Published on the 11/02/2016 | Written by Donovan Jackson
Finance, as essential a function as it is to any business, isn’t generally known as a hotbed of innovation. However, according to Oracle, perceptions and reality are changing where finance is concerned, and it is perhaps not hard to see why...
“There are a range of external influences forcing change or influencing and leading progressive organisations down a different path with the way they perform the finance function.”
That gives rise to an apparent paradox, agreed Oracle Australia’s general manager of ERP applications Steve Bray, but he said that it isn’t just the technology that CFOs are using which is changing, but the broader business landscape too. As it does so, his approximation is that the finance function is loving it.
“The reality is that there are a range of external influences forcing change or influencing and leading progressive organisations down a different path with the way they perform the finance function,” said Bray. “For example, there is a significant increase in the value of intangible assets that businesses have; in 1975, intangible assets made up 17 percent, generally, and in 2015 that number is 84 percent.”
What this example serves to demonstrate, Bray said, is that businesses must by necessity create new KPIs and performance metrics to take account of this expanded asset class and other developments. That, in turn, has an impact on the value that the finance team can deliver to the executive in terms of how it can locate, present and use information to support decision making.
“CFOs tend to look at a core set of data which provides following indicators, rather than leading ones. They look at financial information after the fact…more are starting to look instead at key value drivers, like customer satisfaction. That’s a leading indicator.”
From following to leading indicators
“Information from internal [Oracle] studies show that CFOs tend to look at a core set of data which provides following indicators, rather than leading ones. They look at financial information after the fact. Where that is starting to change is that more are starting to look instead at key value drivers, like customer satisfaction. That’s a leading indicator, because if you start picking up on declining customer satisfaction, it will likely also mean declining revenue in time.”
It’s a seismic shift in approach, because now the CFO has a lever to pull to do something about potentially sliding revenues before that happens.
What that means in practice is that instead of measuring the traditional numbers, said Bray, now CFOs can be enabled to measure things like customer sentiment, and ‘digital body language’. “By equipping finance to grab that sort of information and see how to use it, a new dimension is added to what the finance function can do and the value that it can add.”
Here comes the cloud
What’s driving change in the CFOs office? Bray said a big part of it is the emergence of cloud technology and that’s because a lot of the financial advantages of software as a service make sense to bean counters. “Conceptually, everyone understands that it means lower operating costs and that’s a traditional key driver for the CFO.
“A second factor is that the use of cloud services enables enforcement of standardised processes in areas like the general ledger, procurement or accounts payable, where there is no advantage to be gained from customisation.”
No real surprises there. But here’s Bray’s third factor. “Across all aspects of ERP, human capital management and customer experience, social collaboration is being embedded into the applications. It’s not like Facebook or Twitter [thank heavens], but rather enables collaboration across processes, so when tasks are handed off, people can easily evaluate progress and discuss issues and requirements.”
It makes good sense; after all, most of us will accept intuitively that collaboration is one of the things that enables humanity to achieve great things. “The embedded social aspect is captured as an auditable history within the application, providing context long after the fact around why decisions or actions were taken,” added Bray.
There’s a little more to it, too, and it shouldn’t come as too much of a surprise that analytics, whichGartner has tipped for big things this year, is that extra bit. “Analytics and the presentation of insights is being brought to the front of the applications, delivering role-related, contextual information which isn’t just a report, but which is measured against KPIs. It is an information loop which provides people with simple, actionable information on which they can make decisions, such as how to prioritise work tasks.”
Implemented into line of business functions, analytics brings numbers across the business; following closely behind are the numbers guys. “With standardisation freeing finance people from the mundane, they can move away from pulling numbers together and working in spreadsheets, towards thinking about the business and engaging with other functions inside the organisation. They can have meaningful conversations with sales, marketing, production, and overlay the ‘finance’ view of performance into other functions,” said Bray.
What that means, for forward looking organisations, is that management can achieve a richer, more colourful view of the business. “It is about adding context to the numbers. It enables alignment of operations with strategic objectives.”