Building a Future Ready Finance Function

From Steve Player, North America Program Director for the Beyond Budgeting Round Table (BBRT)

It is an exciting time to be a CFO. It can also be quite challenging as the breadth of the role continues to expand. The world is moving faster. While improving costs and productivity will always be required, today’s CFO is often called on to drive strategy, manage information, and identify acquisition targets while protecting against the threats from hostile suitors. And all this must be done while continuing to smoothly run the traditional finance processes. How can CFOs meet the challenges of today while preparing for the challenges of tomorrow?

During the next ten weeks, I will be examining what CFOs and their finance teams are doing to make sure that both the finance function and their entire organization is “future ready.”

Achieving this requires a different approach from CFOs. They will certainly need to continue to leverage new technology to increase efficiency and effectiveness. The goal is to increase speed and empower their business to make better decisions. Key planks of their action plans include the following:

  1. Realizing that you cannot shrink your finance team to greatness. Finance processes must be transformed to deliver truly outstanding performance. They have developed a clear vision of how finance can help strategically. This often includes eliminating traditional budgeting practices based on assumptions that are out-of-date even before the budget is printed and approved. These are being replaced by next generation planning systems that provide continuous rolling forecasts, scenario planning capability, and ways to manage risks by rapidly modeling the potential impacts of key changes.
  2. Recognizing that the scope of the CFO job can be as broad as they show they can successfully handle. The prior debates about CFO/ CIO rivalries have largely been resolved with CIOs often reporting to CFOs. The modern CFO has also been called the Chief Profitability Officer, Chief Strategy Office, and Chief Innovation Officer. She or he plays a key role leading innovation initiatives.
  3. Focusing on training for higher office without making your CEO nervous. It is hard to successfully train for a higher office without making the king nervous. This is where truly understanding the organization’s product and customer profitability is critical.
  4. Still effectively completing the basics well. To shine at new tasks, you need to also make sure that your prime responsibilities continue to shine as well. The good news is that new technologies also help speed up even traditional functions such as closing and consolidations.
  5. Creatively finding time and resources to pursue improvements while keeping everything running. This likely means finding things to stop doing.

Ship

In my forecast improvement roadmap training, I describe your organization as a ship on the ocean. Your current organizational ship is composed of a cumulative cost structure and a cumulative ability to generate revenues. (Hopefully you generate more revenues than costs. Otherwise you have a leaky ship that needs to be fixed quickly!) These structures are all based on all the decisions you have made in the past about:

  • what products and services to offer,
  • what people were hired,
  • what locations you would use,
  • which process you would use,
  • which customers you have attracted, etc.

Your strategic plan defines what your organization wants to become in three to five years. In essence, it describes the features of your future ship. The key tasks left is to define and execute all the initiatives, programs, and projects to convert your current ship into the strategic vision. Hopefully, your vision describes a ship that is future ready to deal with a changing, constantly evolving world.

Next week, I will look back at past efforts to transform finance to see the key results. I’ll also look ahead at the approaches and tools that are creating a better outlook for success. This begins by examining the robust planning tools currently available.

Steve Player

 

SAP Makes Great Leap Forward in Latest Gartner Magic Quadrant for CPM Suites

From David Williams, Head of EPM Product Marketing, SAP

It’s that time of year again – anxiously waiting for the release of the latest Gartner Magic Quadrant for CPM Suites and appearing at the Financials 2014 conference. These are two key events that happen early each year and provide considerable conversation around SAP solutions for enterprise performance management (EPM).

Our EPM portfolio falls into Gartner’s definition of “corporate performance management,” or CPM. And whether you call  this category CPM or EPM or BPM as different vendors and analysts do, what’s being referred to are applications typically used by finance teams (but increasingly being used by other lines of business) to support setting and executing on strategy, planning/budgeting/forecasting, profitability modeling and optimization, and close/consolidations/disclosure management.

I can now cross both off the anticipation list – the Gartner Magic Quadrant for CPM Suites has just been released as we just wrapped up the Financials 2014 event in Orlando.

