Enterprise resource planning (ERP) systems are central to nearly every organization’s management of operational and financial business processes. They are essential to the smooth functioning of an organization’s record keeping, accounting and finance tasks. In manufacturing and distribution, ERP manages inventory and logistics. Some ERP software vendors incorporate an extended set of capabilities that include managing human resources as well as supply chains and logistics. In the 2020s, technology will drive fundamental change in how ERP systems operate and how companies use the software.
A couple of years ago, I started talking about a “New Era of Trade.” Its starting point was the world financial crisis in 2007, but the evidence that we were experiencing a shift only became obvious years later. I think “new era” is a better description of what’s going on than calling these bilateral ructions a “trade war.” I avoid that latter term because I believe it should apply to an environment that truly merits such a description, one similar to the period from the late 1920s and well into the 1930s when escalating tariffs, export taxes and competitive currency devaluations caused world trade volume to plummet by two-thirds. Until 2020, world trade growth had only been slowing, not declining.
An important recent development in software designed for the Office of Finance is the addition of what we’re calling a data aggregation device (DAD) for analytical applications. A DAD automates the collection of data from disparate sources using, for example, application programming interfaces (APIs) and robotic process automation (RPA). With a DAD, users of the analytical application have immediate access to a much broader data set; one that incorporates operational as well as financial data from internal and external sources. The larger data set enables a much more expansive set of analyses than has been feasible in the past because the process of acquiring the data is automated, and the data aggregation is handled in a controlled manner. This control means that data in the system is authoritative, accurate, consistent, complete and secure. The difference between a DAD and a finance data mart is that the former is prebuilt for the specific application, and therefore eliminates this source of implementation costs and offers faster time to value.
A great deal has changed in how finance and accounting departments operate since the start of 2020. To cope with unprecedented conditions, many departments have found that significant changes to their processes and operating methods are not only possible, they’re necessary. With workers unable to be in office, organizations have learned how to work virtually using videoconferencing, and adopted a variety of new software that make it possible to work under any conditions. Software that automates the close, for instance, smooths the execution of processes by managing hand-offs, reviews and approvals even when face-to-face interaction isn’t feasible.
One of the challenges of being a practically minded technology analyst is squaring the importance of “the next big thing” with the reality of what most organizations are doing. For decades it’s been the case that “the next big thing” in the world of information technology is easily several years ahead of where most organizations are in their use of technology. And before most organizations can realize the benefit of some whiz-bang technology, they frequently need to address a range of more mundane issues, such as data availability and accuracy, employee training and corporate culture, among other impediments. Sometimes, though, advanced technology works to uncomplicate things for organizations.
Topics: Human Capital Management, Marketing, Office of Finance, Analytics, Business Intelligence, Sales Performance Management, Financial Performance Management, Price and Revenue Management, Digital Marketing, Work and Resource Management, Digital Commerce, Operations & Supply Chain, Enterprise Resource Planning, ERP and Continuous Accounting, robotic finance, Predictive Planning, AI and Machine Learning, revenue and lease accounting, subscription management, intelligent sales
In a recent note on virtualizing the close, I observed that finance and accounting organizations that can operate in a virtual mode are better able to adapt to changing circumstances and overcome obstacles. Having systems that people can readily access remotely to collaborate and execute processes virtually makes it easier for departments to meet their commitments with confidence. The core technology underpinning the ability to work in a virtual mode is the cloud. That’s because the cloud eliminates the constraints of having to be in a specific place at a specific time; work gets done when it needs to be done.
I like Louis Pasteur’s observation that “fortune favors the prepared mind.” So-called black swan events happen regularly and can have a very negative effect on a business. Of course, risk is inherent in any commercial undertaking; organizations don’t succeed by being overly cautious and reckless ones usually fail after awhile. Those that are consistently successful are ones that manage risk intelligently. That is, they correctly identify vulnerabilities, avoid the decisions and situations where risks outweigh the benefits, insure the risks that are economically insurable and quickly mitigate the impact of negative events. They are resilient in the face of change because they are adaptable.
We find in our recent Change in the Office of Finance benchmark research an indication of the value of using automation to execute finance department functions. Our findings reveal an increase in the use of automation by finance organizations over the past five years and a concomitant improvement in performance. For example, 46 percent of companies close their monthly books within four business days compared to 29 percent in our earlier research. Yet the glass is only half full. Finance organizations continue to be laggards in adopting technology that measurably improves effectiveness.
One of the objectives of our recent Change in the Office of Finance benchmark research was to assess the technological capabilities of finance and accounting departments. The research confirms that today we are on the verge of a major technology-led shift. Technology that’s already available can have a greater impact on how the finance department operates over the next 10 years than it has over the past 50. Advances in columnar databases, in-memory processing and artificial intelligence and machine learning, as well as a relentless reduction in the cost of computing resources, will make it possible to substantially redefine how work gets done in the department.
Topics: Office of Finance, Financial Performance Management, Price and Revenue Management, ERP and Continuous Accounting, robotic finance, Predictive Planning, revenue and lease accounting, subscription management
I was invited to sit on a panel at CFO 3.0 events held in San Francisco and New York hosted by Sage Intacct. This event is about the evolution of the role that started with the archetypal CFO 1.0, the green-eye-shade-wearing bean counter. Lacking usable technology, he or she was limited to keeping the books in good order and simply reporting what just happened. Today’s CFO 2.0 relies on technology developed over the past two decades as well as the broader perception of the role, catalyzed by technology that provides deeper analysis to explain what happened and why. At the next 3.0 level, CFOs will lead an organization that can provide guidance to executives and managers so they can better shape the company’s future, providing insights through rich scenario planning.