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How Machine Learning Can Optimize Finance Processes

Henner Schliebs

Machine learning is becoming a buzzword in nearly every industry today, and finance is no exception. As its applications and capabilities grow, machine learning is powering finance departments towards the next generation of digitization. Here are three ways finance professionals can embed machine learning to boost the maturity of their financial management systems or extend their accounting and reporting capabilities to better meet today’s business challenges.

Embrace digitization in your finance strategy

Before finance departments can unlock the value of machine learning, they must first ensure that digital tools are at the core of their operations. Machine learning depends on live business and Big Data being integrated across the organization – which is possible to aggregate in real time only through digital in-memory applications based on a modern ERP platform. With a recent survey showing that nearly one in five small and midsize enterprises today are not using accounting software at all, many businesses are still a step behind in being able to apply more advanced technologies.

As new technology makes it easier for finance departments to adopt digital infrastructure that is connected, intelligent, responsive, and predictive, they can also take advantage of machine learning to further improve business performance. Along with digital solutions for managing large amounts of data, machine learning becomes a natural next step to increase efficiency and improve business performance.

Use automation where it counts

In today’s workplace, finance professionals are spending just 17 percent of their time on strategic activities, with a lack of automation serving as the culprit for much of this inefficiency. As finance teams move away from managing work through spreadsheets and towards digital and cloud ERP solutions, machine learning can provide an additional edge in driving innovation through the finance function.

Digital finance solutions that incorporate machine-learning capabilities can greatly expedite transactional tasks and bring teams closer to eliminating manual administrative work entirely. Financial professionals can increase the time spent on strategic priorities by automating back-office processes like procure-to-pay, order-to-cash, and record-to-report. Machine learning programs utilize predictive algorithms to churn through massive amounts of data, working at a much faster speed than traditional processes dependent on human input. Turning non-strategic tasks over to computers will allow corporate finance professionals to spend time on more rewarding and higher-value work like business/deal support or advanced analytics, which will in turn yield increased business opportunities for the entire organization.

Supplement human processes with machine support

While not all financial processes can be completely automated, machine learning can help to support transactions and reduce errors in tasks that require human input. For example, it is likely that financial statement auditing will never be completely trusted to machines, as it depends on human judgement and evaluating circumstantial reasoning behind data. However, machines can be useful in using patterns in data sets to highlight potential areas of discrepancy and double-check human work. Machine-learning technologies can sort through high volumes of data from financial reports at an exponentially faster pace than humans, and then turn that data over to human eyes, which can subsequently investigate the story behind the numbers and evaluate whether certain patterns or anomalies may be cause for concern.

Another process that can allow finance teams to benefit from collaboration between humans and intelligent machines is fraud reduction and cybersecurity. As finance departments are embracing digital solutions for storing and managing financial data – either on-premise or in the cloud – cybersecurity is becoming a top concern for CFOs who must ensure that access to that information is monitored and regulated. Again, machines have the ability to churn through massive sets of data regarding access to and transactions upon those data sets, identifying abnormal patterns or unique access behaviors. Cybersecurity professionals in the enterprise can then analyze that data and determine the next steps that need to be taken to ensure the continual security of sensitive financial information, easing the worries of CFOs.

By embracing a robust digital strategy, allowing automation to take over administrative work, and applying machine learning to supplement human processes, finance professionals can work at the speed of business today and ensure that their organizations are able to continuously innovate. As the capabilities of machine learning continue to grow, CFOs will need to ensure that their organizations are ready to unlock the full value of automation and machine learning through its many applications in accounting and finance.

This article originally appeared in PPN, and is republished by permission.

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | FacebookYouTube

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About Henner Schliebs

Henner Schliebs is global vice president Audience Marketing for SAP S/4HANA and Finance at SAP. He is a progressive sales/marketing executive with 15+ years of experience in business software solutions focused on corporate functions. He has strong marketing and go-to-market skills and a proven track record in enterprise software solutions, along with significant experience in solution management and customer engagement.

5 Things To Look For In Lease Accounting Software For Equipment

Pete Graham

Part 6 in the continuous accounting blog series. Read Part 1, Part 2, Part 3, Part 4, and Part 5.

Most companies use leases for equipment and real estate assets in some part of their operations or business activities. Currently, operating leases for equipment and real estate are reported off the balance sheet and are disclosed in the notes of the financial statements. Today’s current lease accounting regulations have been stable for decades, but that is about to change. Organizations worldwide will need to start complying with new regulations for lease accounting proposed by the FASB and the IASB called ASC 842 and IFRS 16.

SAP has been analyzing this topic since 2010 and has interviewed hundreds of customers on the new lease accounting standards. We have found deep business process differences between real property leases and equipment leases, particularly in availability of software that handles both sets of requirements in the depth that is needed by enterprises today.

