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Starting your Finance Transformation Journey

By: Mark Cracknell, Head of Research, Generation CFO in discussion with Mark Rolfe FCCA, Director of Sales at Certent.

The ‘Last Mile of Finance’

We speak with many organisations who have invested in technology to improve their financial consolidation, planning, or reporting processes. And yet, the ‘Last Mile of Finance’, the production of documents, such as a monthly report book, regulatory submissions, and annual statements, remains a siloed and manually intensive process that consumes the valuable time of the finance team. This article investigates why this is and how it can be addressed as a simple first step on your transformation journey.

What is the ‘Last Mile of Finance’?

There is often a misconception that the ‘Last Mile of Finance’ is about external reporting and delivery of regulatory documents such as quarterly announcements or annual statements. In fact, most organisations produce more internal reports than external reports, such as monthly packs and budget packs. Also, with the increased use of PowerPoint, do not forget presentations as a form of a report. When you take this extended definition, you may find lots of examples where you produce a document or presentation periodically that includes financial data and, potentially, some kind of narrative.

The reason why this often falls under the radar is that the time taken to create each document is small (say 30 minutes). However, there can be many documents that, when added up, comes to a significant amount of time over the year. Do this exercise and you will probably realise that the ‘Last Mile of Finance’ is a bigger problem than you may first have thought. “We would expect customers to be able to save 40% or more of the time and money in preparing annual reports, as well as costs associated with design and production,” said Mark Rolfe FCCA, Director of Sales, EMEA at Certent, “the efficiencies when extended to internal and other types of reporting make a very compelling business case for investment in technology”.

It is not just about efficiency!

So far, we have concentrated on the time and efficiency aspects of document production. There are other things to consider in addition to this.

Risk

This is often overlooked as an issue with document production. In any situation where the manual intervention takes place, we increase the risk of human error. When this relates to internal reports, the implications can be less severe i.e. loss of confidence in finance and incorrect actions are taken. Errors can be a particular problem where we are producing external reports for regulatory requirements as this can cause severe damage and result in financial penalties.

Collaboration

Some documents will require multiple contributors, all working on the document simultaneously. As we know, certain tools are excellent as single-user applications but have weaknesses around multi-user capability.

Control and auditability

If a document is of significant size, with multiple contributors, version control can start to become an issue, as does control over data integrity. There are two aspects to auditability; the first is around document changes, the other around an audit trail from the underlying systems to final reported numbers.

How do most organisations do this?

The overwhelming number of organisations use MS office solutions and manually intensive processes to assemble report books and presentations. Some common process examples that we have seen are;

  • Using highly formatted Excel for numbers and narrative
  • Copy and paste from Excel to Word with the narrative being added there
  • Typing numbers directly into PowerPoint presentations or copy and paste from Excel
  • Output documents to PDF

These adopted processes expose the issues highlighted above; efficiency, risk, collaboration, control, and auditability.

What makes this process difficult?

This seems on the surface to be such a simple process, and yet it is not. In our experience there are three reasons why this process is difficult and cumbersome;

  1. We are mixing data and narrative;
  2. The output can be in various formats; and
  3. Multi-user collaboration is required.

The first point is probably the most important. Technology solutions, such as accounting systems, consolidation, or planning solutions are not designed to collect commentary or narrative. They often can hold comments although, due to the architectural nature of the solutions, this can only be done at an input level node i.e. at a GL nominal account or company level. Therefore, collecting narrative or commentary at the variety of levels needed is not possible. “Finance is often spending valuable time extracting data from legacy systems. In the 21st century, they should be able to automate this time-consuming and manual effort and use their time more beneficially to partner with business,” said Rolfe.

What then adds to this problem is the need to combine data and narrative, sometimes on the same page, sometimes in a paragraph of narrative, and the level of formatting required for presentation. This has resulted in the use of the MS office tools and the processes described above.

Automate the ‘Last Mile of Finance’

This is a process that can be significantly helped by using technology, often described as ‘Disclosure Management’ solutions. These will have core capabilities including:

  • Connectivity with underlying data sources – enabling data to update automatically in all the MS office tools (Excel, Word, and PPT)
  • Comprehensive auditability – of all changes and amendments made to documents and of each data point
  • Multi-user collaboration – allowing multiple user participation, version control, and security
  • Data integrity checks – ensuring data controls where necessary
  • Multiple output formats – including the MS office tools, PDF, publishing tools and electronic formats (e.g. iXBRL)

The final point is worthy of more discussion. There is a current need to deliver information in electronic format to the regulatory authorities and this is only likely to increase in the future. For example, the ESMA mandate and ESEF reporting that was commenced this year. The most common way of dealing with this is through a non-connected tagging solution or to outsource it to a third party. Of course, this introduces an element of risk that can be eliminated by having a seamless process.

“Our view is that if each area of compliance results in an incremental cost - and, if outsourcing, a loss of control - it is an opportunity lost,” said Rolfe. “Why not turn the cost of compliance into an investment in transformation? Increase effectiveness and efficiency, with both quantitative and qualitative benefits”.

GenerationCFO advice

Our research shows that Finance Transformation is of increased priority for organisations. The question is always, where to start? We recommend starting your transformation journey with small definable steps delivering quick wins - a low-risk method of delivery. The ‘Last Mile of Finance’ is a good place to start as the time to value can be rapid with little user training required. In automating this key activity, you can significantly improve the efficiency of the process, whilst at the same time reducing the risk of error and increasing control and auditability.

Identifying the right technology platform(s) to enable your finance transformation is, of course, critical to success. This is where we can help by providing you with expert, independent advice through our GenCFO Advisory service.

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