Evolving the finance function

Financial processes form the heart of every company.

Why have they been so overlooked?

Achieving growth and creating competitive advantage has to be the core driver of any business. CFOs need to rethink the value that finance brings, its role within the organisation and how it undertakes this role. — Brian Furness, global finance consulting leader, PwC

The work of the treasury team maintains the financial integrity of the whole company; informing the quality of client and customer engagement through billing and invoicing, driving service provision in collections and income generation.

What could be more important than driving revenue? The finance function also informs strategic financial decisions, creating the vision of company cash flow and its understanding of working capital.

Despite its significance, the financial processes that comprise the finance function are wildly inefficient. Payment allocation and account reconciliation for example can grow to incorporate a large number of enormously time consuming manual tasks. Viewed externally they suffer from a chronic lack of architecture and systems design, with the treasury team fighting losing battles with ad hoc tools and improvised workarounds.

It is understandable as to why this is the case.

Internal finance presents a classic Big Ball of Mud.

A Big Ball of Mud is a haphazardly structured, sprawling jungle. These systems show unmistakable signs of unregulated growth, and repeated, expedient repair. Information is shared promiscuously among distant elements of the system, often to the point where nearly all the important information becomes global or duplicated. - Big Ball of Mud; Brian Foote and Joseph Yoder

The finance function came into existence at the same moment as the company itself, at the moment of least resources and with little idea as to how the company would evolve. The way in which a company performs its financial operations has had to subsequently adapt to every single business pressure the company has encountered; every pivot, every change in service, product, geography; every change in corporate structure or management…

Two elements emerge that place growing pressure on CFOs, as well as on those committed and compelled to optimise business processes and create efficiencies through digital transformation in their companies:

Firstly the accumulation of an ever increasing amount of technical debt has made it incredibly hard to implement change. What appears like it should be a relatively uncomplicated system, is in fact overly complex in how it is embedded in working day practices, team culture, corporate priorities, and the company’s general aptitude for change and risk.

Secondly self-developed access databases, excel spreadsheets and macros have created a layer of shadow IT practices and processes in the finance function. Now recognised as one of the single biggest barriers to digital transformation, shadow IT has created layers of data being shared that lack validity and integrity, responsible for subsequent layers of decision making and analysis that are inconsistent and inaccurate. If your teams lack confidence and trust in the data they are handling, it is because a layer of information and its accompanying operations has been created, breeding complexity and confusion in the decision making process.

With the advent of cloud software, machine learning and automation we are now experiencing a fundamental shift in how the finance function is able to evolve. At Mortar we create Cohesive Financial Environments (CFEs) that allow the application of AI to transform how finance teams access, share and respond to financial information.

There is no longer any reason why finance teams should have to pass round spreadsheets, create extravagant manual workarounds, or spend hours trying to allocate payments and reconcile accounts.

The moment time-consuming manual tasks are removed, financial operations can become sites of collaborative AI assisted decision making; evolving the finance function and permanently changing the relationships between corporate strategy and employee, client and consumer engagement.

The workplace is changing at a rapid pace. To optimise business processes and undertake effective digital transformation, the finance function has to move out of from the shadows of back-office administrative functions and re-invent itself as the accelerating force behind corporate growth and innovation.

Every company has the potential and the capacity to be a fintech company. It is a question of whether senior management recognise the significance that financial technology represents in defining the growth or eventual demise of their company.