CFOs: 3 Levers of Digital Ascension

Chief Financial Officers are relatively new to the C-Suite — fewer than 10% of the major companies in the U.S. had CFOs before 1978, compared to 80% or more each year after 2000. Just the same, of all the C-level positions, arguably none have seen their role and responsibilities change as dramatically or their importance to the organization grow as significantly.

Digital disruption has been identified as one of the defining trends of the 21st century, creating opportunity and threat in equal measures. CFOs today are expected to embrace technology to strategize and help drive the business. To ensure success (personal as well as corporate), CFOs must reinvent themselves as digital leaders. For this, they must master three levers of digital ascension:

1. CFOs must look beyond their traditional roles to become an enterprise-wide strategist, an innovation and change leader and a proactive decision maker, utilizing technology to look at the bigger picture.
2. CFOs must intelligently guide IT spending, allocating resources and keeping a financial scorecard on transformation initiatives.
3. CFOs must lead by example and rapidly transform finance operations.

CFOs learned much — good, bad and ugly — navigating transformation through its early headwaters. Watching and measuring as business units tested the digital waters with shadow IT initiatives. Impressive wins in cloud, mobility and analytics mounted, but so did complexity and risk. During this period CFOs also witnessed digital natives wreak havoc across industries as stalwarts struggled to find their footing. CFOs understand, from experience, how inaction on the transformation front is nothing short of suicidal. Just the same, they know well that digital success hinges on careful strategic guidance and close fiscal oversight.

While in previous decades the finance function may have been restricted to back-office financial administration, finance is now at the crossroads of IT strategy and business success, and CFOs are uniquely positioned to lead their organization’s digital transformation.

Lever 1 – become a trusted advisor

Today, CFOs are extending their functional scope from directing finance-centered accounting activities to leading cross-functional teams that link sales, distribution, marketing, finance, customer service, and other critical areas. They are broadening their focus from reducing costs and ensuring governance and control to driving transformation and growing revenue. In short, CFOs are elevating their role from backroom cost managers to boardroom strategic advisers.

This roundup of recent CFO survey findings brings into clear relief the CFO’s new role as strategic advisor:

• 88% of respondents report that the CFOs in their organizations are becoming more involved in strategic decision-making outside of finance. (Oxford Economics)
• More than a third of CFOs’ time is being spent as strategic advisors as they move beyond the traditional financial management role. (Grant Thornton)
• More than 70% of over 380 finance executives polled say supporting decision-making is their number-one goal for 2017. (Kaufman Hall)
• 96% of respondents ranked formulating strategy with the business “high” or “critical,” and 78% ranked improving the effectiveness of company decision-making “high” or “critical.” (Hackett Group)

Lever 2 – guide IT spending

In tandem with their transition from accounting and finance leaders into trusted business advisers, CFOs nowadays have a clear stake in enterprise IT strategy and in shaping how the organization may best leverage technology to realize cost savings and business benefits.

CFOs are becoming increasingly influential over IT spending. Most IT organizations report directly to the CFO. Project portfolios are generally managed exclusively under the signoff of finance, even if CEO endorsement is guaranteed. In close collaboration with IT, finance can drive digital transformation.

A recent Gartner study shows that CFOs (at 32%) have more influence over IT spending than any other executive alone. As reported by ComputerWeekly.com, more than 40% of respondents to a survey conducted by Forrester Research said that CFOs will gain more influence over technology spending during the next 12 months.

Some 62% of CFOs surveyed by Duke University’s Fuqua School of Business say the pace of change and innovation in their industries has accelerated, spurring their companies to increase capital spending an average of 76% and R&D spending 46% on “moonshot” projects.

Lever 3 – transform finance (with S4/HANA Finance)

Digital transformation in finance is not just reserved to payments. In finance, digital transformation is being driven by ever evolving systems and processes, with new efficiencies being realized with every iteration. Digital transformation has demonstrated its ability to transform operations and business models, reporting and analytics and even build new product lines.

Today, many finance teams still find themselves trapped by archaic manual processes that can consume unnecessary time for employees and often create redundant work scenarios and system errors. There is a huge opportunity for finance to streamline and automate many of its core, transaction-focused tasks that happen on a monthly, quarterly, and annual basis.

The primary barriers finance organizations must overcome to achieve digital excellence are legacy and disconnected finance systems. Above all, digital success on the finance front requires a single version of the truth and a single, real-time system for transactions and analytics.

Surveys show that CFOs understand finance operations are in dire need of transformation:

• As reported in Analytics Magazine, according to a new IBM study, the vast majority of CFOs (82%) see the value of integrating enterprise-wide data, but only 24% think their team is up to the task.
• According to an Oxford Economics survey of CFOs, 46% say an isolated finance function keeps them from achieving their business goals. Furthermore, 33% of CFOs at large enterprises agree that a disconnected finance function hurts business, according to the survey.
• According to a recent survey conducted by Host Analytics, 50% of respondents cited a lack of systems and tools and 48% cited difficulty in accessing the necessary data or reports.
• According to a new survey by the consulting firm Kaufman Hall, as reported in CFO Magazine, less than 23% of CFOs are very confident about their company’s ability to maneuver past unforeseen business obstacles, due in part to outdated financial planning and analysis (FP&A) tools and processes. More than 50% of CFOs say they take longer than three months to complete a budget, according to the survey.

CFOs drive transformation with S/4HANA Finance

Announced in June 2014 to lead off its S/4HANA roadmap, S/4HANA Finance provides a central finance foundation based on a single source of the truth that drives a full range of finance functions — planning, analysis, accounting, financial operations and consolidation — to meet the evolving business needs of finance departments.

The first business application developed for the S/4HANA platform, S/4HANA Finance (previously called SAP Simple Finance) is designed to remove traditional barriers between transactional, analytics, and planning systems to provide instant insights and on-the-fly analysis using all levels of financial data. For the front end, SAP S/4HANA Finance uses SAP Fiori for a consumer-like and personalized UX (user experience).

The main advantage SAP S/4HANA Finance has is processing speed combined with integrated features for the various financial functions, such as financial accounting and management accounting. Because of this, SAP S/4HANA Finance allows for a much faster reconciliation of financial processes such as the quarterly close, and provides a single source of financial truth for the organization as a whole.

Another key advantage is the ability to use real-time data with analytics to model and predict the impact of changes that a company may want to make, such as acquisitions or new product lines.

SAP S/4HANA Finance can be implemented on-premises, in the cloud, or in hybrid environments. SAP S/4HANA Finance applications can be implemented as standalone products or bundled together.

Equally vital, adoption of S/4HANA Finance is non-disruptive and allows for iterative migration and transformation, yielding high value in a much shorter time and much lower cost than a traditional ERP consolidation program.

A selection of S/4HANA Finance’s analytic capabilities include:

• Providing a single source of truth between transactions and analytics to streamline and eliminate cycle times and reconciliations of the data
• New on-the-fly capabilities for moving finance processing, such as month-end activities, from batch to real time
• Innovative rapid planning and forecasting combined with predictive analysis to explore new business models and immediately assess potential effects on the bottom line
• New reporting and analytics capabilities for finance users with self-service access to all information, allowing instant insight-to-action
• Connections to business networks in real time to establish an integrated business ecosystem and help drive optimal collaboration with customers, suppliers, banks and government authorities
• Global regulatory compliance capabilities across currencies, languages and industries with built-in legal compliance capabilities and continuous risk assessment along all enterprise processes

Contact NTT DATA to learn more about how our SAP experts can help your organization transform with SAP S/4HANA Finance.