Digital transformation for finance has been a hot topic for some time, and the events of the last year have only served to add urgency to the issue.
Many firms have already made significant progress in transforming the way they work, while plenty of others are still behind the curve.
Covid-19, and the surge in home working that it created, has pushed even the most reluctant technology adopters to look towards more flexible tools to manage business financial planning. While for some organisations, lacking the right technology presents the main obstacle, while for others, it’s their processes that need to be modernised.
So, what does digital transformation of the finance function look like in reality? And how are businesses coping with some of the key challenges
The challenge of legacy finance systems
One key issue is that many companies are tied in to heritage ERP systems, and the process of disengaging to move on to something new can look very daunting at the outset. These systems are often customised to fit the specific need of the organisation and likely took years to embed with significant investment in consultancy and adoption programmes along the way.
Businesses are trapped in a lose-lose situation, where they’re not prepared to scrap their current system, but nor can they viably adapt it to more readily fit the present-day reality. For finance teams still hoping to squeeze more return from their initial investment, the costs of further customisation of a legacy system, in time as well as money, can be steep.
For this reason, numerous organisations find themselves caught in a slow-moving, piecemeal digital transformation. So what are the alternatives?
1. Build a totally new platform by customising a standard ERP system or picking a top-of-the-line bespoke system for their specific purpose.
This is likely to be the safest, but also initially the most expensive option. There is also likely to be a complex overlap in phasing out the existing system, with current projects, plans and forecasts still to run. It will also take some time before return on the sunk costs can be recouped. Moreover, the transition would require taking the organisation’s top finance experts away from their normal duties to plan and implement the transition, as well as training and onboarding the rest of the finance team.
2. Adopt an agile approach, with processes being transferred piece by piece, by implementing modular finance systems.
This approach can be riskier, because it involves a step-by-step migration from the existing to the new platform, with more potential for things to go wrong at each juncture. It is likely to be less expensive, however, and there should be numerous wins along the way. That said, the process would likely be drawn out, with the transformation itself becoming a method of working as opposed to a distinct project. This asks a lot of finance staff and would likely stretch the ability of the team to function successfully.
Understanding the dynamics of your organisation will determine which is the right course of action for you. There are plenty of companies that have historically enacted change at a slow pace, that have found, when faced with the imperative to act driven by the pandemic, that they are in fact able to make big changes surprisingly quickly when the motivation is there.
It may seem counterintuitive, but a situation in which finance processes themselves are being radically overhauled – with reporting cycles shortening dramatically, and forecasting processes having to account for an ever-increasing amount of uncertainty – may present the ideal opportunity to replace the tools and technologies that perform those tasks. The key is to have an expert partner in your technology provider, who can guide you through the process.
Digital transformation – discrete project or ongoing process?
Finance processes and the technologies that support them are continually evolving, and for that reason, transformation is in the long run an ongoing process, but one that can be taken on in manageable steps. There will always be better tools and systems appearing on the market, but the key is to know when your legacy system has reached a tipping point to make the costs of inaction outweigh the costs of upgrading.
But it’s not a journey you have to take alone. An experienced financial planning and analysis software provider such as Axiom doesn’t just build and implement your new system, we partner with you on a strategic level to understand the best way forward for your business, including how to approach the sensitive business of transferring from your existing systems and processes. It’s far from a one-size-fits-all process, with different types of organisations benefiting from different methodologies.
For more information on Axiom’s agile, modular financial planning and analysis platform, and the robust consultation process that supports it, call Axiom on +44 (0)1932 548 465, or email us at email@example.com.