2009 Finance System Resolutions: Hunker Down or Thrive?

I recently caught up with Rob Kugel of Ventana Research during a conversation with the executive team from Star Analytics. One of the most interesting parts of the discussion centered on how the economic meltdown is impacting senior executives in corporate finance departments and the ways technology can help.

Kugel mentioned, “Unfortunately, the financial meltdown has driven many senior financial executives to hunker down and focus only on survival tactics. It’s a shame because this is a great time to throw off organizational complacency and make important changes to how the finance department operates.”

The challenge, he says, is that people delay making changes in better times because they think they’re too busy, complicated by the tendency of people trained in accounting to reflexively answer “we’ve always done it this way” when asked about a policy or process.

“Now is the time to make changes because facing deep, persistent challenges, people are more willing to accept change and the results can be dramatic.”

Star Analytics CEO Trevor Hughes agreed, “From a technology perspective, we’re starting to see a shift this year as more finance executives look for ways their existing technologies can provide the slightest competitive advantage in this economy.”

Hughes remarked that the days of making decisions on yesterday’s data are long gone, and what’s emerging are continuous planning and forecasting environments and make it easy to adapt to uncertainty in the markets.

Hughes added, “The challenge is that financial data has been inaccessible in non-standard proprietary systems and beyond the immediate reach of the business decision makers. This is driving a surge of interest in simple and cost-effective solutions that allow IT and Finance to communicate and provide a stream of continuous data into the hands of everyone who needs it.”

The discussion surfaced a call to action for finance executives, with Rob outlining simple and cost effective ways Ventana Research believes they can drive change in 2009 and prepare to capitalize on an economic turnaround – both from an IT and business perspective. Over the next few weeks and months, I’ll reveal his top 10 “resolutions.”

Kugel points out, “Many of the ten resolutions are interrelated, and almost always there is a connection between the business and IT issues since the latter drives or heavily influences how well departments can do the former. Our research consistently shows companies misuse spreadsheets and consequently suffer from – for example – a longer than necessary closing cycle and ineffective business planning. It’s also not intended to be an exhaustive list.”

Resolution #1. Focus attention on more strategic activities and less on transactions processing.

For years CFOs have been advised to change the focus of finance departments from transaction processing to more strategic activities. Surveys show, however, not much has happened. The two biggest barriers to making this shift are people and IT. Sadly, too many finance executives love managing minutiae because it’s at the core of their comfort zone. Misusing technology contributes to the problem since not applying automation to rote functions or using spreadsheets inappropriately. There is a data dimension as well: frequently it is too difficult to bring together finance department data and data from business operations because companies are not using the right tools to reliably automate this process.

Is your company making headway in this area?

To Automate...or not to Automate

A Deloitte study titled “When CFOs Debate: What Keeps You Up at Night?” finds CFOs agree that “finance should be extending its focus from accumulating information to adding value through insight” and asks what role automation should play. Deloitte's report (part of a pdf workbook with 9 important issues facing CFOs today) cites two reasons LOB managers still make decisions by ‘gut feel’:

1. they lack tools to unify finance and operational data, or
2. they rely on homegrown tools that generate numbers which are out-of-synch.

Does this mean companies should go all-in on a fully-automated performance management initiative? Look before you leap, it says, cautioning companies to assess their readiness in 3 key areas: 1) business processes, 2) master data management and 3) business alignment. After shoring-up these areas, it prescribes an 80/20 approach to automation, suggesting companies “shouldn’t have to manually mine multiple systems or conduct a special study for routine decisions and performance reports,” but still need flexibility to accommodate decisions that “require unique, in-depth analysis” or those that warrant a special data repository with “a ‘play room’ for analyzing non-routine decisions.”

Is 80/20 the right mix in an economy when few decisions are routine? Therein lies the question. With technology available to support 24/7 readiness of all data and business logic needed for structured AND unstructured analysis, finance departments no longer need to compromise. Making critical business decisions based on partially automated systems that are almost urgent enough to present data that’s somewhat complete lets technology vendors off the hook. Would you bet your next decision on that?