Is Old Faithful Letting You Down?

Many businesses today are evolving faster than their financial software – a situation that can have serious consequences for the entire enterprise. Although the impact of aging financial technology can be slow to emerge, the challenges only increase over time. The pain is usually first felt by those responsible for reporting, as they have to work harder and harder to provide timely, accurate information. Eventually, the problems become significant enough to warrant executive level attention. Complaints from frustrated employees and colleagues in other departments make their way to the CFO, who will almost certainly be having difficulty reporting at the executive level. The costs and resource requirements also become eye-catching, as aging systems become more expensive to support. The challenge of propping up old technology and creating workarounds for functional deficits inevitably extends the burden to IT, whose time would be better spent helping drive the business, rather than trying to prevent it from grinding to a halt.

While it will likely provide little solace, CFOs should know that outdated systems are certainly not an unusual problem. A recent SimCorp poll found that 56% of senior finance execs lack confidence in the accuracy of their present accounting systems, while 52% of them say their biggest barrier to improving financial operations is an outdated accounting system.

• In the US, the number of late filings is rising (see chart at left), and technology is increasingly cited as a reason. In the KBRG Midcap 1200 Index (as shown), the number of companies listing technology as a cause of late filings role by 38% over the past three years.
• Ten years ago, 58% of companies in Ventana Research’s benchmark survey could close the books in five days. Now only 49% can do so.
• Eighty-nine percent of 200 organizations surveyed by the Aberdeen Group in 2013 still use spreadsheets, despite the fact that 88% report that their spreadsheets often contain errors.

Outmoded software not only makes reporting difficult, it also impedes innovation. Antiquated systems can gradually make companies more rigid and slower to respond to opportunities. One recent Ventana Research study showed that 77% of executives who say they have accurate data feel their companies can manage change well. By comparison, in companies where the executives don’t have confidence in their data, only 35% say they can do so.

Part of the reason is that managing an old computer system takes a lot of time and energy. Today, most analysts aren’t data scientists; they’re data janitors. Another recent study found that 68% of analysts surveyed spend more time collecting and standardizing the data used in their analytics than thinking about what it actually means. Only 28% said their efforts focus primarily on analysis and trying to determine root causes.

Future-Proof Your Financial Systems

The problem isn’t an easy one to solve, but it can be mitigated. The following four steps can help you ensure that your finance department has technology that’s an asset to achieving business goals, rather than an obstacle to overcome.

1. Take an inventory of tech capabilities. It’s a good bet that you already know your most significant deficiencies from a systems perspective, but a formal review process can help you build a technology blueprint that will best serve your needs. Don’t go into the process assuming that recommendation of a complete overhaul will automatically be the outcome or that the costs will prevent you from moving ahead. There are so many choices available now that virtually every finance department can find an option that meets its needs. In fact, familiarizing yourself with those options should be part of your review process. Technological advances happen quickly; and new software can offer lower costs, more flexibility, and dramatically improved visibility for the finance department. Be sure you fully understand your options before decisions are made.
2. Determine when staff members were trained on the systems they use. Finance roles are tough and tend to be subject to regular turnover. Over time, in an outmoded system, people unfamiliar with how to handle certain kinds of manual tasks take over, but they may not have been trained on how to execute them. A regular refresh of skills will not only help keep processes moving as smoothly as is possible with existing systems but will also help prevent additional ad-hoc workarounds from being created by employees who are just trying to get their jobs done.
3. Define the business need before selecting the next system. Starting with the baseline assessment described in point one, layer in needs that will likely develop in two to five years. For example, if a merger or acquisition looms, there will likely be a need to consolidate or integrate disparate systems. New business overseas may mean coping with different regulations, currencies, and language barriers. Factors such as integration, flexibility, and long-term vision of the selected software vendor are essential to finding sustainable solutions and optimizing ROI.
4. Consider the Cloud. For many businesses, cloud computing can help make their software and data consumption scale more seamlessly as the enterprise grows. The advantages begin, however, even before any actual change is made: preparing to deploy a cloud-based solution can be helpful in streamlining processes and clarifying system permissions.

Conclusion

It’s been said that as human beings, we first shape our tools and then our tools shape us. Financial management software is no exception to this rule. Over time, financial management technology can either help a CFO forge a culture of high performance or, just as easily, undermine it. In the end, the tool itself is only part of the solution. Ironically, the more financial management is automated, the more crucial the role of the CFO becomes.