How finance can use digital transformation to inform business strategy
When one thinks of finance professionals, the traditional images that come to mind are often related to the numerous day-to-day tasks they undertake to keep the books in order.
For example, CFOs are seen as the C-level executives with their heads down, huddled over desks late at night closing the books, while CEOs, CTOs and CMOs are seen as the C-level executives brainstorming in the boardroom or articulating the future at industry events. With their attention concentrated on critical financial tasks, it has been difficult for finance professionals to play a leading role in driving their firms’ business strategy — despite the fact that, as those best positioned to understand and analyze their firms’ financial data, they might also be the best able to improve these strategies.
However, new cloud, automation, analytics and other digital technologies are increasingly enabling finance professionals to play a greater role in business strategy. Specifically, these technologies allow financial professionals to pull together data from a wide variety of financial and other applications, and then use this data to create reports that deliver insights on their firm’s business strategy. Rather than solely managing their data, finance professionals are now able to activate it, uncovering knowledge that enables them to play a larger role in the strategic decision-making processes that will determine the success of their firms.
This goal — to pull together a wide variety of financial and other data for reporting and analysis — is not new. Finance departments first started considering how they could aggregate and then analyze their data when, starting around the late 90s, they saw the number of accounting, ERP, e-commerce and other applications beginning to proliferate. While these applications helped them better manage specific business tasks and processes, there was no easy way to pull all of their data together from multiple applications for enterprise-wide reporting and analysis that could be used to inform their firm’s overall business strategy.
However, new cloud, automation, data analytics and other digital technologies are transforming the ability of finance departments to pull together data and use it to guide the future of their firms. For example:
• The cloud enables enterprises to rent, rather than buy the computer and storage infrastructure they need to pull together and analyze data from multiple applications. Finance departments no longer have to purchase large numbers of computers or storage arrays to collect and process all this data — and can easily scale up or down this cloud infrastructure to meet their current needs.
• Many cloud service providers offer pre-built connectivity with dozens of financial and other applications. Previously, if firms wanted to pull together data from multiple applications, they often had to build all these connections themselves.
• Cloud-based systems also use web-scale architectures that can handle practically unlimited amounts of data. In the past, legacy systems might restrict the amount of data finance teams could pull together and then analyze.
• The new cloud technologies can also automate integration and mapping of both structured and unstructured data from multiple applications. Previously this work had to be done manually, increasing the cost while also limiting financial teams’ ability to analyze data in real-time.
• Finally, these cloud-based systems are flexible, allowing financial professionals to build their own reports, drill down into specific sets or types of data, and even apply sophisticated data analytics to this data. With old legacy systems, these reports had to be built manually, and it was difficult to drill-down into or apply analytics to data.
The ability of these new cloud, automation, data analytics and other digital technologies to transform how finance departments pull together data and use it to guide the future of their firms can be seen in how many companies are now using these technologies to gain new insights into their excise taxes.
For example, new cloud-based, automated excise tax management solutions come with built-in connectivity that allows the finance department to pull in their excise tax data from their ERP, back-end financial systems and other applications. These solutions can map both structured and unstructured data into their databases, and can support large amounts of historical data. They allow finance teams to easily create reports that show their firm’s total tax liability, or drill down to determine their firm’s tax burden in specific markets. They come with excise tax data analysis tools, such as simulated scenario evaluation, which finance professionals can use to build what-if scenarios to see the impact of potential transactions or new rules and rates on the bottom line. With all this knowledge, the finance team can provide advice on how their firm should adjust their business strategy to lessen their overall tax burden.
For years the inability of financial departments to pull together large amounts of data from multiple applications, and then review and analyze this data, has hindered their ability to play a greater role in their firms’ business strategy. However, with the rise of new cloud, automation and analytics technologies, the obstacles that have prevented them from using this data have been lifted. In fact, now that they are empowered by their firms’ data to play a greater role in guiding business strategy, we should expect the traditional image of CFOs and other finance professionals to soon change — to heads-up visionary leaders, looking towards the future.