Can Running in Real Time Make Finance a Major Player?

by Chris Grundy, Director Product Marketing, SAP

In a constant quest for maximum efficiency, much of finance is now automated. The new challenge facing finance professionals is becoming a more valuable and essential part of proactive decision making. Many wonder if real-time processes can help expedite reporting and analysis that give innovative thinkers a competitive edge.

Panelists Celina Rogers, VP and editorial director for CFO Publishing; Tony Rogan, senior manager from Accenture; and Birgit Starmanns, senior director for product marketing with SAP discussed all this and more on a recent SAP Game-Changers radiocast.

Near-real time doesn’t cut it anymore

If you think the difference between real time and near-real time comes down to just a few seconds here and there, think again. According to Starmanns, it can actually be a matter of days, especially where batch processes are concerned. Those are run overnight and typically require adjustments – which then require another night to register.

Rogers understands the importance of real-time processes and sees data integrity as a concern directly tied to the quest for real time. She asserts that finance teams need to focus on how to interact with and use that data more analytically and wisely to make better-informed decisions.

“This sort of transition in finance technology will create a different kind of feedback. One that rewards the manipulation and analysis of data rather than the processing of data,” she concludes.

Personalization quickens and simplifies finance

What’s one of Google’s greatest features, aside from instantaneous search results? The personalization it provides. Over time, it actually knows your preferences. Rogers sees workers looking for the same convenience in their professional lives. Run in real time to drill down to:

  • Tax jurisdiction
  • Customer
  • Profit center
  • Country

You can pick and choose any combination to see or exclude. And business users can configure it all without having to rely on IT.

As Starmanns points out, “It’s not just making it faster for the sake of being faster, but being able to analyze other business scenarios. Because you’re done faster with the transactional piece, which is never going to go away for finance. But all the sudden you have this extra capacity to analyze other things that you could not analyze before.”

Even more exciting, you can run in real time with external information as well as your own internal data.

Scale and strategize in real time

Rogan highlights the importance of real-time capabilities for large projects and enterprises. For example, nuclear power plants need to run critical what-if analyses at their facilities to prepare for possible outages.

He details the types of questions his clients expect him to answer: “‘What if we start on this day? What if we add more people to it?’ That is getting much easier with the information we’re now able to get.”

The consensus is that a shift is occurring in finance – one that relies on real-time processes to push analytics to the forefront and make finance a true partner to the business. Listen to the full radiocast to find out more.

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Simplified Financial Planning, Part III: The Future of Financial Planning and Analysis is Closer Than You Think

by Babak Ghoreyshi, Global Marketing Program manager at SAP

In the previous posts in this series, we reviewed survey data from a report by the CFO Research and SAP titled “The Future of Financial Planning and Analysis.” This detailed report covered what finance executives are saying about their current FP&A mandate and the role of data, technology and right solutions in making quicker, better and more accurate business decisions. In this final installment, we look at three of the top priorities for CFO’s and other finance executives.

New IT Systems That Can Handle the Flood of Data

The demands for real-time, ad-hoc analysis in FP&A are overwhelming existing IT systems. Finance leaders suggest that that current systems will fall even further behind as these demands grow. A majority have been unable to plan as they would like due to short turnaround times. Nearly all agree that they need faster and more responsive infrastructure for the next wave of big data. In the CFO Research study, the results show that:

  • Over half (56 percent) of finance executives are not satisfied with the scope and granularity of data due to system constraints and time pressure.
  • Just over 53 percent admit to jettisoning some complexity during “what-if” projections and risk modeling to get actionable advice quick enough to be effective.
  • A full 93 percent say that focusing on increasing speed and responsiveness will have the biggest impact on their bottom line.