Overview of the timing and solution mapping for the new lease accounting regulations

We have also found that many companies already have software to assist them with managing real estate leases, but very few companies have software that assists them with equipment leases. So, with the new regulations, organizations will be required to capitalize many of these operating leases for equipment and record them on their balance sheets as assets and obligations. With these major changes to the accounting standards, the burning question is: What can you do now to help get ready for the new accounting regulations for equipment leases?

To ensure that enterprises have the information ready and organized to meet and assist compliance for equipment leases, organizations need to start considering how technology can help them prepare. So, what should they look for in software to ensure they meet the new regulations for equipment leases and also benefit from additional cost savings that can be realized with improved lease administration processes for equipment?

The right solution that goes beyond just regulatory compliance should provide your organization with the following:

1. Unified database for all equipment lease operations

Organizations should aim to build a comprehensive equipment lease portfolio by centralizing lease data in a single repository. This approach provides excellent access, visibility, and traceability regarding critical issues, such as lease composition, key lifecycle dates, the value of leased equipment assets, and responsible organizational units.

2. Collaboration during the process of data collection

The right technology should offer the entire organization (not just a single user) the ability to track changes and understand who made them. Collaboration tools are essential to empower all stakeholders to easily validate contracts for leased equipment assets and better understand all the associated legal, financial, and business implications.

Collaboration across the enterprise for accurate and validated equipment lease data with software support

3. Strategic insight for sound decision making

Executives need to be able to analyze the financial implications on the business of current and proposed lease accounting regulations for equipment in order to make more informed decisions. Therefore, it’s important to use a tool that can provide rich analytics and visibility into the portfolio composition by different dimensions and provide “what-if” scenario analysis to identify opportunities to efficiently manage leases.

4. User-friendly interface with minimum training required

The new accounting regulations for equipment leases are approaching fast, and many compliance processes are very time consuming. With this in mind, your accounting team needs to be able to hit the ground running with a solution that requires a minimum of training. It’s very important to look for a solution that allows for efficient management of lease administration for equipment in a user-friendly, visual format that is easy to learn and use.

5. A solution that adapts to your business

Integration with your current systems and flexibility to address your specific business are key technical requirements for the right solution. The solution should also enable a smooth transition to the new required processes and controls by the accounting and finance departments. The solution should allow you to abstract equipment leases and perform the related accounting valuations across multiple accounting standards if necessary.

Follow SAP Finance online: @SAPFinance (Twitter) | LinkedIn | FacebookYouTube

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Pete Graham

About Pete Graham

Pete Graham is the director of Finance Solutions and Mobility at SAP. He is the solution management expert for Office of the CFO topics including SAP S/4HANA Finance, and is solution management owner for accounting change topics such as IFRS, revenue recognition, revenue accounting, lease administration, lease accounting, and others, as well as general ledger and mobility solutions.

The Promise Of Digital Finance: A New Level Of Performance

Nilly Essaides

World-class finance organizations outperform more typical peers on two important dimensions: They are more efficient and do their work faster at less cost, and they are more effective at delivering services to internal and external customers. They show fewer errors. They provide better forecasts. They spend 30% less time on collecting vs. analyzing information.

But despite years of perfecting their technology and processes, they’ve reached a certain plateau. Total cost of finance for world-class finance organizations has been hovering at 45% below peers for the past three to five years. So, how can they reach the next level of performance excellence? By adopting digital technologies on a mainstream basis.

According to The Hackett Group’s 2017 finance benchmark study, technology had a substantial impact on finance performance. We keep over 1,000 efficiency and effectiveness benchmarks and refresh them annually. Finance organizations that rank in the top quartile for both efficiency and effectiveness get the world-class label. The rest are called peers.

We found that by using more technology, world-class finance functions reduce operational costs. They shorten the close and budget cycle times. They have much higher efficiency rates when it comes to measures like invoice per full-time equivalent (FTE) or cost per transaction. And they don’t do it by throwing money at the problem; in fact, they spend 61% less on technology.

The digital transformation imperative

However, the finance function has now reached an inflection point. The experience of the last several years indicates that current automation and transformation initiatives are no longer yielding substantial performance gains. There’s still value in cleaning up the technology landscape and rationalizing legacy systems. That’s particularly true for peer organizations that are trying to catch up. So, where will the next wave of performance improvement come from?

Digital transformation.

In our 2017 Key Issues Study, 97% of respondents predicted that digital transformation will have a step-change impact on the finance organization’s performance. The rate of improvement will only accelerate, because new technologies and combinations of technologies are arriving at an ever-increasing pace.

