Five Tips for an Effective Finance Transformation

Introduction

The finance function is a critical component of any business, and it must be transformed to meet the company’s needs. However, implementing a successful transformation of your finance function can be tricky.

In this article, we will give you five tips to help you get started on your transformation journey. By following these tips, you will be able to streamline your finance function and make it more effective and efficient. This information is beneficial if you are a CFO, finance director, executive manager, or business owner.

At the end of this article, readers should be able to find answers to the following questions:

What are the best practices for finance transformation?
What is included in finance transformation?
How do you approach finance transformations?
How can the financial system be improved?

Background

With the rapid pace of modern business, companies have begun to feel that they are moving too slowly, and they are considering more drastic measures to increase their efficiency. While business process automation and agile methodology can help, you should think carefully about how to approach these changes to get the most out of them.

In a world where change management is now one of the most important techniques in management, organizations are investing heavily in change management and other changes to create an environment that helps them thrive. These include ‘reinventing’ individuals or departments, as well as the processes that they use to operate within them.

Automation, process improvements, and agile methodology are all commonly used terms in business today. But how can you implement these three tools in the same initiative?

By automating as many tedious, time-consuming tasks as possible, streamlining inefficient manual processes, and utilizing an agile methodology that enables continuous improvement over time, you will be able to adapt to the rapidly changing financial landscape and provide your business with the services it requires to stay competitive.

Stakeholders in finance transformation

There are numerous stakeholders in a finance transformation, including the board, senior management, CFOs, and other functional teams. There can be many others who will have an impact on your success as well.

The finance transformation management team

A finance transformation management team is a collection of individuals who are accountable for the strategy, execution, and evaluation of change. Members can vary in size depending on the scope of the project, but should include the following:

Change leaders are senior executives in charge of business transformation. They need to be able to lead teams and communicate effectively with stakeholders (including customers).

Change champions are individuals who have influence over their peers and decision-makers outside of work, for example, family and friends, community organizations, etc.

Change agents are employees who will actively engage others in the change management process.

Change managers are individuals on the finance transformation management team who are accountable for the implementation and evaluation of change processes.

The finance transformation project manager is a key player in the finance transformation management team, having overall responsibility for all aspects of the change programme from inception to completion (or termination). They need to be able to:

Identify business drivers – determine what needs to be changed and why, as well as who will benefit and how they will benefit.
Identify stakeholders—determine who has an impact on your success and who does not.
Develop a change management strategy: define the processes and milestones for change management.
Lead the finance transformation team—be accountable for the change program’s day-to-day implementation.
Support the finance transformation project in all aspects of the finance transformation management team’s work, including acting as a coach, mentor, or advisor to other team members on how to do their jobs more effectively and when they require assistance.

Are today’s CFOs and businesses ready for tomorrow’s demands on finance?

If your company has discussed finance transformation, here are five tips to help you do it correctly and make the most of the resources available.

Finance automation: a path to transformation

1. Automation

If you’re embarking on any type of finance transformation, one of your primary objectives should be to automate as much as possible. It is important to note that businesses do not have to automate 100% of their processes. Just strive to get as close to 100% automation as possible within reason and with respect to other business priorities (like growth). As a best practice, strive for between 70-80% efficiency in any given process before attempting reengineering or transformation. In addition, start with simpler tasks that can be more easily automated; it is easier to break down one large step into several smaller steps than it is to try and simplify five or six complex steps all at once. Think about how each task could be simplified by machines versus manually before trying anything too complicated.

A large amount of IT-enabled automation is not just meant to make your employees more efficient. It can also be used to smooth out processes that would otherwise consume too much time, resources, and (ultimately) money. Automation is a fantastic way to ensure all transactions are managed properly and in line with company policies—and without errors! Inadequate automation is one of the most common causes of customer dissatisfaction. Fortunately, it is also a simple problem to resolve if proactive steps are taken today.

By automating repetitive manual tasks, a business can save 70% of its time.

2. Process improvements

It is all about continuous process improvement. Before you embark on your transformation journey, start by identifying areas where you can improve and working on them. You might be surprised at how much you can get done with minimal disruptions, and it will make your business more productive and agile from day one. Plus, if you start making changes before your go-live date, your users will appreciate it—and everyone wins!

No matter how sophisticated your business or management team is, there’s always room for improvement. Taking an agile approach to process improvements can help create new efficiencies and drive down costs. And it is not just about major projects. Focusing on smaller, iterative changes in processes will make you more agile as a company and keep your team focused on improving results in small increments rather than doing big strategic re-imagining every year. For example, you might start by focusing on reducing hand-offs between departments or creating more automation around low-level tasks that require high labour costs. If you start with these process improvements first and integrate them into daily operations, your finance transformation will be much easier to handle at scale.

3. Lean Six Sigma – not only automation

When most people think of Lean Six Sigma, they immediately think of automation. If you are starting with Lean Six Sigma, it is important to realize that you can apply many aspects of Lean and Six Sigma as part of an agile methodology. Self-organization, working software, and customer collaboration are key concepts in the Agile Manifesto, and they make sense in any business culture. The true power of Lean Six Sigma is its ability to drive process improvements (that is lean) while taking advantage of automation (which is where six sigma comes in). Put another way, if you have limited resources and must optimize your project portfolio, focus on implementing a process improvement strategy using lean tools like Kaizen events or 5S first.