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Tighter Integration of Financial Planning Software with Core ERP

Instinct and experience can only take you so far in a turbulent environment. Data-based decision making software is becoming a critical tool. Financial execs report that they rely heavily on decision support software that already integrates their financial planning systems with their enterprise resource planning (ERP) systems. From the CFO Research survey data, it’s clear that the majority of financial leaders recognize the significance of ERP integration:

  • 82 percent of financial leaders who say their financial planning systems are already integrated with core ERP systems confirm that they rely on this tech to support their decisions.
  • In comparison, only 41 percent of those with financial-planning systems that are “fairly well integrated with core ERP systems, requiring some data migration” say that their systems substantially contribute to decision-support abilities.

The companies that have already integrated their financial planning systems with core ERP systems are winning in that they are better able to support effective decision making.

More Flexible and Responsive Systems

Looking into the future, financial leaders expect business users to demand greater contributions from high-value FP&A projections through 2017. Decision makers will want to dive into the numbers themselves with interactive reports and projections that reach further into the future.

Providing that level of depth in planning, analysis and reporting will grow in importance as a business need that requires higher and more effective contribution from the finance function. Here are two more fascinating predictions from financial executives that have emerged from the CFO Research survey:

  • In the near future, information and analysis systems will need to be simpler to use, but also more sophisticated and interactive with longer-range validity.
  • 88 percent of financial leaders say that decision makers in their enterprise want a better understanding of the analysis they receive and they want finance to simplify it for them.

Finance executives are already striving to help other business users make the best decisions with the analysis that they provide. In results from this survey, finance leaders expect that this trend will expand across the enterprise in the future.

How to Build on Financial Success

Success in this turbulent new economic landscape depends on access to higher quality data and analysis tools. Finance experts need more far-reaching projections that can be presented simply and clearly to their colleagues for better decision making. Start now from Finance Solution content hub, and find more details on EPM in the cloud, collaborative analytics and advice on how to best communicate reporting data. The right financial planning places a CFO in the position of a trusted adviser who can see beyond the chaos in the marketplace.

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Want to Be a CFO? You’ll Need More Than an Accounting Degree

by Chris Grundy, Director Product Marketing, SAP

If you’ve reached a position as prestigious as CFO, you must be finished with formal education, right? Actually, nothing could be further from the truth. As the technological landscape has evolved with in-memory technology, visualization, plus the ability to integrate forecasting and planning with the ERP system, CFOs must use of a whole new set of tools.

Panelists at a recent SAP Game-Changers radiocast, John Steele, principal with Deloitte Consulting LLP and head of the U.S. SAP finance transformation practice at Deloitte; David Dixon, partner principal at TruQua Enterprises; and Henner Schliebs, head of finance audience marketing at SAP, discussed the need to adapt to a rapidly evolving role and what characteristics define a successful CFO.

SAP's current range of mobile solutions for Finance

SAP’s current range of mobile solutions for Finance

Fulfill the many purposes of CFO

Being CFO is now a balancing act that requires tending to the traditional post of information steward and business advisor while heralding a new vision for the finance department.

According to Steele, finance is the “Rome” of a business – all roads lead to it. Every other department relies on information held by the CFO. And as finance moves further toward the back end of an organization, CFOs need a greater handle on technology so they can drive analytics in a highly mobile and social world.

Dixon adds that this critical role has reached a tipping point – you can’t just crunch numbers and expect to get the job done. If the office of the CFO can’t step up and fulfill all the organization’s needs, it will have to start sharing leadership space. This new trend is on the rise with positions such as chief information officer and other digital executives gaining in popularity.

Ideally, less is more in global leadership. It’s easier to unify an organization under one solid viewpoint. That’s where the idea of continuing education arises. Steele says, “The CFO really should think about learning more about the technology. If the CFO can rely on the CFO team to get a little bit deeper and educate the CFO, I think that’s beneficial.”

Master a Technology-Driven Finance Function

One of the key topics is data security. Schliebs explains the double-edged sword that comes with bringing a world of information to the masses: “We need to make sure that we bring the people to data, that we go away from the area of bringing data to the people, but have the service arrangement.”

He also suggests that one of the CFO’s top priorities is guaranteeing a single source of truth. Instead of spending half of planning and analysis time wondering where data came from and if it’s reliable, you can get down to brass tacks and truly run in real time.