So, we delved into our 2017 benchmark database. We asked this question: What additional cost savings and effectiveness gains can world-class and peer-group finance organizations accrue if they make digital technologies mainstream?

Here’s what we found:

First, new technologies will dramatically accelerate the speed at which peer-group organizations can catch up to world-class performance. They can leapfrog generations of technologies to close 80% of the cost gap between the two groups.

Second, digital tools will enable world-class finance organizations to further improve their cost by 20%. They will break through that cost ceiling. It will also make them more effective. It will increase the amount of time they spend on analytics to 75% and reduce billing errors to 1%.

The promise of digital technologies for finance is large and it is real. Finance organizations that wish to capture or maintain world-class status must adopt new solutions to reduce the cost and increase the effectiveness of their processes to reach a new level of process excellence.

For more on this topic, see Why CFOs Must Become Digitally Savvy.

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Nilly Essaides

About Nilly Essaides

Nilly Essaides is senior research director, Finance & EPM Advisory Practice at The Hackett Group. Nilly is a thought leader and frequent speaker and meeting facilitator at industry events, the author of multiple in-depth guides on financial planning & analysis topics, as well as monthly articles and numerous blogs. She was formerly director and practice lead of Financial Planning & Analysis at the Association for Financial Professionals, and managing director at the NeuGroup, where she co-led the company’s successful peer group business. Nilly also co-authored a book about knowledge management and how to transfer best practices with the American Productivity and Quality Center (APQC).

Taking Learning Back to School

Dan Wellers

 

Denmark spends most GDP on labor market programs at 3.3%.
The U.S. spends only 0.1% of it’s GDP on adult education and workforce retraining.
The number of post-secondary vocational and training institutions in China more than doubled from 2000 to 2014.
47% of U.S. jobs are at risk for automation.

Our overarching approach to education is top down, inflexible, and front loaded in life, and does not encourage collaboration.

Smartphone apps that gamify learning or deliver lessons in small bits of free time can be effective tools for teaching. However, they don’t address the more pressing issue that the future is digital and those whose skills are outmoded will be left behind.

Many companies have a history of effective partnerships with local schools to expand their talent pool, but these efforts are not designed to change overall systems of learning.


The Question We Must Answer

What will we do when digitization, automation, and artificial intelligence eject vast numbers of people from their current jobs, and they lack the skills needed to find new ones?

Solutions could include:

  • National and multinational adult education programs
  • Greater investment in technical and vocational schools
  • Increased emphasis on apprenticeships
  • Tax incentives for initiatives proven to close skills gaps

We need a broad, systemic approach that breaks businesses, schools, governments, and other organizations that target adult learners out of their silos so they can work together. Chief learning officers (CLOs) can spearhead this approach by working together to create goals, benchmarks, and strategy.

Advancing the field of learning will help every business compete in an increasingly global economy with a tight market for skills. More than this, it will mitigate the workplace risks and challenges inherent in the digital economy, thus positively influencing the future of business itself.


Download the executive brief Taking Learning Back to School.


Read the full article The Future of Learning – Keeping up With The Digital Economy

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About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

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Why Millennials Quit: Understanding A New Workforce

Shelly Kramer

Millennials are like mobile devices: they’re everywhere. You can’t visit a coffee shop without encountering both in large numbers. But after all, who doesn’t like a little caffeine with their connectivity? The point is that you should be paying attention to millennials now more than ever because they have surpassed Boomers and Gen-Xers as the largest generation.

Unfortunately for the workforce, they’re also the generation most likely to quit. Let’s examine a new report that sheds some light on exactly why that is—and what you can do to keep millennial employees working for you longer.

New workforce, new values

Deloitte found that two out of three millennials are expected to leave their current jobs by 2020. The survey also found that a staggering one in four would probably move on in the next year alone.

If you’re a business owner, consider putting four of your millennial employees in a room. Take a look around—one of them will be gone next year. Besides their skills and contributions, you’ve also lost time and resources spent by onboarding and training those employees—a very costly process. According to a new report from XYZ University, turnover costs U.S. companies a whopping $30.5 billion annually.

Let’s take a step back and look at this new workforce with new priorities and values.

Everything about millennials is different, from how to market to them as consumers to how you treat them as employees. The catalyst for this shift is the difference in what they value most. Millennials grew up with technology at their fingertips and are the most highly educated generation to date. Many have delayed marriage and/or parenthood in favor of pursuing their careers, which aren’t always about having a great paycheck (although that helps). Instead, it may be more that the core values of your business (like sustainability, for example) or its mission are the reasons that millennials stick around at the same job or look for opportunities elsewhere. Consider this: How invested are they in their work? Are they bored? What does their work/life balance look like? Do they have advancement opportunities?