A lot of people think that Lean Six Sigma is something like automating and leaving, but not so! The main goal of Lean Six Sigma is constant improvement. And automation happens to be just one approach out of many when it comes to making businesses more efficient. To keep improving, you need people who understand what they are doing. Unfortunately, most businesses today rely on far too many people who have no idea how or why things work the way they do. Automation without Lean Six Sigma in place will lead to minimal long-term improvements at best.

If you are unfamiliar with Lean Six Sigma, conduct some preliminary research and apply some principles to your business.

4. Agile methodology

Agile methodology is so critical to agile transformation. Agile methodology is more than just an efficient way to conduct your work; it’s a transformational strategy that will change how you and your team members think about your day-to-day jobs and their relevance in an overall business strategy. While agile methodology may appear to have nothing to do with finance, when used correctly, it can have an impact on all aspects of financial operations. When people think of agile transformation, they often focus on development and forget about other parts of an organization. Businesses today are moving towards being run by multiple small independent teams that work collaboratively towards achieving bigger goals than those of individual workers, who report back directly to their managers.

Planning, budgeting, and accounting are just three areas that can be streamlined using agile methodology. In many businesses, these processes have taken on a waterfall structure, with each phase of a process following on from the previous one and needing to be completed before anything else can be done. The issue with waterfall planning is that it is risky, not only because you are spending money on something you do not know, but also because it frequently forces departments to collaborate in ways they are not accustomed to. With Agile methodologies like Scrum, changes and updates can be made throughout the process rather than at designated points.

Without getting too technical, small businesses are better suited to adopting agile methods because they are, in fact, the only way to survive.

5. Implement an ERP system

To begin optimizing finance processes, it is critical to have a system in place. Fortunately, ERP (enterprise resource planning) systems make it much easier to streamline and optimize business processes. These digital platforms can include CRM (customer relationship management), accounting and payroll, as well as more specific solutions that deal with specific industry-specific issues—like a car service company using solutions tailored to transportation companies. Once your company implements an ERP system, you will need to ensure everyone is on board with implementing changes.

An enterprise resource planning (ERP) system is an all-in-one solution for managing your finances. The software encompasses every aspect of how you do business, including accounting, payroll, and inventory management. By incorporating best practices into your operations and streamlining processes, ERP systems help you cut costs while increasing productivity. If you want to run your finances in an agile way, consider implementing an ERP system that can grow with your company as it scales up over time.

Many small businesses still operate on Excel spreadsheets, which can create inefficiencies in your accounting and finance department. If you are at all serious about moving up to “big boy” business operations, implementing an ERP system is an excellent way to begin improving your agility. A fitting example of such a system is SAP, which has capabilities built-in for SMB companies looking to take their operations to the next level. Smaller business management programs such as QuickBooks will also suffice – with significant benefits.

Using ERP enables you to:

easily track inventory
send invoices
access information 24/7
better plan ahead
quickly respond to urgent situations or requests from clients or partners.

Key Takeaways

1. Take it Step by Step

Building a business case or project plan before you begin implementation is crucial in ensuring that your finance transformation project is done right. Do not just do it blindly, I had a client pay multi-millions on an ERP software that was not suited for their business. They had to do it all over again.

2. Get Executive Support

Transforming an organization is never easy, and it is even harder if top management is not on board with how you want to proceed. Find out if your CEO, senior leaders, and other executives are ready to make changes now, so you can avoid wasting time trying to get them on board later. The bottom line, it must be a collaborative effort.

3. Make It Part of Your Culture

For an agile methodology or process improvement initiative to truly be successful at transforming your finance organization, you need buy-in from throughout the company because, as everyone knows, culture eats strategy (and tactics) for breakfast.

4. Know what makes your Company tick

Successful transformations involve creating systems and tools that improve financial reporting, help make better business decisions, and get employees on board with recent technology.

5. Do some analysis

Your transformation plan should start with assessing where you are right now. That includes financial data that goes back far enough to see how things change over time — preferably three years or more — along with details about the technology and how it is being used today by employees in all parts of your company.

Next Steps

If you are managing a big transformation in your finance department, you may need to call in extra hands, like myCFOng —and not just to fill extra desks. Having an outside view of your company’s finance processes and data can help you identify areas that might need more work or resources than you have internally. Outsourcing these tasks will give you access to specialized talent and can save time as well as money.

When you are planning out your finance transformation, it is important to make sure that you get expert advice and guidance on how to do it right. An effective way to approach this is by consulting with experts in each of your most-affected areas. Your own employees will also have valuable insight into where new processes should be implemented and what information is needed to carry them out effectively.

Conclusion

This blog was all about how to transform your small business finance function. Following the tips provided will help you achieve remarkable results in a brief period. Do you want to start your finance transformation journey today? Just click the link below and get started!
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