Get The Basics Right For Finance Transformation: Seven Steps To Begin

Johannes Vogel

Finance transformation and digitalization are hot topics in the CFO domain. Before planning extensive transformation programs, finance chiefs may be well advised to address some basics within their organization.

Why “getting the basics right” is a good idea

There are several reasons why it’s a good idea to look at the basics of how the finance function works. First, one of the most blatant reasons is that a significant number of finance organizations are still in need of fixing due to lack of investment in the support function, simply due to other priorities or organizational or cultural reasons.

A second reason is a result of changes in technologies adopted by the business that lead to “two-speed IT.” On one hand, there are existing, slow, and monolithic legacy ERP systems running core business processes. On the other hand, companies are starting to build new applications or solutions – for example, to accommodate new platform-based business models or customer-experience-driven business opportunities. These are faster and need to be integrated with the legacy IT architecture. It’s important to review the efficiency of the processes run in the core ERP as well as the integration with the faster app “speedboats.”

Finally, antiquated paradigms on how to run the finance function still exist. Examples are departmental organizational setup and boundaries or excessive focus on bookkeeping accuracy without providing insights from the financials to the business.

Finance principles create the foundation for improvement

As a foundation for basic improvements in the finance function, consider reviewing some guiding principles. Validate whether your organizational setup is still largely function- or department-oriented. Modern organizations are process-based. Next, consider eliminating waste from your finance processes and organization by adopting lean principles. Define the right level of harmonization and standardization of finance processes and systems. One interesting approach by the EFQM organization provides clear definitions for different levels of process excellence. Such an approach can be used to provide guidance on the level of ambition for process excellence while maintaining a heterogeneous process and system base for the time being.

The basics – my personal selection

Once you have identified your company’s situation and determined if there is a need to fix some basics, you must decide the specific next steps. I recommend a pragmatic approach. Moving from a strategic to a more tactical set of recommendations:

  1. Create a high-level vision and mission statement describing the future finance function and what it will do.
  1. Align and define the finance organization and roles to achieve process ownership. Providing clarity of who is in charge for which finance process will empower team members to act as managers, which in turn will support a continuous-improvement mindset.
  1. Implement process improvements by accelerating the month-end close by at least two to three workdays.
  1. Align legal and management reporting to create a single version of the truth to avoid management discussions about who has the correct numbers.
  1. Create a set of basic reports for use by both business and finance to simplify and promote trust in the numbers.
  1. Review your company’s planning and create a lean planning process.
  1. Start a review of your finance IT architecture. Define which elements of the ERP system should be maintained as core ERP processes; explore which add-on tools or point solutions in transactional processes, reporting, and analysis may provide better support for finance and the business; and create an implementation roadmap to eliminate most stand-alone spreadsheet solutions in the CFO domain.

Certainly, there will be other activities that might be relevant to your company. Some of the above steps may not apply to you. The duration and time needed for the work required may vary from one company to another. Stephen Hawking once said: “A zero-gravity flight is a first step towards space travel.” With the first steps described here, you can start to get the basics right. Then you are ready for activities that will lead into the higher spheres of finance transformation.

Read more on this topic in the CFO Strategy Playbook series.


Johannes Vogel

About Johannes Vogel

Johannes Vogel is director of Finance & Regulatory for Finance Strategy & Digital CFO Services at BearingPoint. Johannes is an experienced professional in management consulting in the areas of finance strategy, finance process improvement, digital CFO services, and process management. He has worked with national and international clients in creating functional strategies for CFO teams preparing to support the business by creating value and business insights, while running a cost-efficient yet technologically modern organization. Other projects Johannes conducted with his clients included digital CFO assessments and benchmarking, as well as ERP and finance process implementations. Prior to consulting, Johannes worked in various finance functions of an Atlanta-based international media group. Johannes is a lecturer for a Master Program at the Universität der Künste in Berlin and likes to post on finance topics. In his time off, he enjoys playing guitar with friends and tries to spend as much time as possible with his sailing buddies somewhere off the coast of Croatia or elsewhere.