Investing in digital technologies can support the Finance function in reducing costs or optimizing value. But are CFOs investing in the right places?

According to Accenture’s recent point of view The Digital Finance Moonshot, Finance functions typically focus their digital investments on cost saving technologies because they are accessible and bring demonstrable cost efficiencies and agility to transactional processes.

However, not all digital finance investments are alike. Accenture has found that almost 70% of companies with a digitally mature financial planning & analysis (FP&A) function, run a better enterprise performance management (EPM) cycle and consistently beat the competition on profitability, growth, and capital efficiency measures. In short, digitizing the FP&A function can create a valuable competitive advantage.

What’s stopping CFOs from making FP&A their first digitization priority?

Firstly, although a more efficient EPM cycle will save you time and effort, the main financial impact is created by improved insights in the future. This is undoubtedly a valuable capability to have in any complex business environment, but hard to quantify in a top or bottom line impact. That is the N°1 reason why EPM improvements are hard to ‘sell’ internally. A second barrier is that EPM requires the participation of the entire organization. Finance typically drives the EPM, but management must live by it and all other functions need to be held accountable through it, for it to be effective. This collaborative call to arms is often hard to realize. In brief, a hard to quantify business case and the required cross-functional mobilization are two reasons why the C-suite does not often prioritize EPM projects.

“48% of CFOs think that digital technologies will fundamentally change Finance”

So, how does digital improve the original EPM cycle in terms of strategizing, budgeting, target setting, forecasting, reporting and monitoring?

Despite digital disruption and changing business needs, the fundamental EPM principles remain valid and the best place to observe the immediate impact of digitization is at the process level:

  1. Digital Data: The agile consolidation of legacy systems into the cloud and the expansion of data beyond the traditional financials – i.e. operational (e.g. inventory levels, customer satisfaction, employee engagement) and external data (e.g. country GDPs, steel prices, etc.).
  2. EPM Processes: Supported recurring procedures that are run out of a central and technology backed team. Today’s EPM software offers flexible solutions to structure and manage input processes, while Cloud Computing and Software as a Service (SaaS) enable agile implementations and a new form of business case for project investments.
  3. Fact-based Decisions: Predictive models allow for (central) value driver sensitivity testing, or scenario planning, while for example advanced analytics present opportunities to understand relationships beyond the usual drivers. These opportunities require quite an investment, but are being adopted more and more in the market as they lead to valuable capabilities.
  4. Information Availability: Information where, when and how it works best. As already mentioned, EPM software has significantly evolved in the last decade to offer considerable flexibility (e.g. self-service reporting), mobility (e.g. smart phone information for remote workers), speed (e.g. in-memory computing), and visualization (e.g. more intuitive formats).

Keen to learn more? At Accenture Strategy Finance and Transformation, we work with Finance functions on a daily basis to make their digital transformation journey tangible and actionable. Are you ready to act? Get in touch!