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Digital transformation in finance

Digitization is taking hold in all business areas and is being driven forward massively in most industries. There is a need to catch up in this respect in the financial organization, where too little has been invested in automation in recent years.
Ralph Weiss, Blackline
September 18, 2023
This text has been automatically translated from German to English.

This is now changing as companies take advantage of a move to SAP S/4 HANA to position themselves for the future in this important area as well. However, many a company has paid apprenticeship money with a less well-prepared transformation. Often, the reason for dissatisfaction is not the actual transformation process, but disappointment with the hoped-for level of automation. This often happens when one of the two high performers is not on board. This does not have to be the case. After all, those who solidly plan the transformation and the desired degree of automation in finance and implement it, for example, with solutions such as BlackLine, benefit from significantly reduced manual processes and, as a result, from a much higher level of satisfaction among finance experts. However, clear goals must be set for this and finance and IT experts must work hand in hand.

It is time

The fact is that confidence in the financial figures is insufficient in some cases to
to lead a company securely into the future in times of global economic change. A study commissioned by BlackLine from the independent market research institute Censuswide shows that more than 30 percent of financial professionals still have doubts about the accuracy of financial figures. This is one of the reasons why 22 percent of respondents in the study confirmed that they would invest in automation solutions. After all, automation reduces the risk of errors and significantly increases transparency about the financial status. And there is hardly a more appropriate moment than to carry out far-reaching automation of finance in a consolidated manner as part of the digital transformation. By eliminating manual work, significantly improving data quality, and providing reliable, real-time analysis and forecasting, the result is a much better basis for decision-making and new opportunities for the business - combined with improved governance.

IT and Finance transform hand in hand

In practice, a transformation to SAP S/4 HANA works particularly well when IT and finance are pulling in the same direction. On the one hand, there is the lift and shift approach, which is mostly driven from IT, and the real transformation to SAP S/4 HANA, which is mostly initiated from the finance department. The transformation needs the impetus of the CFO and his department to redesign processes, develop new business areas or novel business models. However, this can only be achieved with the support of the Chief Information Officer (CIO) and his team, which looks at the transformation from an IT governance and architecture perspective. While finance people know exactly how they want to change and streamline their processes, it is the CIOs who understand the technical feasibility and know exactly how the data will be transformed into the new system. The CIO is also the one who can assess what preparatory and accompanying activities and budgets are required to realize the transformation within a defined timeframe. 

Basic aspects of a financial transformation

A digital transformation is a complex task in which those responsible occasionally concern themselves with too many details too quickly. Therefore, the five most important aspects should be given top priority:

Implementation: ERP transformation takes time and each step requires critical expertise and control.

Data integration: Transferring data from existing systems is vital and holds a lot of room for error.

Planning: Unforeseen delays can cause significant bottlenecks and quickly drive up costs.

Budget: It is not uncommon for ERP projects to exceed budgets as unforeseen expenses arise.

Capacities: The project requires considerable capacity on both the IT and business side. It is therefore necessary to consider how the teams can be relieved even before the changeover.

The better a transformation project is managed through efficient planning, staffing and potential upfront investments, the more certain a successful outcome.

Transformation not without automation 

The upgrade, for example to SAP S/4 HANA, should under no circumstances be carried out separately from an automation initiative, i.e., the highest possible elimination of manual standard processes. In order to derive maximum value from the transformation in finance, it does not make sense to transfer the old processes one-to-one to the new system and automate individual processes after the fact. Instead, it is advisable to use suitable tools and solutions, such as BlackLine, to redesign the processes before the actual transformation and then transform them to the new system with an already high level of automation. For example, BlackLine's Financial Close Management, Accounts Receivable Automation and Intercompany Financial Management optimize ERP transformations by eliminating manual processes that are normally performed outside the ERP system in spreadsheets.

Different approaches exist for consolidated transformation and automation. One option is to optimize the legacy system during the preparation phase with maximum automation in order to massively relieve the transformation teams. This ensures that the existing foundation is best prepared for the transformation. Another option is process optimization and automation during the transformation itself. The combination of both approaches is ideal. It ensures far-reaching value creation, especially in finance and accounting. Because by integrating, orchestrating and automating end-to-end accounting processes, complete and accurate results are achieved faster. 

The success factor

Probably the most important factor common to all companies that have successfully implemented digital transformation initiatives is a shared understanding of what they want to achieve with digital transformation in the finance department using the latest technology, the much-cited North Star. CFOs and CIOs should therefore define clear and, above all, realistically implementable goals that closely involve both parties in the finance department transformation program.

Ralph Weiss, Blackline

Ralph Weiss is Geo Vice President DACH at BlackLine.

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