Ping-pong tables and bringing your dog to work might be trendy, but they aren’t the solution to retaining a millennial workforce. So why exactly are they quitting? Let’s take a look at the data.

Millennials’ common reasons for quitting

In order to gain more insight into the problem of millennial turnover, XYZ University surveyed more than 500 respondents between the ages of 21 and 34 years old. There was a good mix of men and women, college grads versus high school grads, and entry-level employees versus managers. We’re all dying to know: Why did they quit? Here are the most popular reasons, some in their own words:

  • Millennials are risk-takers. XYZ University attributes this affection for risk taking with the fact that millennials essentially came of age during the recession. Surveyed millennials reported this experience made them wary of spending decades working at one company only to be potentially laid off.
  • They are focused on education. More than one-third of millennials hold college degrees. Those seeking advanced degrees can find themselves struggling to finish school while holding down a job, necessitating odd hours or more than one part-time gig. As a whole, this generation is entering the job market later, with higher degrees and higher debt.
  • They don’t want just any job—they want one that fits. In an age where both startups and seasoned companies are enjoying success, there is no shortage of job opportunities. As such, they’re often looking for one that suits their identity and their goals, not just the one that comes up first in an online search. Interestingly, job fit is often prioritized over job pay for millennials. Don’t forget, if they have to start their own company, they will—the average age for millennial entrepreneurs is 27.
  • They want skills that make them competitive. Many millennials enjoy the challenge that accompanies competition, so wearing many hats at a position is actually a good thing. One millennial journalist who used to work at Forbes reported that millennials want to learn by “being in the trenches, and doing it alongside the people who do it best.”
  • They want to do something that matters. Millennials have grown up with change, both good and bad, so they’re unafraid of making changes in their own lives to pursue careers that align with their desire to make a difference.
  • They prefer flexibility. Technology today means it’s possible to work from essentially anywhere that has an Internet connection, so many millennials expect at least some level of flexibility when it comes to their employer. Working remotely all of the time isn’t feasible for every situation, of course, but millennials expect companies to be flexible enough to allow them to occasionally dictate their own schedules. If they have no say in their workday, that’s a red flag.
  • They’ve got skills—and they want to use them. In the words of a 24-year-old designer, millennials “don’t need to print copies all day.” Many have paid (or are in the midst of paying) for their own education, and they’re ready and willing to put it to work. Most would prefer you leave the smaller tasks to the interns.
  • They got a better offer. Thirty-five percent of respondents to XYZ’s survey said they quit a previous job because they received a better opportunity. That makes sense, especially as recruiting is made simpler by technology. (Hello, LinkedIn.)
  • They seek mentors. Millennials are used to being supervised, as many were raised by what have been dubbed as “helicopter parents.” Receiving support from those in charge is the norm, not the anomaly, for this generation, and they expect that in the workplace, too.

Note that it’s not just XYZ University making this final point about the importance of mentoring. Consider Figures 1 and 2 from Deloitte, proving that millennials with worthwhile mentors report high satisfaction rates in other areas, such as personal development. As you can see, this can trickle down into employee satisfaction and ultimately result in higher retention numbers.

Millennials and Mentors
Figure 1. Source: Deloitte


Figure 2. Source: Deloitte

Failure to . . .

No, not communicate—I would say “engage.” On second thought, communication plays a role in that, too. (Who would have thought “Cool Hand Luke” would be applicable to this conversation?)

Data from a recent Gallup poll reiterates that millennials are “job-hoppers,” also pointing out that most of them—71 percent, to be exact—are either not engaged in or are actively disengaged from the workplace. That’s a striking number, but businesses aren’t without hope. That same Gallup poll found that millennials who reported they are engaged at work were 26 percent less likely than their disengaged counterparts to consider switching jobs, even with a raise of up to 20 percent. That’s huge. Furthermore, if the market improves in the next year, those engaged millennial employees are 64 percent less likely to job-hop than those who report feeling actively disengaged.

What’s next?

I’ve covered a lot in this discussion, but here’s what I hope you will take away: Millennials comprise a majority of the workforce, but they’re changing how you should look at hiring, recruiting, and retention as a whole. What matters to millennials matters to your other generations of employees, too. Mentoring, compensation, flexibility, and engagement have always been important, but thanks to the vocal millennial generation, we’re just now learning exactly how much.

What has been your experience with millennials and turnover? Are you a millennial who has recently left a job or are currently looking for a new position? If so, what are you missing from your current employer, and what are you looking for in a prospective one? Alternatively, if you’re reading this from a company perspective, how do you think your organization stacks up in the hearts and minds of your millennial employees? Do you have plans to do anything differently? I’d love to hear your thoughts.

For more insight on millennials and the workforce, see Multigenerational Workforce? Collaboration Tech Is The Key To Success.

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