Finance Transformation Definition

Finance transformation is the process of aligning the finance function with the overall strategic goals of an organization. It may involve restructuring and reimplementing accounting and finance functions, finance operating models, financial capabilities, and accounting and finance processes.

Finance transformation typically includes a significant focus on digital transformation in finance and accounting systems. This tactic reshapes how an organization manages its financial processes, like reporting, internal controls, and other associated processes.

Finance Transformation FAQs

What is Finance Transformation?

Finance transformation strategically shifts how an organization manages its corporate finance function, including its processes, strategy, financial reporting, and internal controls. Although digital transformation in the finance industry is a significant part of the process, and finance transformation technology is essential, technology is not the sole focus.

Modern finance operations are inevitably undergoing a long-term transformation toward autonomous finance functions.

It’s up to CFOs to shape their organizational finance transformation strategy to research and adopt new technology to boost areas like reporting and analytics. The finance team must also redirect employees to engage in portfolio-level analysis toward portfolio-level view activities like cash flow and balance sheet analytics. This approach will strengthen the finance function and support the organization’s overall goals.

Strategic Considerations for Finance Leaders:

1. Impact of External Trends. How will external rising trends affect digital transformation and the finance function?
2. Transformational Goals and Strategy. Which goals should we set for our finance transformation, and what functional strategy will position the finance function best to achieve them?
3. Roadmap and Strategy Presentation. How should we describe and present our corporate finance transformation roadmap and phased functional strategy? Where do we stand right now relative to our goals?
4. Key Performance Indicators. What is the ideal mix of leading and lagging indicators that can help drive our business?

Why Finance Transformation is Important

A well-executed finance transformation roadmap creates value through improved information.

This strategic insight improves processes, leading to greater efficiency for the finance team. A streamlined finance department can contribute to increased business profitability and reduced costs.

A finance function should be aligned with the strategic goals of its organization. Any modern enterprise today must include digitalization among its core goals.

To accelerate a finance transformation journey, CFOs must focus on best-in-class solutions to lead to faster, more accurate data. This empowers finance and accounting teams to make smarter decisions about products, pricing, and customer and investor sentiment.

As FP&A teams work to develop future strategies, separate value-creation activities from the rest, and brainstorm new ways to execute goals, they face two fundamental challenges: an overreliance on spreadsheets and an overly backward-looking focus.

These issues mean that FP&A departments are often drowning in the complexity of spreadsheets of data that cannot change in real time.

If you want to transform finance and accounting into a functional business partner, here are four steps you can take:

• Conduct a thorough value-creation analysis. Include who the customers are, what key activities generate value for them, and how the business offers that value to those customers. This analysis should be deep and thorough, not cursory or shallow.
• Build trust with stakeholders. Conduct stakeholder research to gather information from internal stakeholders. This will help to identify fresh issues, signal empathy, and foster stronger relationships.
• Look beyond the internal business model. Instead, focus on finance transformation trends. This will help to identify new opportunities for improvement.
• Get organizational buy-in, starting from the top. Ensure the right team members, including C-level management, are involved in finance transformation.

The primary benefits of finance transformation are far-reaching and transformative for organizations. They include:

• Standardized finance processes and systems to increase efficiency and avoid error.
• Automated month-end reporting for time and resource savings.
• Cross-function automation for seamless data flow and better decision-making.
• Centralized finance data hub for easy access, integrity, and security.
• Improved remote work opportunities for employee morale, productivity, and cost reduction.

What are the Three Critical Phases of Finance Transformation?

A successful finance transformation framework proceeds in three phases: reactive, proactive, and optimized.

1. Reactive phase. Businesses in the reactive phase need a planning technology platform. Tasks and processes are manual and plagued with errors. Changes take lots of time and effort to make. This means the business is constantly reactive and missing opportunities.
2. Proactive phase. In the proactive phase, the finance department owns and deploys a planning platform that automates data collection, shortens budget cycles, forecasts more often, and reports in real time. Finance is agile and forward-looking, and becoming a trusted business partner. However, some opportunities are still missed as the platform is not yet optimized.
3. Optimized phase. Continuous planning offers rolling forecasts; dynamic planning connects teams across departments. Prioritize high-value services and allocate resources to high-value markets, products, and services to clients that deliver the most value to business partnering while scaling back or eliminating low-value services.

What does a Finance Transformation Team do?

A digital finance transformation team helps businesses interpret market trends, implement technology, and transform the workforce.

Finance transformation demands the application of deep and broad insight into trends influencing the business. It requires a multidisciplinary skill set that stretches across many industries that touch finance.

A finance transformation team can successfully:

• Detect potential cost savings, risks, and ways to mitigate both.
• Advise leadership on building a sustainable, resilient digital architecture that can evolve over time.
• Address compliance, regulatory, and internal control tasks, including fraud prevention, forensics, and risk management.
  Implement disruptive technology and modernization programs.
• Establish industry-leading cyber risk protocols across applications, infrastructure, data, and platforms.

In the process, the team can also assist with fostering enhanced communication across departments, more effective use of human capital, and a data-driven approach to change management and leadership.

What are Finance Transformation Best Practices?

