Digital transformation is quickly moving from hype to reality when it comes to financial technology, writes BlackLine's Ann Furlong.
While there is an almost bewildering array of new technologies, the barriers to testing new innovations have dropped dramatically. There has never been a better time for finance leaders to take the lead on technology decisions.
Less than a decade ago, finance and accounting teams typically relied on IT to deploy and make changes to systems, and required big capital expenditure investments around hardware and software. Now, new finance applications are often deployed in the cloud and can be accessed from anywhere.
While new technology used to come with associated heavy complexity, advancements such as financial corporate performance management (FCPM) and robotic process automation (RPA) can be deployed as a service, in the cloud. As a result, modern finance and accounting applications can now be maintained by the finance department itself.
Taking a hybrid approach
Despite the clear benefits offered by new technologies, many chief financial officers (CFOs) face the hurdle of what to do with existing legacy systems. While ageing, most enterprise resource planning (ERP) investments are entrenched, heavily customised, and critical to business processes and operations. As systems of record, they simply can’t be ripped and replaced without creating risk.
This is why increasing numbers of CFOs are constructing hybrid finance technology landscapes, with cloud finance automation and reporting, planning, robotics, and analytics connecting and integrating with their existing ERP system, adding innovative new technologies while reducing risk exposure.
Taking such an approach requires an understanding of the technology options in the marketplace. Each needs to be carefully assessed to determine how it could be implemented and what business benefits would be delivered. Some of the key technologies and trends that should currently be on the radar screens of CFOs include:
This trend is based on a model where software is managed in secure data centres and delivered through a web browser. There are, however, important nuances between vendors offering cloud solutions, and how they are deployed.
Some providers offer hosted versions of older on-premise software while others have solutions specifically designed for cloud delivery. It’s important to understand the approach taken by a vendor before any agreement for services is signed.
Cloud financial corporate performance management (FCPM)
Cloud FCPM technology is focused on streamlining and reducing risks in the financial close process. It incorporates multiple capabilities including reconciliations, financial close task management, financial reporting, intercompany processing, variance analysis, financial consolidation and pre-consolidation.
Typical value drivers for FCPM include greater accounting efficiency through automation, accounting by exception, improved audit trails, accelerated financial close, and easier access to financial reports.
Robotic process automation (RPA)
RPA can be considered a subset of FCPM and is a rules-based technology approach designed to replicate high-volume, repetitive tasks. It can be applied to areas such as transaction matching or intercompany eliminations.
With increased advancements in areas such as cognitive computing and machine learning, complexity of tasks that are subject to automation by RPA engines is advancing continually. Value drivers include efficiency as well as consistency in the application of business rules.
Cloud strategic corporate performance management (SCPM):
Like FCPM, cloud SCPM applications are a shift away from legacy “mega-suites” toward solutions designed specifically for financial planning and analysis. Capabilities often include balance sheet, cash flow, expense, and headcount planning.
Value drivers include faster budgeting and planning processes, fewer errors, increased forecasting accuracy, and a better budgeting process through increased line of business manager participation.
Cloud financial management solution (FMS)
With on-premise ERP deployments declining, new financial management deployments are often cloud-based; however, the emergence of cloud FMS marks another technology shift.
Finance departments are no longer deploying a single, large-scale ERP system but instead deploying loosely coupled but highly integrated apps for billing, purchasing, financial close, reporting, and budgeting that complement a more narrowly defined FMS.
Value drivers include more integrated quote-to-cash and procure-to-pay processes, ease of customisation and configuration by business users, and ease of integration with new digital applications.
Continuous accounting (CA)
CA is a combination of process and technology. It pivots tasks like reconciliations, intercompany processes, transaction matching, and variance analysis, so they are not just automated but also completed in real time.
CA delivers more than efficiency benefits alone, because it distributes the accounting workload over the accounting period, reducing the overtime and weekend crunches that often overload and burn out accounting staff.
Artificial intelligence (AI)
AI tools can be trained to identify patterns in large volumes of numerical or text-based data.
They can then apply what they’ve learned to uncover insights such as helping accounting teams and auditors find anomalies and exceptions.
In many cases, the claimed benefits of the current state-of-the-art AI tools in finance are already being provided by existing FCPM- and RPA-based solutions; however, this could change as AI technology improves.
Blockchain and the distributed ledger
In the longer term, blockchain has the potential to have a significant impact on accounting, compliance, and meeting regulatory needs.
The ability to timestamp documents and transactions no matter what stage they are in could ensure greater integrity throughout processes, and improve the overall traceability of transactions. Keeping a close eye on developments in this space should be on the to-do list for all CFOs.
By keeping these trends firmly in mind, CFOs will be able to create a strategy that helps their organisation extract the most business benefit from new and emerging technologies. Taking the time to plan and evaluate options now will ensure they are well positioned to take advantage of ongoing developments as they occur.
Ann Furlong is APAC director at financial automation software provider BlackLine.
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