A Modern CFO Challenge: How to Enable Dynamic Planning and Continuous Accounting

The role of the modern CFO is experiencing a wave of transformation as the speed of business and the prevalence of exponential technologies push toward real-time dynamic planning and financial decision-making.

A PwC report into the role of technology in financial services over the next few years found that, by 2020, CFOs will be expected to make a virtually limitless combination of inputs work together seamlessly and at speed. To enable this, CFOs will need to ensure their infrastructure is aligned with applications, so it can scale in real time, and be able to integrate anything from external financial data to sensor data from IoT implementations.

Gone are the days of relying on expansive spreadsheets to plan and consolidate company finances. The modern enterprise is simply far too complex, making traditional financial planning simply unmanageable. The digitisation of the CFO role is bringing an end to static planning and enabling faster and more integrated financial reporting through the complementary concepts of dynamic planning and continuous accounting. And at the centre of this sits a vital component in the CFO’s digital core: the financial data warehouse.

The transformation of the CFOTypical financial planning involves looking at historic financial performance over the past month, quarter, or year. Predictive analytics unlocks the ability for CFOs to look at financial and business performance trends over multiple years and provides insight into forecasts for the year ahead. This enables CFOs to develop smarter budgets not just at the start of a new financial year, but on an on-going basis as the predictive analytics solution takes actual business performance to date into account and matches that with the likely trends ahead. The result is a new-found agility that enables CFOs to operationalise financial data insight into finance business processes, leading to improved decision making and a stronger bottom line.

The key enabling technology of this agile approach to the CFO role is a single financial data warehouse that pulls together all financial and operational data from the ERP system, as well as non-ERP data from operations, procurement, and human resources. All general ledger information is pulled into the financial data warehouse to allow for true end-to-end consolidation. The financial data warehouse becomes the CFO’s digital core, creating a platform that opens the door to the introduction of next-generation technologies such as machine learning into day-to-day financial processes. With all data consolidated in a single place, the CFO task of complying to changing regulatory requirements ‘ such as the upcoming IFRS17 reporting standards for the insurance industrybecomes easier to manage.

This empowers the CFO role by enabling more calculated decision-making, providing greater clarity on the profitability of all lines-of-business and each customer, while mitigating the risk of financial loss as a result of changes in forex, government policies, and the like. It also enables dynamic planning, one of the modern CFO’s most powerful business tools.

How does a financial data warehouse unlock business value?

One of the key reasons for the financial consolidation process is the disclosing of financial results. Traditionally this would involve waiting for the end of a financial period before a sequence of late nights and deadlines eventually result in the reporting being complete. With a financial data warehouse as a foundation, modern CFOs can conduct continuous accounting that executes multiple tasks simultaneously to enable CFOs to soft-close the books well before the end of the period.

By bringing all general ledger and operational data into a single data warehouse, CFOs enable true consolidation that seamlessly delivers business value to the rest of the organisation. Within this paradigm, CFOs become enablers of better organisational planning that reaches beyond pure financial functions to the realms of HR, procurement, production, and more. Running financial planning off Excel spreadsheets limits processes to the processing power of the user’s PC or laptop, severely restricting the business value of running, for example, what-if scenarios. This prevents CFOs from exploring innovative new injections into the planning and consolidation process.

A roadmap to dynamic planning and continuous accounting

So where should CFOs start?

Not all businesses are suited to an all-in migration to the cloud. In many cases, companies want to retain control over business-critical data and prefer the assurance that a physical and accessible data centre brings. To this end, modern cloud services, such as the SAP Analytics Cloud, push BI applications into the company’s local network ‘ within their firewall ‘ giving them all the benefits of using cloud services without any real or perceived loss of control over their data or processes.

CFOs looking to enable continuous accounting and dynamic financial planning in their organisations can automate the following capability to get them started:

  • Create a summary plan with top management
  • Amend the plan with what-if scenario modelling
  • Supply data to the rest of the organisation so that bottom-up planning can take place
  • Review and amend plan before sending it back to executive management
  • Present final plan for the financial year
  • Budget, plan, and execute
  • Develop on-going forecasts to ensure alignment of activities and budget
  • Conduct on-going what-if scenario modelling
  • Report on actual performance vs forecasts and adjust where needed.

Dynamic financial planning and continuous accounting are within easy reach of modern CFOs, and do not require an upheaval of all current financial processes or systems. By prioritising a few key practical building blocks now, CFOs will enable better financial decision-making while also future-proofing the financial function within their organisations, bringing them one step closer to real-time predictive simulation and seamless disclosure of financial statements across all end-to-end processes.