Why the success of finance leaders increasingly depends on ERP

A modern ERP may be the secret to achieving your KRAs

Finance as a function has come a long way. During my 20+ year career as a finance user, function head and now, consultant, I’ve seen it evolve from being a back-end function responsible for processing and recording transactions ‘after the event’, to taking a lead role in driving the business.

Increasingly, this means steering the business towards digitally enabled growth. Finance leaders now actively plan, sponsor, and execute strategies that promote digital transformation of the business and finance and ensure that the organization's investments and capital decisions can support it.

I understand what it takes for finance leaders to succeed in this expanded role. And increasingly, the answer is ERP. In fact, it isn’t wrong to say that the choice of an ERP system, as part of digital transformation, can have a significant impact on the future-readiness and success of finance leaders.

But given the plethora of best-of-breed and point solutions in the market, many leaders overlook recent innovations in ERP – to their detriment.

The five core ‘focus areas’ for ERP investment – and why SAP deserves a closer look

In the rest of this blog, I outline how leaders can achieve their KRAs and be future-ready across five core ‘focus areas’ by investing in a leading-edge ERP like SAP.

These areas are:

• Creating value for stakeholders
• Enterprise Performance Management (EPM)
• Process optimization and standardisation
• Business resiliency
• Compliances, controls & risk management

1. Creating value for stakeholders

   This is probably the most important focus area of a ‘future-ready’ finance leader. They need to think about getting the maximum value out of their ERP systems by investing in the following areas:

   1. Collaborative planning using ‘Experience’, ‘Operational’ & ‘Financial’ data - Experience data provides insights into the market evolution and trends, customers’ product experience and their perception of the brand. Operational data helps define how the organization can respond to Experience data. This may require inputs from research and development, demand generation, manufacturing footprint, workforce management etc. Combining this data and adding the finance layer on top of the quantitative plan helps the business decision-making process by providing key ingredients that will lead to actionable insights: analytics, business intelligence and prediction. SAP is a market leader here, and SAP solutions like Integrated Business Planning (IBP) and SAP Analytics Cloud (SAC) are transforming this space.
   2. Actionable analytics for cost control – Finance leaders need access to data which is reliable, real-time, at the right level of detail. SAP offers solutions which are truly integrated into operational processes and generate real-time data and analytics for Product Costing, Overhead Cost Controlling, Project Cost Controlling and Margin Analysis.
   3. Real-time integration with operational data, banks and financial institutions – Real-time integration with an organization’s operational data helps in effective cash and risk management. Integration with banks and financial institutions helps with accurate, timely and efficient monitoring of bank exposures, and automated extraction of market rates. SAP provides highly robust solutions for Cash & Funds Management, Liquidity Management, Treasury and Risk Management; and real-time integration with industry-leading finance portals like Bloomberg and Reuters.
   4. Seamless collaboration with key stakeholders ensures that any changes to business plans are executed efficiently without impacting operations. SAP offers products like C/4HANA Cloud, Supplier Relationship Management (SRM), SAP Ariba Network and SAP Fieldglass which enable seamless collaboration with customers, vendors and the contracted workforce.
   5. Efficient integration of processes & systems in case of mergers & acquisitions – To minimize any disruption in the onboarding of acquired/merged entities, SAP offers a highly robust product called SAP Central Finance. It helps plug-in the onboarded entity’s systems into a central database and transform the data, without having to change or standardize their processes or data in line with that of acquiring entity’s processes or data in the short to medium term. This helps save valuable time in systems integration, and helps finance leaders focus on the more important task of business integration between the two entities.
2. Enterprise Performance Management (EPM)

   Finance leaders normally struggle with EPM, as it involves people from multiple functions spread across various geographies working with manual processes and systems to collaborate, making the entire exercise highly inefficient and error prone.

