Technology – providing access to real-time, reliable data – is paving the way to a new kind of finance professional who’s now able to shift from backwards-looking reporting to forward-looking performance improvement. However, obstacles remain. How does the finance function get past them and leverage these new capabilities?
This compelling subject was recently tackled by thought leaders from Ventana Research, EY, and Macrospect on Financial Excellence with Game-Changers Radio, presented by SAP and hosted by Bonnie D. Graham of SAP. Click to listen to the full episode.
Three perspectives on doing – or not
Bonnie introduced the panelists with quotes they had selected to lead into their perspectives on the topic.
Robert D. Kugel, CFA, SVP, and research director of Business Research at Ventana Research, is the originator of the term “continuous accounting.” He chose a quote from Peter F. Drucker: “There is surely nothing quite so useless as doing with great efficiency what should not be done at all. Yet, our tools, especially our accounting concepts and data, all focus on efficiency.” Robert noted that technology has now evolved to the point where it can be truly transformational for today’s finance professional, eliminating a significant amount of work and speeding up the availability of performance data.
Suzanne Roelofs, a senior manager for IT Advisory at EY, chose words from the late TV star and comedienne Lucille Ball: “I would rather regret the things I have done than regret the things I have not done.” Suzanne said this quote inspired her to embrace the changes happening in the business environment. “It is all about innovation; a lot of companies are afraid of change, but it absolutely can improve their businesses.”
Jeff Hattendorf, COO of Macrospect, cited the much-loved “Star Wars” character, Yoda: “Do or do not. There is no try.” According to Jeff, this quote captures the mindset that finance professionals need to embrace if they want to make a real difference in their organization.
Working toward continuous accounting
Robert explained the three principles of “continuous accounting,” which he noted is gaining popularity:
- Optimizing the accounting calendar to eliminate bottlenecks
- Automating mechanical tasks in a controlled end-to-end fashion that also ensures data integrity
- Establishing a culture of continuous improvement in the financial process
He emphasized that organizations will need a strong culture where the leadership sets objectives and prioritizes reviewing and addressing performance. Technology and access to real-time data are crucial elements, he said.
Suzanne agreed, noting that a finance department focused on optimizing performance can move away from being transactional and toward becoming a strategic business partner.
Why is this transformation important?
Robert explained that, for the finance professional, technology is now delivering on the promises it made 20 years ago. Real-time data enables stakeholders to “manage the business as the business is happening.” But he noted that some of his clients with access to the technology still do backwards-looking reporting. “It’s really a cultural shift.”
Real-time closing – not for every company?
The panelists were divided about the value of real-time closing, however. Suzanne pointed out that, depending on the industry, it might not make sense to operate in real time. While real-time closing is where everything is headed, it is ultimately up to each business to determine if it makes sense.
Jeff challenged this notion, saying that access to real-time data is a benefit to companies regardless of industry. However, he acknowledged Suzanne’s point, considering the complexity involved in consolidating data, especially for large, multinational companies with multiple instances in different ledgers.
Robert commented that the real question is whether your systems are evolved enough to be able to handle real-time data. He observed that maintaining data integrity in the system design and operation is what will make continuous accounting and real-time availability of information a practical reality. Otherwise “a lot of people are still fooling around in spreadsheets, pulling numbers together, and you’re not going to have reliable information in real time.”
A wake-up call to large enterprises: stay competitive
With smaller, more agile companies moving toward continuous accounting and becoming more competitive in their growing markets, is this a wake-up call for established companies to sustain their edge?
Jeff said yes. However, fully taking advantage of continuous accounting involves change management for bigger players. “If they already have the technology in place and information at their fingertips, it will come to nothing if it’s not used to affect decision-making.”
There is no one-size-fits-all solution. “Individual companies need the right combination of technology,” according to Suzanne. “We have to deal with different industries and ways of doing business. If we talk about, for example, in-memory technology, it doesn’t matter what kind of business or sector you are in.”
For Jeff, speed of information is always a value to the business. He mentioned a client that saw a tangible impact on the bottom line with technology that helps save on shipping costs.
A truly strategic finance function
If continuous accounting is just the beginning, what’s next?
Jeff is surprised by the number of companies that still manage and measure their businesses with spreadsheets and will not commit to investing in technology for finance. “But if you are the CFO and you want to lead, you have to help the business make better decisions. The CFO has the ability and, quite frankly the budget, to give the business the ability to measure itself ‘just in time.’”
Robert added that the spreadsheet is a key barrier to achieving a more strategic finance organization. “Our research has shown that there are always errors in spreadsheets. And you have a lot of folks spending their first and second years in the accounting department doing nothing but checks and reconciliations. They’re wasting their time on a soul-deadening job that really should not exist because you can get rid of almost all the spreadsheets with an automated system.”
Jeff agreed. “Spreadsheets are useful for a presentation or an ad hoc use of the data. But when spreadsheets are treated like a database, and we email and link them together, then we are using that tool for the wrong purpose.”
Continuous accounting in 2020
In the “crystal ball” round at the close of the program, Robert predicted that continuous accounting will become mainstream in the next five to 10 years. Suzanne concurred. “Every company has a ‘vision 2020,’ but what will that really look like in 2020, since the technology is running so fast?” Jeff added, “We are going to see small and midsize companies that are more flexible moving toward continuous accounting or just-in-time reporting. For multibillion-dollar companies that own a lot of other companies with a lot of systems, getting all the data in one place is a challenge, and there is not a perfect answer for that yet.”
This excerpt from Financial Excellence with Game Changers, presented by SAP on the World Talk Radio Business Channel July 19, 2016, was adapted for the Digitalist Magazine.