The Strategic Role of Finance In Today's Business Landscape

Subject matter experts from SAP and TruQua, an IBM Company, share insights about trends in finance, how to improve the record-to-report process, and best practices for achieving predictive accounting

by Brianna Shipley, Director of Editorial, SAPinsider

Finance teams have always been expected to fulfill a variety of reporting requirements to complete the financial close, also known as the record-to-report process. Today, that expectation has evolved, requiring finance professionals to deliver insights for both operational and strategic decision making. And yet completing operational tasks within the accounting and financial close process cannot be abandoned. In fact, these tasks need to be executed more efficiently than ever before.

How can finance teams achieve operational efficiency within the record-to-report process and also become strategic partners to the business? This article will provide best  practices for how the finance department can simplify complexity and increase integration, achieve real-time insights into financial data, and add business value by helping leadership make informed and predictive decisions.

Consolidate

When companies consider how to improve their financial close, the word accelerate is usually not far behind. “Many companies spend a lot of time and effort just to get it done faster,” says Maximilian Koebler, Global Solution Owner, Advanced Financial Closing at SAP. “But companies today should be taking a different approach all together.”

Koebler cites the extraction, transformation, and loading (ETL) process, which he says “destroys transparency,” as the source for a common challenge faced by finance professionals — overwhelming complexity. Data that is scattered across the organization in different data models and data silos can lead to poor data quality and broken processes, resulting in high error rates, lower levels of compliance and governance enforcement, and high costs associated with operations and innovation adoption. Therefore, eliminating the ETL process from the record-to-report scenario has become highly recommended by many finance experts, including SAP.

“SAP S/4HANA for central finance provides a solid basis for bringing data from multiple SAP and non-SAP systems into the universal journal,” says Koebler. And with SAP S/4HANA for group reporting, “there’s no need to transfer the data from the ERP accounting system into a separate consolidation system to complete the record-to report scenario — the information is all in one integrated system that leverages the architecture and structures of the universal journal.”

Maximilian Koebler, Global Solution Owner, Advanced Financial Closing at SAP

 

Having a single, integrated repository for all transactions eliminates interference between the entity and group close, and helps companies avoid having to repeat the entire ETL process if an error is found after the fact.

According to Koebler, customers can apply a forward-thinking approach to the record-to-report process by imagining the reach of accounting extending beyond general ledger entries, like sales orders or expense reports, into other relevant data sources, like logistics. By considering relevant data from integrated business processes such as order-to-cash or invoice-to-pay — rather than solely past financial data — customers can achieve a more reliable and accurate view of the organization’s future financial results as a first step toward achieving predictive accounting.

Globalize & Orchestrate

Once companies achieve a consolidated financial system containing real-time data, they can then move forward to acquiring a global view of the business on a continuous basis. To get there, Kirk Anderson, Chief of Financial Solutions at TruQua, an IBM Company, recommends looking at solutions such as SAP S/4HANA for central finance or global single SAP S/4HANA deployments complemented by solutions including SAP S/4HANA for group reporting.

“The finance function needs to move toward having a view of the business on a regular and continuous basis — not just at period end. A lot of companies today are able to close in four, five, or six days, but although their days to close are relatively low, it’s still a heavily transactional process with an end goal of getting the numbers out,” says Anderson. “The problem with simply getting the numbers out is that it doesn’t necessarily mean that the finance team has had the time required to truly understand the implications of the numbers or communicate those implications.”

It warrants repeating that the traditional focus on shortening the financial close may not be the most important consideration for finance teams moving forward. Instead, finance professionals are being challenged to shift their focus to ensuring a continuous close process that leaves room for comprehension of the numbers and delivery of valuable insights along the way.

Finance professionals can lead this initiative by utilizing the right tools, solutions, and skills. Leadership wants to know, for example: Am I meeting my targets? What am I doing in terms of profitability and which products and customers are driving that profitability? Am I managing my expenses effectively?

One way that finance professionals can streamline global and real-time visibility into these questions is by automating the verification of accurate information using applications like SAP Account Substantiation and Automation by BlackLine, allowing them to dedicate precious mind space to exceptions only.

 

Kirk Anderson, Chief of Financial Solutions at TruQua, an IBM Company

 

Organizations should not only consider globalizing from a reporting perspective, but from a processing perspective as well. “Being able to consolidate a lot of the traditional activities, like cash application, within a single central environment makes processes more efficient, especially as companies move more and more towards shared services centers and try to optimize transactional processing costs,” says Anderson.

He adds that as globalization continues to increase, another key challenge for companies with locations around the world is the massive amount of regulatory and compliance reporting that needs to be performed and effectively managed.

SAP offers many solutions that support regulatory needs, such as SAP Contract and Lease Management for SAP S/4HANA, SAP Revenue Accounting and Reporting, SAP S/4HANA for advanced compliance reporting, and SAP Disclosure Management, which become more important for companies that operate in various regions and jurisdictions and need to comply with tax and compliance reporting, for example.

Automate & Analyze

Once processes have been globalized and confirmed for compliance, the finance team can begin to understand where they land in the closing process and identify and resolve bottlenecks. The monitoring and task management capabilities provided by SAP S/4HANA Cloud for advanced financial closing help further support process management, while the tool’s embedded workflows that can be orchestrated from a mobile device offer users flexibility and enable agility. “As part of SAP’s planned future product roadmap, SAP S/4HANA Cloud for advanced financial closing will be able to integrate with SAP Intelligent Robotic Process Automation,” says Koebler.