   Again, investing strategically in the following areas will help:

   1. Real-time consolidation of business and financial data – SAP’s Group Reporting solution helps automate the transfer of financial & management data from multiple countries, legal entities and business units and consolidate cash flow reporting in real-time, while maintaining high level of confidence in the accuracy and completeness of the reported results.
   2. Predictive and Prescriptive Business Analytics – Finance Leaders ought to look at generating various types of analytics for the business and use those appropriately for decision making. ERP products like SAP Analytics Cloud (SAC) can help go beyond the descriptive and diagnostic analytics towards predictive and prescriptive analytics with the help of AI and ML capabilities.
3. Process optimization and standardization

   Large organizations operating in different geographies typically face a challenge of disparity in business processes, which results in inefficiencies and time spent on non-value-added activities like consolidation and reporting. Finance leaders of the future have a big responsibility to ensure that business processes are optimized and standardized across the organization.

   The suite of SAP S/4HANA and SAP Cloud solutions has robust solutions to help achieve process optimization and standardization.

   1. Process mining, modelling and automation
      1. SAP Celonis, which is a solution for process mining, helps retrieve, visualize and analyze the real ‘as-is’ business processes from transactional data stored within the transactional / ERP systems
      2. SAP Signavio, a solution for process modelling, helps optimize the business processes, with the usual objective of making the processes better and faster.
      3. SAP Process Automation combines Business Workflow management, Robotics Process Automation, and Artificial Intelligence to create an intuitive user experience.
   2. Continuous accounting
      1. The industry and domain best practices, tight integration of end-to-end processes, AI/ML capabilities for Reconciliation of GR/IR Accounts, Inter-company and Banking transactions help to achieve real-time insights, financial statement accuracy and accelerated financial close. The intuitive User Experience for transactional processing, and robust operational analytics, help business & finance teams to spend more time on value-added activities.
   3. Master Data Governance
      1. High-quality master data is key to faster and accurate transactional processing and analytics, leading to operational excellence and better decision making at pace. Finance leaders should seriously consider adopting solutions like SAP’s MDG (Master Data Governance) for central or decentralized master data management in hybrid system landscapes, which allows enterprises to define, enforce, monitor and improve master data across domains.
4. Business resiliency

   Finance leaders of the future will have a huge responsibility to lead business resiliency plans, ensuring that business operations are not impacted severely in times of disruption and that financial commitments of the organization can be delivered.

   They should consider investing resources in the following key areas to help make the business resilient:

   1. Liquidity Management
      1. Unexpected disruptions can have a huge impact on an organization’s cash flow, which in turn can disrupt the whole business. It is thus important for finance leaders to have near, mid-term and long-term visibility of cash and liquidity. SAP has invested heavily in its Cash & Liquidity Management solution, which can provide a real-time multi-dimensional view of the cash and liquidity position and forecast for the organization.
      2. Local Disruptions
         1. Adopting Cloud-based solutions in one or more of the various formats available can be an effective way of planning for unexpected local disruptions, as it ensures stability of ‘up-time’ and provides effective business-continuity and disaster-recovery options. SAP provides Cloud solutions in multiple formats, which provide an effective way to remediate risks resulting from local disruptions.
5. Compliances, controls and risk management

   As the business environment becomes more global and complex, CFOs of the future should expect to manage controls and risks with the help of the right technology rather than through additional manpower or external legal consultants. This might include:

   1. Compliances – Have a library of all relevant legal and regulatory compliances by country in one place, and a robust solution to manage the complexities of international trade and data protection compliance requirements. SAP’s Document and Reporting Compliance solution integrates with the portals of most regulatory authorities (wherever permitted) to achieve full digital compliances and SAP Global Trade Service (GTS) solution helps manage the complexities of Foreign Trade regulations.
   2. Internal Controls – Implement the best practices and automation of internal controls for vulnerable operational processes and financial reporting. SAP’s ‘Internal Controls’ and GRC solution incorporates Process, Access and Identity Controls, and allows large volumes of transactional data to be screened in real-time, based on predictive analysis and extensible rule sets that uncover anomalies, fraud or deviations from policy.
   3. Risk management - CFOs should aim to get an insight into how risk drivers can impact an organization’s business value and reputation. With the use of a right technological solution like SAP Enterprise Risk Management, they can set-up and execute a risk strategy that is truly integrated into business operations and financials.

Conclusion

Finance leaders should think about taking a long term ‘Best of Suite’ approach to be future-ready in this highly competitive and fast-evolving business world. Investing in an ERP like SAP will help them evolve at pace with the continuous technological innovations and improvements happening in the market, thereby enabling them to focus on what is most important for the business.