School of Horse-Eye Jacks following Longjaw Squirrelfish, underwater shot

SAP’s Completeness of Vision Rating Rises

I’m happy to say that for the eighth year in a row, SAP has been positioned as a “Leader” in the report. Of particular note this year was a move to the right for SAP on Completeness of Vision. According to Gartner, Leaders have a large percentage of the CPM suite market share and demonstrate superior CPM sales levels. They can deliver breadth and depth of CPM suite functionality, as well as provide enterprise-wide implementations to support a broad CPM strategy. Leaders excel at vision, successfully articulate a business proposition that resonates with buyers, are well-recognized in the space, have broad international presence in execution, and are supported by the viability and operational capability to deliver on a global basis.

Peering into the SAP EPM portfolio there have been a number of recent innovations leveraging what Gartner refers to as the “Nexus of Forces” – mobile, cloud, social, and information. Examples of this are the leveraging of mobile and in-memory technologies (SAP HANA) to transform planning and analysis capabilities. Providing simplified mobile interfaces for business users to both consume and input plan or budget data anytime/anywhere provides increased engagement beyond Finance, increased response time and ultimately better results. Having an underlying platform that can handle rapid, complex allocations, calculations and simulations at any level of detail changes the behavior of those involved in analysis and planning. Why? Because in the past we did not ask certain questions, particularly at certain times of the day/month or year for fear of the lights flickering and the system grinding to a halt. Those days are behind us and the SAP HANA platform is removing the performance barriers that once limited applications’ ability to support the business so we can sense what’s happening, simulate outcomes, and act much faster than ever before. An example of this is SAP HANA powering the SAP Business Planning and Consolidation, version for SAP NetWeaver (aka “BPC NW”) application. Many customers are running this killer combination today and experiencing tangible business benefits including HP.

At the end of 2013, SAP had a number of key releases including SAP Business Planning and Consolidation 10.1, version for SAP NetWeaver, SAP EPM Unwired 3.0, and SAP Financial Consolidation support for SAP HANA as a database. The newest version of SAP Business Planning and Consolidation includes a redesigned, highly-intuitive HTML 5 web user interface and best-in-class integration into SAP NetWeaver Business Warehouse with the ability to build planning models directly on existing Objects.

SAP EPM Unwired 3.0 has a new Fiori-like look and feel, and new customization capabilities and content. Because it’s built on the mobile business intelligence (BI) platform, you can access your existing SAP BusinessObjects BI reports as well as your reports based on SAP Business Planning and Consolidation, version for SAP NetWeaver and input schedules in one app.

These and other innovations will be on display at the upcoming Financials 2014 event in Nice, France (check out the agenda).  I hope to see you there!

Effective Communication Requires Striking a Balance in the Age of Increasing Information

From Malcolm Faulkner, Senior Director Product Marketing, SAP

History reveals that a lack of communication, or a breakdown in communications, can determine the outcome of individual battles and entire military campaigns.

Perhaps the most controversial military debacle attributed to an initially vague order unclearly communicated was the famous charge of the light brigade during the Crimean War’s Battle of Balaclava in 1854.

In another example from historian Joseph Persico’s excellent book, 11th Month, 11th Day, 11th Hour, a senior officer, after the third Ypres battle being driven to the front lines, viewed the muddy wasteland. He is reputed to have broken into tears, cried, “Good God, did we really send men to fight in that?” His driver responded, “It gets worse, farther on up.”

While the consequences of bad business decisions pale in comparison to military ones, there are lessons in communication we can learn and apply in business today.

Improving Employee Communication

As the much quoted Kaplan and Norton’s research reveals, “Only 5% of the workforce understand their company’s strategy.”  It’s not that companies don’t communicate their strategy – but they do a poor job ensuring the message is received.

In an age of increasing information, the challenge is sifting through relevant and trustworthy data quickly enough and surfacing the salient facts upon which to make decisions. Then, the directives that determine the desired course of action need to be regularly reinforced.

Effective communication doesn’t mean broadcasting a strategy once a year that most employees immediately forget.  Nor is it a matter of inundating employees with so many e-mails, meetings, and announcements that they tune out.  As employees are more inundated with information, their attention spans are correspondingly shorter.

We need to find the right balance in communication, and deliver a message that employees can embrace and provide them with the resources and support to make them successful. 