Imagine the CFO of the Future

Dixon asserts that it’s paramount for a CFO to keep up with what’s happening in technology and the market – and that means going outside the four walls of the company. Schliebs takes this idea a step further, saying that the CFO is evolving into the true leader of an organization.

Essentially, we’re moving from a CPA-type CFO to an MBA-type CFO. More than chief bean counters, they need to be business managers who can lead and inspire an entire organization. To learn more about the characteristics and market forces that are shaping the role of CFO, listen to the full radiocast.

Simplified Financial Planning, Part II: Responding to Market Volatility in Financial Planning and analysis

by Babak Ghoreyshi, Global Marketing Program manager at SAP

In the “5 Advantages of Thinking Ahead” blog, I discussed five essential market advantages that can be achieved with the right FP&A technology and strategic management of KPI’s. Now in this blog, will go deeper into what finance executives are saying about their future FP&A mandate and precisely what kind of technological innovations they will need. The FP&A mandate in the coming years will be for finance departments put the right tools in place now so they can make more substantial contributions to profitability over the next few years. The finance department is becoming a more integral part of business decision making process, participating actively and effectively. That’s what planning and analytics can empower the finance function to do.

A Survey on the Future of Financial Planning and Analysis

The main objective of any enterprise is profitability. Organizations understand that in order to improve accuracy in financial reporting, they must get a better understanding of the business drivers that impact performance. They must also involve more key stakeholders in order to ensure that all essential information is accounted for. Incremental improvements to the existing FP&A methodology haven’t delivered the kind of cost controls that companies need going forward. These pressures call for changes to the FP&A process, as well as the technology that supports it.

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SAP sponsored a global survey, conducted by CFO Research, of 335 senior finance executives earlier this year. The result was a report titled, “The Future of Financial Planning and Analysis: Finance Leaders on Their FP&A Mandate—and the Technology Innovations that Will Help Them to Fulfill It.” The ultimate goal of the report was to gather consensus from finance leaders about how to assist the organization in creating value. Specifically, the survey covered how the advanced techniques and technology in FP&A can factor into the bigger picture of profitability. Here are the top two findings from that original research:

Companies Need to Respond Swiftly to Volatility

Agility is emerging as the defining feature of companies that lead their respective markets. Ramped-up global competition and economic uncertainty may turn out to be persistent, if not permanent, features of this new world. The ability of finance to respond rapidly to changing market conditions came up repeatedly in our survey results. The CFO Research survey, “Future of Financial Planning and Analysis”, revealed that:

  • Approximately 77 percent of respondents identified “greater agility” in responding to market threats and seeing new lines of business have proven to be a critical competitive advantage.
  • Three out of four — 76 percent — senior finance executives said that they believe greater agility in the face of uncertainty will be critical for basic business survival over the next two years.
  • Nearly all — 92 percent — of financial execs said that better speed and responsiveness in the finance function would present the most “substantial, measurable financial benefit” to their organization.

Today, speed translates into tremendous number-crunching power. Access to real time data can empower finance departments with ad-hoc business decisions very quickly through high-performance, collaborative solutions.

CFO’s Must Prepare for Real Time Data

Making business decisions based on historical data was the only possibility in the past, but now, the real time data adds a very different kind of value added features in planning for the future. Today’s competitive landscape demands more actionable, real-time analysis to match the sudden shifts in market conditions. The kind of agility finance leaders are hoping for, will require original solutions. This is not just because of Big Data era. Different data structures, even data in lower veracity or volume can be valuable for the finance department to process, report and extract business decisions from it.

The study from CFO Research found that most CFOs recognize that demands on finance to improve profitability will grow from now through 2017. The hurdle they must overcome is the time it takes to collect, normalize and build reports from the flood of data. The “Future of Financial Planning and Analysis” also reported that:

  • CFOs are being called on to provide company decision makers with clear options and forward-looking insights. They also recognize that they have to provide them faster.
  • 84 percent say that requirements for ad-hoc decision support and analysis from finance will intensify over the next two years.
  • Among the biggest obstacles to offering insights is collecting and compiling data from various, incompatible information systems. By the time the data is merged and normalized, it is no longer real-time data.