This level of process management and integration provides a solid basis for automation.

Leveraging intelligent technologies like robotic process automation, machine learning, and artificial intelligence (AI) to apply automation to the record-to-report process not only helps streamline manual tasks; it can also help shape jobs within the finance function into more innovative and valuable roles. When routine, repetitive tasks are completed via technology, finance professionals are able to dedicate more time to learning new skills, such as data science, which further empower them to focus on strategic tasks and provide actionable insights to the company.

According to Koebler, chief financial officers and management should train their workforce how to interpret and present the data clearly and accurately to others in the company. “Translating data insights into really specific actions can help the business make informed decisions, such as how to improve pricing models or make better forecasts or improve process efficiencies,” he says.

In addition to understanding how to use digital tools that are offered as part of SAP S/4HANA, finance professionals should also become familiar with analytical, predictive, and AI features of modern analytical applications like SAP Analytics Cloud, as they need to be able to interpret and analyze the underlying data effectively, says Anderson. “Especially when it comes to machine learning, employees need to be able to validate what the technology is doing underneath in order to determine whether it’s delivering optimal results. The concept of the traditional close will never go away entirely, but companies’ dependency on it for understanding how the business is performing is waning,” he says. Instead of relying on financial data that only becomes available after the close — when it’s too late to change the past — finance needs to be able to provide insights that can inform the future.

Predict

Automation and skilled data analysis allow companies to move toward predictive accounting by speeding up the availability of information and providing predictive information that can drive decision making.

“Currently, what we see most is that insights delivered by finance teams mostly look back at the past. In other words, they’re reporting on actuals. That information is interesting and relevant and it’s very important to have that — especially for reporting — but it doesn’t tell us much about what will happen in the future,” says Koebler.
With the development of new business models and ever-increasing drivers transforming the market — from government frameworks to economic disruption — businesses need this ability to see into the future so they can be prepared for the unexpected.

This need can be understood by considering the fast-paced environment of the fashion industry, for example. “Decision makers cannot wait 10 to 15 days after the financial close until the results are ready for consumption. Instead, they need a real-time and contextualized insight into the lowest level of detail to understand KPIs like which fabrics and brands are selling best,” says Koebler.

Insights derived from advanced analytics can enable finance further by allowing them to inform leadership and drive strategic decisions. Such decisions could impact the business directly, or they could contribute to worldly initiatives like sustainability, which is increasingly driving transformational changes in all areas of business, including finance. “We know that the world needs to become more ethical, more ecological, more sustainable to survive in the long term. The finance function can play an important part here by not only focusing on what they are expected to do today — such as capture reporting, optimize financial figures, and contribute to the bottom line — but also by providing KPIs that can help businesses become more ethical and ecological,” says Koebler. With solutions from SAP’s Climate 21 solution portfolio such as SAP Carbon Footprint Analytics, the finance department may be able to provide figures related to emissions, ethically developed products, and workplace equality.

“One of the challenges that the financial planning and analysis (FP&A) department faces when it comes to planning and forecasting future results is identifying key business drivers. Leveraging AI and big data analysis, for example, can enable finance professionals to find correlations within the data that inform on key information about what is driving the business,” says Anderson.

Evolutions in FP&A as a result of intelligent technologies empower finance professionals to provide management with insights that go deeper than traditional financial analysis — such as what-if analysis (based on business drivers) and predictive capabilities (that could potentially leverage machine learning). “Intelligent technology is capable of analyzing and identifying data at a speed far beyond human capacity,” says Anderson, “so it’s a focus that will only continue to evolve.”

What Does This Mean for SAPinsiders?

  • Digitalize and globalize. The increase in remote working has proven the necessity of ensuring that business processes can run independent of work location. Additionally, a hyper focus on liquidity and cash flow to recover from business disruption as a result of the pandemic makes real-time insights into financial data an important factor for recovery. Therefore, globalizing processes and having the right solutions and tools in place to support a digital work environment as well as real-time insights will be key to achieving predictive accounting capabilities, and to driving transformational change moving forward.
  • Empower the finance function to deliver business value. Finance is driven by modern technologies, and businesses are experiencing a large wave of transformation due to innovations in this area. Intelligent technologies specifically are enabling finance to become a strategic business partner and inform on important initiatives such as sustainability. Leadership must infuse their finance teams with the right skills (via training) and the time to learn(by applying automation to repetitive tasks) so their workforce can become a strategic business partner.
  • Pivot focus from days-to-close to a continuous and predictive close. Shortening days to close is no longer the most important consideration for finance professionals as predictive capabilities become available. Companies should focus on how they can leverage financial data throughout the period to not only inform future decision making, but project what the data will say tomorrow.

About TruQua, an IBM Company

TruQua, an IBM Company, has been providing SAP solutions to Fortune 500 companies for nearly a decade. The company was founded in 2010 with the vision to create the best environment for innovation, solutions accelerators, and a team that propels businesses forward. Today, TruQua specializes in roadmap strategies, project implementations, post-go-live support, and software solutions in the areas of SAP S/4HANA transformation, SAP BW/4HANA, SAP Business Intelligence, SAP Group Reporting, SAP Analytics Cloud, Machine Learning, and more.