The Evolution of the Finance Department

Rob Coyne, Head of Analytics, SAP UKI discusses the role of analytics in finance

Finance departments have long been investing in IT solutions, something which has become more pressing this financial year with greater demands from the business coming into play. The finance function is becoming an increasingly integral partner to the business and financial directors and CFOs are facing more markets and greater competition, despite often having less resource, less money and less time. Moreover, an astronomical amount of information is being generated on a daily basis from multiple sources and across disparate business departments, all of which could have an impact on finance, particularly from a risk management perspective. This era of austerity is one which requires continuous innovation, but a cultural shift and change in mindset within organisations is required.

As many discussions within the IT industry have highlighted in recent years, if the information housed within a business is analysed and understood it has the potential to deliver a 360 degree picture of the business at any point in time. It’s hardly surprising then that so many financial directors are now looking towards analytics to transform the way their finance department operates, but there is still a wider barrier to adoption when it comes to the overall impact this can (and should) have on the business as a whole.

So how can the finance department become a more strategic partner to the business, and what role does analytics play?

Working backwards from the balance sheet
Before diving into a re-ordering of the way in which you process finances and operate the finance department, it is vital to understand where you are on the analytics curve. Without a full evaluation of what you want to achieve, it is easy to get stuck into projects which don’t directly correlate with business strategy.

This means not only looking at the finance department’s requirements but also understanding how a decision could potentially affect the entire business. All too often, each department from HR to marketing, supply chain to finance, operate independently rather than working collaboratively when it comes to decision making. Yet different areas of business are inextricably linked and thinking about how solutions can complement and integrate currently disparate departments, should be kept front of mind.

The collaboration of risk and finance
Greater pressure, including in excess of 20 new or changed regulations coming into effect over the next six years, requires finance and risk functions to work closely together; a culture shift in most organisations. This involves integrating processes and identifying, sourcing and articulating the increasingly granular data required for compliance and disclosure which can only really be achieved effectively through analytics.

As previously mentioned, the volume of data continues to grow meaning so too does the challenge of obtaining a comprehensive view of the entire risk and finance landscape in today’s data-driven environment.

If you can’t measure risk, you can’t manage it and at decision time every second counts. The ability to aggregate vast quantities of data from various sources is crucial to keep up with market changes and, crucially, competitors. Only once events, trends and patterns can be identified and analysed by all stakeholders as they happen can swift and decisive mitigating action be taken; across the entire business and the various regulatory bodies.

The move to integration
The key message throughout this discussion is integration. Departments, and the data stored within them, can so often become siloed in an organisation to the detriment of the wider business objectives. There is a real opportunity for CFOs and FDs to become the drivers of analysis within their companies, not just their departments, working closely with the CIO to help other business functions to develop insight into the efficiency of their teams and projects; ultimately becoming more of a partner to the entire business. Not only will this prove useful to improve processes but clear business cases for new investments can be compiled much more easily.

The progression of greater collaboration between IT and finance is encouraging to see, but investment alone won’t suffice. Seeing the implementation of new solutions, particularly analytics, as an overnight transformation or as a project with a finite start and finish can lead to long-term issues. Finance directors need to go on a journey with data, and the entire business, to ensure the full benefits are realised through usable insight and analysis. The key is in becoming more analytical by nature; constantly asking more of your data across departments and functions to make more informed decisions and deliver insight into the business, market trends and customers. These changes will ultimately better place CFOs and FDs to approach risk whilst instigating cost-saving initiatives across the business.