The finance function is growing in importance as businesses’ reliable navigation system through tempestuous economic storms. New technology and solutions for FP&A operate as the finance leader’s guide to what’s on the horizon.

Financial Resource Kit

This three-part series will conclude by rounding out the top five findings from the financial executive survey. It will show how financial leaders characterize the role of finance today and the most likely scenarios for the next few budget cycles. You can build your own resource kit starting with the Finance Solution content hub. You’ll be able to read technical documents or watch videos on what’s happening in the world of SAP finance solutions.

Simplified Financial Planning, Part I: 5 Advantages of Thinking Ahead

by Babak Ghoreyshi, Global Marketing Program manager at SAP

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Planning is everything, but for many financial executives, planning involves an extremely complex process of predicting metrics and budget impacts of sprawling projects with many moving parts. For the practical-minded finance executive, this leads to an ongoing search for better planning tools delivering faster, more informative reporting solutions that can help them be more efficient in setting and monitoring KPIs and as a result making more effective business decisions.
CFOs in many industries are looking for the right technological solutions to breathe life into their budgets and plans. Current planning, budgeting, and forecasting processes are just too difficult to complete within a reasonable amount of time without disrupting business operations. In addition, enterprises are finding it difficult to get accurate results due to market volatility using their current technology. The following are real-world examples and survey results covering how financial planning solutions are helping enterprises do more in five significant areas.

1. Adapt to Market Conditions

VELUX is a Danish window-maker that needed to adapt to the changing designs, technologies and lifestyles of modern homes and businesses. They found that their yearly budget planning process was not fast enough to accurately provide the insights that they needed to react to the market in a timely manner. They moved from yearly to a repeated monthly business planning by using SAP Business Planning and Consolidation on SAP HANA. They now have a clearer vision of what kinds of windows the market wants, the lifespan of what they produce and economic impacts across the organization.

2. Identify Growth Opportunities

Forecasting should do more than just helping enterprises avoid surprises. Good forecasting can also identify a window of opportunity before it slams shut. Intuitive modeling makes it possible to analyze a variety of complex what-if scenarios at once. Companies that embrace the new planning technology to gain the ability to identify opportunities and react in the most profitable way. That is what happened at Hunt Consolidated Inc. (HCI) when they recognized a growing need for centralized, top-down planning to manage the business as a whole. Using SAP HANA as a platform for Business Planning and Consolidation, HCI was able to run wide-open queries involving hundreds of millions of record objects, rendering what-if scenarios in seconds. This opened up a world of original solutions and opportunities for them.

3. Allocate Resources

Aberdeen’s 2014 Excellence in Financial Management Survey revealed that the top three priorities for finance leaders were:
Conducting assessments of financial processes
Automation of core functions
Promoting collaboration across all finance roles
All three play a part in discovering the optimum pathway for allocating finance resources. Allocation and replenishment assessments allow financiers to identify cost centers that need to be reduced. In addition, these assessments make sure the supply chain is optimized, so the products and services customers need, are available when they want them.

4. Execute Organizational Strategies

CFO’s are searching for self-service technology that allows them to visualize data in ways that are most convenient for them instead of relying on IT. According to Aberdeen’s report on “The Next Generation of Cloud FP&A,” 87 percent of business users in the cloud either have self-service options or would like to get them in the very near future. They need the ability to execute organizational strategies with detailed forecasts using embedded analytics and scenario projections without waiting for help from IT.

5. Increase Profitability

Many finance executives say they need better solutions to face what’s coming next. In Aberdeen’s “The Next Generation of Cloud FP&A,” 37 percent of finance leaders say that their current forecasting and budgeting processes are too long and are resource intensive. Their companies are now searching for a cloud solution that helps them to reduce the operational costs and boost profitability. Cloud-based financial planning and analysis tools are better able to run queries on thousands of variables simultaneously and respond dynamically to real-time data.