African American businessman talking on cell phone

What Not To Do

It’s critical to recognize the limitations as well as the benefits of modern communication.  E-mails go unread? Time to pick up the phone!  Indiscriminatingly hitting Reply-All increases the chances of tuning people out. Webinars are not as effective as face to face meetings.  This might all seem a bit old school, but it’s hard to argue otherwise.

Endless op reviews and meetings might seem to make sense, but do these activities really translate into tangible change or are we just rehashing the same story?

All too often, senior management becomes removed from the day-to-day workings of their organizations. They hear from only a few voices, usually their direct reports. Their information can be skewed by personal and political factors or they may be simply tuned out.

Tools You Can Use

Performance management tools can help you pinpoint places in the organization that need your attention. In times past, the main challenge was just getting information. Now we have the challenge of too much information. Technologies can help us sift through huge volumes of data, highlight what’s most important, and take action.

One visionary example of the use of such tools is the widely acclaimed CitizenInsight application deployed by the City of Boston to keep its constituents informed of government initiatives and performance.  Creating a simple iPad application like this, that clearly communicates strategy and performance and is accessible and readily available, is an effective way of addressing the 5% issue.

But even this isn’t enough, though.  The message needs to be followed up to ensure employees understand it. Much like the charge of the light brigade – confusion can result in a disastrous course of action.

Attending the SAPinsider Financials 2014 conference next week in Orlando? If you are planning to be there then why not come and hear me talk more about performance management in my session on Wednesday 19th March, “Achieve excellence with end-to-end financial planning and analytic solutions”. I look forward to communicating with you there!

Spring into performance at SAPinsider Financials 2014

While I have nothing in particular against the months of January and February, I’m always pleased for March to arrive, as spring is generally well on the way by then. Seeing the splashes of colour from the spring flowers gives me hope that Field of Red and Purple Tulipswe’re just a few short weeks away from brighter and hopefully warmer days.

Bright and warm days are, of course, not in question for anyone planning to attend the SAPinsider Financials 2014 Conference in Orlando, 17-21 March. Similar to those spring flowers, this event heralds the start of an exciting and no doubt, colourful events season.

With SAPinsider Financials being one of the first key events on the SAP events calendar, I’m sure that attendees will be eager to get the most out of this superb event.

For SAP’s EPM team, the Financials 2014 event is shaping up very nicely. EPM sessions are featured in a number of the event tracks, with topics ranging from best practice tips and advice, to the impact of innovative technologies on EPM processes like in-memory and mobility solutions, as well as multiple sessions focused on customer success.

If you’re attending the Financials 2014 event then you can review details of sessions online before you go and select your topics of interest. Here are a few EPM sessions that I’d recommend:

Case study: Consolidation process improvements at Bank of America using SAP Business Planning and Consolidation

Case study: How Hunt Consolidated deployed SAP Business Planning and Consolidation on SAP HANA to reduce the time it takes to perform planning and forecasting activities

The 2014 guide to SAP enterprise performance management (EPM) solutions

EPM and mobility: Capabilities, integration points, and process decisions

These are just some of the many sessions available this year at Financials 2014, in addition to the excellent pre-conference workshops for attendees wishing to dive into deeper levels of their subject areas.

My advice – if you’re attending – is to plan ahead on how you’ll spend your time. It’ll pay dividends in the end, so you can maximize your time, and the value you’ll get out of the conference.

Watch the @CFOKnowledge twitter handle over the next few weeks for links to more EPM sessions at SAPinsider Financials 2014.

EPM Reflections #7; Staying in Control of the ‘Last Mile of Finance’

EPM Reflections 7Continuing our out-takes from the SAP radio shows with this one that asked our panel of experts to discuss annual reporting . It challenged the panel to consider the importance of having the right people, processes, technology, and best practices in place to conquer the intensifying challenges in annual reporting disclosures.

Listen to what they had to say by clicking on the image.

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Why your place in the Fast Close rankings matters

Two new reports ranking the speed of closing of the world’s largest listed companies have just been published – Close Cycle Rankings 2013 from BPM International and the Close Cycle Report 2013 from PWC – (registration required).  For folk who like lists, rankings and ‘Best of’ charts, they make fascinating reading and enable you to benchmark your performance against your peers in your region – global rankings being largely meaningless due to the differences between local reporting requirements.

