Rapid outbreak of COVID-19 pandemic exposed flaws in existing work methods, forcing organizations worldwide to adapt processes and technology swiftly to ensure business continuity during prolonged lockdowns. However, it’s undeniable that some organizations outperformed others. Now that the dust has settled, we can assess what worked and what didn’t, pondering the future direction for businesses, especially finance departments.
“To understand the ‘new normal,’ we surveyed 1,320 financial and business leaders from private enterprises with over 1,000 employees in North America, Europe, and the Asia-Pacific region (APAC),” said Michael Chung, General Manager of Wolters Kluwer (CCH Tagetik) Greater China, in an interview with 《The Icons》, discussing key findings from the survey.
Financial and Business Processes Become More Challenging and Complex
The pandemic-induced business disruptions were unprecedented in scale and impact. Chung said: “Only a handful of organizations managed seamless operations. In contrast, the majority of respondents (90%) in our survey indicated that financial and business processes became more challenging and complex over the past 2 years.”
Increased complexity had significant implications for enterprises, including rising operational costs, difficulties in providing insightful strategic guidance, heightened risk exposure, and a lack of visibility into performance-driving factors.
Hence, organizations must replace outdated Corporate Performance Management (CPM) processes hindering financial teams’ development, including obsolete software, manual intervention points, and spreadsheet-based processes. Given the complexity increase, leaders must decide which tools and technologies can simplify these processes.
Financial Leaders Play a Crucial Role in Navigating Uncertainty
According the survey Three-quarters of the leaders expressed challenges in balancing:
- Growth plans with financial controls and risk management
- Adapting to market changes and proactive innovation
- Financial investments and operational process investments
- Traditional technologies and new technologies
- Retraining existing staff and hiring new employees
Chung pointed: “Worse still, manual operations consumed financial leaders’ time, preventing them from focusing on high-value activities like strategic planning. Respondents cited manual financial operations as one of the top three frustrating work issues, along with technical problems and data integration, and the disconnect between financial and operational processes.”
“Despite financial leaders’ responsibilities expanding from strategic guidance to cost control, ethical consultation, new reporting requirements, and operational planning, many were hampered by inefficient tools. Up to 95% of respondents felt frustrated with their financial processes.”
To ensure businesses can thrive amidst chaos in future and grow in evolving business environments, financial teams need centralized data management and must leverage AI and automation technologies in their CPM processes. This enables them to overcome challenges such as technical issues, inadequate tools, and departmental silos.
Unified Concerns among Financial Leaders
the survey also found that financial and operational leaders almost unanimously identified the most urgent issues in the next 2-3 years:
- Economic chaos
- Workforce disruption
- Technological upheaval (AI, Machine Learning)
- Industry/supply chain disruptions
- Regulatory turmoil
- Competition turmoil, new competitors
- Mergers and acquisitions chaos
Chung thought these concerns reflect the inevitable and varied forms of chaos organizations might face. “Given the diverse threats today, organizations need to proactively plan for chaotic events. When asked how important it is now, compared to two years ago, to predict financial chaos and provide business guidance, 95% said it’s now more critical.”
While no one can accurately predict the next chaotic event, financial teams can prepare. To do this, they need to utilize CPM tools, including process automation, planning expanded and analysis, predictive analytics, real-time forecasting, and scenario analysis, to enhance flexibility. These functionalities enable organizations to respond to sudden changes more quickly and efficiently.
The Disconnect between Finance and Operations is a Pressing Issue
When chaos strikes, seemingly insignificant inefficiencies in processes can lead to significant consequences, such as delayed predictions that could severely postpone crucial production decisions.
“That’s why it’s crucial for financial and operational leaders to maintain consistency and flexibility across different business functions. Unfortunately, almost half of the respondents indicated a disconnect between finance and operations in various aspects” Chung said.
These disconnects include:
- Systems, technology, and tools.
- Financial and operational processes.
- Inconsistent data.
- Data sharing.
However, this doesn’t mean that leaders don’t recognize the value of aligning finance and operations. “In fact, most respondents believe integrating with financial planning would benefit various business areas significantly. The majority (63%) stated that supply chain planning would benefit from this integration. Approximately half of the respondents believed that sales performance, human resources/labor, marketing, and information planning would also benefit.”Chung stated.
The advantages of this integration include improved decision-making, more accurate predictions, and better understanding of revenue and operational situations.
So, what hampers the connection between finance and operations? One of the significant obstacles is the inconsistency in tools and planning systems, “with 39% of respondents considering this a challenge. Other barriers include inconsistent financial and operational data, ownership of processes and cross-functional key performance indicators are disparate, and concerns about data management skills.” Chung said.
Fortunately, CPM enterprise software can help businesses overcome these challenges. The platform connects different departments, teams, and business units by providing a single data source for data transformation. It serves as a platform for planning, reporting, and analysis execution, acting as the communication hub for performance management. In essence, the CPM platform ensures internal coordination across the entire company, leading to better decision-making.
On the path forward, embracing change, adopting advanced technology, and promoting coordination between financial and operational departments are key to navigating today’s complex business environment. Organizations that actively invest in CPM processes, utilize data-driven insights, and maintain agility when facing chaos will secure a favorable position for future developments and achieve success.
In the face of unprecedented challenges and complex situations, the financial function stands at a critical crossroads. Embracing change, adopting advanced technology, and promoting coordination between financial and operational functions are essential to steer your enterprise toward success. Download Wolters Kluwer’s “Global CPM Trends Report” for valuable insights guiding financial leaders in their journey forward.