The Finance Solution

Finance leaders are searching for the right solutions to deliver better speed and computing power so they can produce results in these five areas. In our next blog, we’ll take a step further by looking at specific technological innovations that deliver results. Another great resource for CFO’s is available now at the Finance Solution content hub, where there is a rich library of researches and insights into the most relevant topics in the world of finance.

How the Future of Financial Planning and Analysis would look in Latin America

By Pras Chatterjee, Sr. Director Product Marketing, SAP.

Highlights from the latest study by CFO Research and SAP

Finance executives from Latin America (including South America and Mexico) believe that the pressure to deliver clear, actionable business insight to their colleagues is increasing (CFO.com/SAP Research). But do they also feel they have the right tools and resources in order to make good on that promise and their contribution to high-value planning and analysis?

For finance leaders and their teams, the challenge ahead goes well beyond ensuring high-quality, forward-looking information and analysis reaches the hands of decision makers with the speed and interactivity they increasingly demand. In addition to supplying swift, powerful, interactive information and analysis, finance teams will be called upon to make certain that decision makers are in a position to make effective use of that information and analysis.

In the survey conducted by CFO.com, more than nine in ten (93%) finance executives from Latin America agree that over the next two years, the demand on the finance function to supply highly responsive, interactive, and flexible business analysis to decision-makers is likely to increase. Of those, nearly four in ten (39%) expect the increased demand will be substantial—the highest of any region in terms of the intensity of that demand.

At the same time, virtually all of the Latin American respondents (98%) say they could provide substantial, measurable financial benefits to their companies if only they could improve on the speed and responsiveness with which they supply business analysis to decision makers.

These respondents clearly take pride in their responsiveness. Respondents from Latin America lead the pack in their belief that they can respond to a typical ad-hoc request for business analysis within minutes, if not instantly.

They do think they have room for improvement, however, on both the front end and the back end of the data analysis process. More than half of the Latin American respondents (52%) feel strongly that to maximize the benefit of financial planning and business analysis, the finance function needs to spend less time on simply moving the data around—that is, the amount of time, attention, and resources they devote to manually migrating and reconciling data from system to system.

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And even more (61%) agree strongly that improving the finance function’s ability to communicate business analysis effectively—in a way that would allow decision makers to grasp key insights, underlying risks, and assumptions easily—would yield substantial, measurable financial benefits to their companies.

Once they can overcome those hurdles, there appears to be little standing in the way of their aspirations to improve their contribution to high-value planning, analysis, and decision-support.

Read the Executive summary of the report here

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How Does Integrated Business Planning (IBP) Support Process Improvement?

By Gary Cokins, Founder of Analytics-Based Performance Management LLC

In my initial blog in this series related to integrated business planning (IBP) I described IBP as seamlessly integrating user interfaces and workflows. IBP links strategic, operational, and financial objectives and plans to improve employee alignment with the executive team’s strategy and financial performance. In my second and third blogs I discussed, respectively, how IBP is part of the solution for issues and needs related to strategy execution and next to product, channel, and customer profitability.

In this blog I will discuss issues, needs and solutions related to operations, processes, and productivity improvement and how IBP is part of the solution.

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The strategic versus operational view

In commercial companies there are two levers to increase profits: (1) raise top line revenues and (2) reduce expenses. Although a company cannot continue to reduce costs forever to achieve prosperity, there are always opportunities to reduce waste, increase throughput cycle time, improve quality, and consequently improve processes. A top line revenue increase places more emphasis on a strategic view whereas expense reduction places more emphasis on an operational view.

