Finance departments have been slow to adopt cloud solutions, but its transformative impact can no longer be ignored. Keith Mattioli, principal, advisory, KPMG in the US, takes CFO Agenda through the potential benefits and challenges facing CFOs looking to the cloud.
It’s no secret that CFOs have a lot on their minds. Managing the risks of an ongoing economic crisis, and understanding and implementing the rules of a new regulatory regime are challenging tasks.
At the same time as navigating this fallout, many CFOs are looking to help their businesses expand. Gone are the days where finance chiefs were confined to simple accounting functions; today’s crop are widely seen as strategic partners to the general business, and are expected to participate actively in its transformation.
Of course, entering new markets and geographies presents significant challenges to the way finance teams are structured. When done badly, mergers and acquisitions can create architectures of discontinuity – a disorderly network of ad-hoc systems bolted on-top of one another.
Sticking with the old ERP systems is unlikely to offer what finance departments really need in the future. Acquisitions by the larger software vendors have created a broadly stagnant market that cannot provide the infrastructure needed to support business growth.
“Increased requirements have caused leaders in finance organisations to consider alternative approaches that fundamentally change the way they view the finance function,” Mattioli says. “The emergence of new providers and solutions powered by a software-as-a-service (SaaS) model is giving finance organisations options that previously did not exist.”
The introduction of cloud computing to the finance function represents what might be called the third wave of SaaS solutions. Originally reserved for sales-oriented CRM platforms, the service gradually branched out to include human capital management and finally, financial processes.
“The SaaS model is important because it addresses some of the challenges today’s financial systems face,” Mattioli says. “Their lack of agility and dependence on back-office IT for basic or complex changes is particularly problematic. Solutions built on the SaaS model take advantage of the new computing paradigms that have arisen over recent years, such as new user interfaces, better collaboration through social interactions, built-in mobile capabilities and a focus on increasing access to data via embedded analytics.”
"Though old ERP systems remain widespread, new research suggests that CFOs are increasingly looking to the cloud as an alternative approach."
“KPMG research indicates that many are ready and willing to move finance and accounting-related systems and applications to the cloud,” Mattioli says. “When asked about the practicality of moving these functions to the cloud, the vast majority of respondents to the survey said it was either ‘very practical’ or ‘somewhat practical’.”
For CFOs, part of the logic of the cloud is the opportunity to control initial capital outlays. With so many companies finding their existing ERP systems cannot cope with changes to the business, costly up-grades and reimplementation are important to avoid.
Equally important is information. New SaaS technology can provide companies with a far smarter way of viewing, organising and visualising key financial data.
“You may be getting complaints from your internal customers about data overload, inconsistent data, and no single source of truth,” Mattioli says.
“Managing your financial transactions and accounting using a combination of a heavily customised, outdated version of traditional, on-premise ERP and several point solutions is challenging. Areas like revenue recognition or dynamic, usage-based billing are good examples of business processes that do not have the required flexibility in today’s ERP systems. SaaS solutions offer standardised processes, controls and automation that can help transition finance resources from the mentality of just getting the books closed or number crunching to more effectively supporting finance’s internal and external customers.”
Like other areas, the actual transformation process needn’t require an all-or-nothing approach. Using the cloud for finance offers the opportunity for a genuinely transformative approach but CFOs can instigate change incrementally, at a pace that suits their business.
“It’s an emotional challenge,” Mattioli admits. “Even with the considerable advantages, moving all or part of your financial processes to the cloud is a business challenge. Having a clear vision and strategy with the right executive sponsorship can provide the overall governance required, whether you’re looking to migrate from your current ERP platform, upgrade your current platform or move to a best-of-breed approach.”