moving in and out of the market, to the accompanying M&A activity that constantly changes the landscape – both internally and externally – finance is growing right before our eyes.

The rapid growth of finance is making it a central figure in an organization’s strategic initiatives within an enterprise, taking advantage of an advanced and expanded finance function to meet those goals and vision.

As part of that transformation, CFOs are increasingly becoming an advisor of sorts to CEOs, advising on all strategic matters, thanks to their unique and distinctive perch within an enterprise.

From that position, CFOs can focus on using innovation in thought and practice to create new value, develop cost efficiencies and streamline operations.

Budgeting and forecasting cycles become thinner and more accurate, attrition and overhead drop, and this significant agility increases.

While technology plays a vital role in the continuing transformation of finance, it is still just one piece of the larger transformational puzzle.

Yes, Embark’s elite team of financial advisors can certainly guide your organization on the technical front, but focusing on the most common hurdles while transitioning finance functions will help ensure a solid foundation that will help you in the future. Will serve the enterprise well.

Finance Transformation Traps

DigitlalMarketingFinance research has found that 85% of finance teams today are in the middle of a finance transformation initiative. Success is not certain.

This is no easy feat, as 70% of financial changes fail – they do not meet their forecast results or cost objectives.

Understand that satisfaction does not equal efficiency: Recognize that business partner satisfaction is an inadequate measure of the value of finance.

Eighty percent of financial teams use feedback from business as the sole measure of work effectiveness, and 90% strive for universal internal customer satisfaction.

Despite best intentions, focusing on satisfaction often leads to neglect of strategies that will actually do more to improve performance.

Instead, finance transformation projects should shape customer expectations and emphasize an effective assessment of needs versus needs.

Finance departments that shape expectations and compel business operations provide better decision support and are more effective in helping a company achieve strategic objectives.

The imperative to reduce costs while increasing business value means that finance today has to become significantly more efficient and resources will have to be reinvested in building new capabilities.

In response, many finance leaders are turning to finance transformation or a range of projects to replace work, including restructuring, outsourcing, finance IT, process improvement and shared services.

Companies that are successful treat finance as if it were a profit center. They measure performance and allocate resources based on return on investment (ROI) and risk mitigation from their services, not just the cost of the service.

Those who are successful cross four common traps that derail efforts to change.

Focus on Corporate Strategy and Financial Role: Don’t fall into the trap of underestimating business complexity when setting cost targets.

Finance bases its cost targets on a narrow set of inputs such as revenue size and industry peer groups.

But DigitalMarketingFinance‘s research shows that complexity – in terms of legal entity structure, geographic locations and core finance technology operating systems – is twice as important as revenue size in explaining total finance department costs.

Instead, align the finance strategy to the drivers of business growth.

The finance executives driving is the most successful transformations pay less attention to how the total cost of finance stacks up against companies of similar size and industry.

To the right balance of their corporate strategy and finance resources to help the business succeed. More attention is paid to the level.

Always focus on quality: Avoid the trap of focusing on cost over quality. 73 percent of surveyed leaders said their primary goal of finance transition was to cut costs. “When ‘cheap’ becomes synonymous with ‘good.’ the finance budget suffers,” says Bunt.

The Finance Transformation Initiative provides leaders with the opportunity to redesign the finance function so that their teams can devote more time to quality, high-value activities and being better business partners.

Prioritize resources over high-value activities: Don’t spread resources too thin. Finance teams battle two competing pressures: reducing costs while improving the customer experience.

Often this leads to an approach to cutting costs across the board rather than in targeted areas that creates less value for the business and results in mixed reviews for overall effectiveness.

How to Boost Your Transformation Goals

We understand that high-level advice only goes a long way in highlighting the importance of a transformed finance function in today’s enterprises.

Although we’ll take a more nuanced look at the specifics of change in the near future, some best practices will help keep your organization’s finance department up and running on the change front, giving you a solid foundation to build on in the future.

Activity Analysis: Business leaders and decision-makers need to have a good understanding of what their employees are actually doing, not what they should be doing.

That’s where activity analysis comes into play, a way for leadership to track how long it takes employees to complete tasks. Whether through software, surveys, or daily tracking polls, management estimates that time and compares it to benchmarks or performance standards.

The difference between the two represents a potential area of ​​inefficiency and an important driver for change.

Goal Setting: Would You Start a Road Trip Without Considering the Destination? Maybe not. You can say the same about most, if not all, aspects of your work.

Your goal is the future state you have in mind, what your enterprise strives to become. Keep those goals reasonable and actionable, but not so simple that they don’t propel your team to excellence.

Once established, compare your current position to that desired future position, and begin building a strategy to get you from point A to point B.

This may include new technology, partnerships, staff training and development, a change in processes, or one. The combination of things helps you reach your vision.

Start small and grow: We absolutely love it when enterprises come to us with big visions and even big dreams, but with low-hanging fruit to your organization’s finances.

It is often best to start developing. Identify the most obvious sources of inefficiency in your organization, create a strategy to address it, and then put your plan into action. In other words, get a few wins under your belt and move on from them, letting those small victories grow into an enterprise-wide process that, over time, consistency and tirelessness, will affect your organization, internal processes and how you compete. will be redefined. Crowded market.

Final Words

Finance Transformation (FT) is a broad term that is hard for people to define precisely. The word “change” is used so often that It is often difficult to separate this from general reform initiatives.

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