The strategic view is primarily enterprise-wide and involves first “doing the right things.” That is, selling profitable products to customers that are profitable to conduct business with. As described in my prior blog the strategic view is about enhancing revenues and assuring higher profits based on the product’s or service’s value to draw good prices and the considering varying levels of demanding behavior of different types of customers.  In contrast the operational view is not enterprise-wide, but rather addresses individual functions, departments, or business processes. It involves “doing the right things well.” Its intent is less about analyzing profit contribution margins, but rather focuses on improving processes, managing them more efficiently, and optimizing asset utilization all for which to better manage costs.

The operational view for productivity improvement

The pursuit of benefits from the operational view involves quality management, lean management with value stream mapping of processes, activity analysis, cost driver analysis, and scoring activity costs with attributes, such as for nonvalue-added costs. IBP supports all of these endeavors. Here are a few examples:

Quality management – In the 1960s Japanese manufacturers began to increase market share by providing higher quality products. Manufacturers in North America and Europe began to copy some of the Japanese practices. There came a point in time however when senior executives began to question the return on investment with quality initiatives, and this spawned interest in Six Sigma. Six Sigma is a set of techniques and tools for process improvement. It was initially developed at Motorola and soon embraced at General Electric. Six Sigma seeks to improve the quality output of processes by identifying and removing the causes of defects and errors and minimizing variability in processes.  It uses a set of quality management methods, mainly statistical methods, and creates a special infrastructure of people within the organization (“Champions”, “Black Belts”, “Green Belts”, “Yellow Belts”, etc.) who are experts in these methods.

Lean management – In the 1990s lean management stemmed from a method used at Toyota in Japan called the Toyota Production System. Its premise is that by smoothing the flow of work then quality problems are exposed. As they are addressed, waste is reduced and throughput cycle time speed increases. A technique applied is value stream mapping. Lean management amplifies quality management techniques by placing attention on the value add of the steps and work activities belonging to processes.

Cost driver analysis and cost of quality (COQ) – The management accounting function eventually found ways to make a contribution to process improvement. As activity-based costing (ABC) has been embraced, based on cause-and-effect principles, companies benefit from visibility to the cost drivers of making products or delivering services. With accounting information as the operations work force can decrease the quantity, frequency, or intensity of a cost driver (e.g., the number of machine set-ups) then costs can decline. ABC also provided a way to score the work activities displayed in a value stream map as value-added or nonvalue-added (or as a spectrum of value-add) to enable focus based on the magnitude of costs. Progressive accountants recognized they could add another scoring method to classify activities as correct, prevention, appraisal, internal defect, or external defect. This is the basis for measuring the cost of quality (COQ). With repetitive COQ reporting companies can monitor the shift of their costs from the latter to the former of the five COQ classifications as well as reduction of the last four of them.

IBP for productivity improvement

IBP should be viewed as holistic where as an umbrella it covers strategic issues, as described in my three prior blogs in this blog series, as well as operational issues discussed in this blog.

There is some controversy. Just as there is organization chart silo behavior that becomes an obstacle for better integration of how employees should work together there can also be improvement method silos. Some advocates in the lean and quality management communities promote their methods (e.g., fish bone diagrams), as the primary ones to adopt. To their credit, their methods do educate employees on how to think. But IBP’s broader suite of methods aids managers and employees on where to think. As a result IBP provides focus to better address which improvement opportunities will lead to improved troubleshooting for corrective actions. This also includes the broader set of products available now to users to perform their analysis on the different silos of information.  With In-Memory technology it’s easier to consume disparate sets of information into one source as well as analytical tools that provide easy visualization options the convergence of strategic and operational analysis comes together easier.

IBP is for enterprise wide improvement

As mentioned, integrated business planning (IBP) integrates financial, strategic, and operational information. It can help the enterprise integrate all their objectives and ensure synchronization.

In my next blog I will discuss integrated business planning for improved budgeting, rolling financial forecasts, and evaluating proposed business decisions.

 

 

About the Author: Gary Cokins, CPIM

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Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC www.garycokins.com .  He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methods, Risk, and Analytics and Predictive Business Analytics.

 

Linkedin contact:

http://www.linkedin.com/pub/gary-cokins/0/15a/949