Both reports show that the steps change reductions in reporting times that were common 5-10 years ago seem to have washed through as most companies have now addressed the major bottlenecks that delivered the big wins. If companies want to make further progress, then it probably means fine tuning the process particularly around the ‘last mile of finance’   - disclosure management. SAP itself is a perfect example of this. The company comes second in the FTSE Europe Top 100 rankings by Public Announcement date and 29th in the rankings by Audit Date reflecting steady gains of a couple of days on each measure that came after implementing SAP® Notes Management to gather financial data, such as pension disclosures, that is not available in the company’s accounting records from its 235 subsidiaries around the globe. At the same time, SAP also implemented SAP® Disclosure Management to automate the data transfer from the company’s accounting and consolidation systems to generate both internal and external reports. The combination of these two applications supports SAP® in the preparation and generation of reports in compliance with key regulatory requirements such as the U.S. Securities and Exchange Commission’s Form 20-F and International Financial Reporting Standards (IFRS).

Other companies, many of them SAP’s customers, have made similar progress, but both reports point out that the global financial crisis has made companies hyper-cautious about risking re-statements. So the good news is that companies’ underlying capabilities could well be much better than the results shown in the tables. And as long as they haven’t been hampered by integrating a major new acquisition, most companies that made the step-change a few years back have since sustained a fast close.

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When it comes to reporting, appearances matter

Being ranked at the top of these tables should give most CFO’s and their corporate finance teams a nice warm feeling. But you should also reward yourselves with a glass of bubbles.  You can certainly afford to because, unless you are one of the newer companies such as Google or Amazon with a simple reporting structure that will automatically take you to the top of these tables, speed of closing is a good proxy measure  of the overall health, efficiency, effectiveness and quality of finance processes and systems. PWC also write that they see a ‘close correlation between the speed of year-end external reporting and the speed of internal reporting used for decision-making, analytics and insight in organisations’. So if you are fast at external reporting, then you are typically fast at internal reporting – and if anything that’s more important as it’s the foundation of good performance management essential for driving the business forward. That makes your success, doubly worth celebrating.

Financial Results Insight streamlines SAP BPC data in the ‘last mile of finance’

Mobile has a key role in taking the waiting out financial processes and the new app Financial Results Insight will certainly help to streamline the “last mile of finance” process. Finance teams engage in this intense, deadline-driven process at the end of each financial quarter and know the pressure involved in closing company books quickly while producing accurate results. With the growing use of enterprise deployed mobile tablets, mobile Financial Results Insight provides finance professionals with an “anywhere – anytime” access to key financial indicators to better monitor their corporate financial results and share them with corporate leaders prior to data being made available to investors, financial institutions and shareholders.

Fin_Insight_ThumbnailFinancial Results Insight smoothly connects SAP Business Planning and Consolidation data to iOS through SAP® BusinessObjects™ BI, while ensuring full security on corporate data. During the few days before their quarterly books are closed and made publicly available most CFOs and finance professionals are polishing the final numbers, monitoring key financial indicators many times a day, checking that they conform to forecasts, preparing statements and briefings when figures are not quite as expected, checking whether everything is green or if unexpected red lights appear, and immediately raising any critical issue with fellow executives and board members. With Financial Results Insight, the office of finance is able to track in a fully secure way the most important indicators of their financial report anywhere on mobile tablet and make sure all key topics are “green lighted” prior to financial statements being made available externally to their investors.

Financial Results Insight delivers out of the box reports including:

  • Revenue growth analysis with organic growth, currency rate effect and M&A impact
  • Profit and Loss growth analysis, trends and geo-mapping visualization
  • Cash Flows at-a-glance explanation through waterfall graph
  • Asset and Liabilities illustrated by associating data with graphical trends representation
  • Portfolio summary where BPC data can be read like never before

If a key financial indicator is not quite as expected, as a CFO you can annotate or voice annotate the issue and email the owner in your team from your iPad. It’s intuitive and simple.