Building A Business Case For Financial Transformation

Nilly Essaides

There’s constant pressure on the CFO from the CEO to do better—to innovate, and to transform the finance organization into both a leaner and a more forward-looking analytics hub that provides insight and foresight to the enterprise. CFOs today must:

  • Interpret numbers instead of reporting them
  • Deploy enabling technology to automate low-value work
  • Scout for business and growth opportunities
  • Work effectively with Big Data to turn their teams into the brains of the organization
  • Act as true partners to the CEO, business leaders, and board of directors

Defining the ROI for transformation

Transformation sounds great in theory, but to get finance to literally go beyond its form—not an easy feat—executives need to see a strong business case and a tangible payback. After all, finance is all about the ROI.

Here are some solutions CFOs can wrap their heads around to help drive change:

  • Manage competitive disruption. Today’s business environment is rife with competitive threats. My last post listed five ways financial planning and analysis (FP&A) in its future form can help companies battle these threats. The cost of not transforming the finance function into the fast-thinking, forward-looking brains of the enterprise is the opportunity cost of falling behind. It’s the risk of becoming irrelevant through the inability to foresee competitive threats, or of lacking an action plan for dealing with the potential impact of such pressures on the financial health of the corporation.
  • Streamline processes. Obviously, there’s the dollars-and-cents savings that come from streamlining processes, using new technologies, and breaking down internal silos. For example, in many organizations, forecasting processes occur in different departments. Merging these disparate processes into one and using a single technology platform can save enormous resources in terms of systems and time. It eliminates duplicate entries of data and the need to reconcile discordant information, or the need to later argue about which number is right. It creates a single version of the truth.

Even within finance, things can be improved. Often the processes of budgeting, forecasting, and planning happen in isolation in different time frames. And operational and financial planning occur in different cycles and levels. By syncing up these processes, companies can get rid of redundancies. What’s more important, they can discover efficiencies and improve the quality of the end product.

  • Eliminate waste and free up strategic time. New technologies are enabling the finance function to automate low-value work and free up executives’ time to focus on strategic thinking, developing partnerships with the business, and advising management on how to drive growth. The payback is smarter decisions (faster growth, higher investment returns) while lowering operating expenses.
  • Look forward. Finance and FP&A today are shifting their focus from yesterday to tomorrow, from what happened to what’s going to happen. Transforming their mindset is key to helping the business move forward. Using techniques and technologies like driver-based modeling and predictive analytics, finance is remaking itself and producing faster, more frequent and—most importantly—more accurate forecasts. It’s giving management the one thing that matters most: time to pull business levers to affect future financial results. The payback is higher sales, wider margins, and lower cost of operations.
  • Change the mindset. There’s no transformation of the financial organization without a transformation of the financial skill set of executives. The first-quarter Deloitte CFO Signal Survey indicated that CFOs expect to embark on a wide range of efforts to improve the performance of their teams before the end of 2016. While foundational finance skills remain a must, to transform finance into the “A-team” of the future, executives must possess business acumen, diplomacy skills, intellectual curiosity, technology savvy, and a degree of comfort with ambivalence. They have to be okay with making decisions without 100% of the information. One can argue that the return on soft skills is soft. But it also means being able to move fast and grab windows of opportunity. Not all business cases are based on cost savings.
  • Build an analytics hub. The biggest challenge for CFOs today is to transform finance into the analytical hub of the organization and leverage Big Data to drive smarter business decisions—both in terms of cost cutting and in giving the business units advice on how to market, sell, develop, and grow their operations. That’s how finance fits within the digital enterprise. Finance needs to funnel Big Data from all corners of the organization—and outside it—to leverage its unique central viewpoint. It must bring the information together and run it through advanced analytics models to come up with causal relationships that explain what business initiatives are really moving the needle, what steps the company can take to improve results, and what its customers are doing and are likely to do. Digitizing finance has a huge payback: It allows companies to stay competitive in a digital economy.

Is finance transformation worth the effort? That may be the wrong question. The question is, can companies afford not to transform their finance function and remain relevant now and going forward?

Learn how the FP&A team at CF Industries Holdings Inc. prioritized business partnering options and transformed the organization to optimally support strategic goals by establishing an integrated business planning process at the AFP Annual Conference session, Driving Finance Transformation Through Integrated Business Planning.

For more of my insights on FP&A, subscribe to the monthly FP&A e-newsletter from my company, the Association for Financial Professionals. You can also connect with me on LinkedIn or follow me on Twitter.


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).