Successful finance transformation reduces reliance on outdated, manual, low-value processes and empowers team members. Although strategies vary, most share several common finance transformation steps:

• Integrate systems to manage transactional budgeting and processing scale. To process and report transactions efficiently, it is essential to standardize organizational enterprise performance management (EPM) and enterprise resource planning (ERP) systems.
  The EPM tracks the forecast and budget in a specific way, while the ERP processes back-office transactions and other information differently. Finance transformation software connects and integrates those systems to foster communication and growth.
• Reduce reliance on spreadsheets. Excel is less than ideal for financial planning and reporting processes because it lacks the level of collaboration that cloud-based tools provide. Spreadsheets also create risks for accuracy and security.
  The right mix of flexible technology can produce a massive return on investment. A cloud-based system is more secure and accurate.
• Streamline the yearly budgeting process. Streamline budgeting for the finance team and the business with a cloud-based system that can be customized to collect and validate the correct information automatically. Eliminate the need for periodic manual data entry and offline spreadsheets and empower cross-team collaboration for faster budgeting.
• Implement rolling forecasts that frequently update budget assumptions. A rolling forecast is more effective than a static budget because it more accurately reflects new risks and opportunities that can better predict the future of finance and inform decisions for the business. Rolling forecasts open more time for finance teams by eliminating annoying manual tasks.
• Use self-service reporting. Finance departments often struggle to collect data from ad hoc sources at the end of each period so they can engage in analysis—for example, IT, marketing, and sales. Self-service reporting for all end-users allows the organization to mix and match formatted reports to identify trends and make better decisions.
• Automate and accelerate financial reporting. Traditionally, a finance team’s operating model depended upon the manual completion of each step. Yet digital transformation in accounting and finance improves data and reporting accuracy.
  Finance and accounting transformation gives teams the most accurate data and time to analyze performance.
• Prioritize high-value activities. Finance teams can more effectively deploy traditional data metrics for analytics to gain insight into underperforming areas of the business that hold hidden growth opportunities. Analytics-based finance transformation solutions make existing data more valuable for decision-making.

Obstacles to Finance Transformation Success

Successful finance digital transformation is more likely with the finance transformation best practices in place. Although every finance transformation is unique, there are strategies for tackling the common obstacles.

• Misalignment between business partners, stakeholders, and finance leaders. Ensure each perspective is communicated and all parties can agree on the goals of the transformation (for example, saving money and adopting new tools) and what the transformation process should look like.
• Resistance to change. To support finance transformation, the change management process must account for resistance to change and meet employees where they are. Incremental, planned changes are more accessible for employees to accept, acclimate, and master.
• Leadership fails to adopt new technologies or finance processes. Ensure that the culture of the finance department transformation starts at the top with leadership. Ongoing learning is essential to a high-performing team. Leaning into new technologies as a team makes change easier.

What are Finance Transformation Tools?

Several technological tools for finance transformation are on the market today. Here are some of the most common:

• Finance transformation software. Integrate core financial processes online to drive better results.
• RPA. The F&A team can schedule RPA bots (robotic process automation bots) to handle repetitive tasks such as reconciliations or journal entries.
• Artificial intelligence (AI). AI is part of many different finance transformation tools, such as real time databases for bank officers to make financial decisions.
• Automation. Automated workloads for generating invoices that allow the F&A team to focus on more demanding tasks.
• Cloud computing. Cloud solutions allow for greater security of online data and 24/7 remote access without needing on-premises infrastructure.
• Web monitoring. Forward-looking tools like web monitoring tools can scour documents and online databases for information that could impact investments.

Does Planful’s Platform Offer Finance Transformation Services?

Planful’s finance transformation platform can align your finance team and streamline the budgeting process. High-performing back-office teams such as sales, marketing, and the finance department. These teams sell products and services with new technology and high-quality materials and maintain brand awareness on the latest digital channels. Technology like Planful is a natural fit for delivering data to leadership so they can make empowered business decisions.

Digital Finance Transformation Case Studies

Two Planful customers offer great examples of companies with successful finance transformation initiatives: Veritone and Rocket Software.

Veritone, an enterprise artificial intelligence technology company, needed a reliable marketing system that would provide transparency and accuracy in tracking their marketing spend and enable them to make data-driven decisions.

Searching for a financial management solution, Veritone discovered Planful’s user-friendly interface and flexibility platform. Following the successful implementation of Planful, Veritone benefited from marketing operations efficiencies, resulting in significant cost savings.

• With Planful, Veritone:
  Gained the ability to track the allocation of budget to advertising expenditures and the resulting ROI.
• Eliminated any long waiting time for monthly budget, expense, and ROI reports from the finance department
• Was able to access this critical data seamlessly from a centralized location.

Learn more about how Veritone achieved financial clarity and efficiency with Planful.

Rocket Software provides IT modernization and IT automation solutions. As a human capital-intensive organization, the business needed to modernize its legacy ERP system to a single platform for financial performance management. They also needed to foster closer relationships with the human resources team and hiring managers across the business.

Once Rocket Software upgraded from to Planful, including the Planful Predict suite of artificial intelligence solutions, the company’s workforce planning challenges were resolved. The combination of Planful’s deep workforce planning capabilities and its ease of use for business users now gives Rocket Software a platform for businesswide workforce planning collaboration.

Learn more about how Rocket Software modernized Finance and Workforce Planning with Planful.

Curious to learn how Planful can help your team achieve financial transformation? Book a demo with a Planful expert to get started.