How was your 2018? A year has come and gone and the economy has had its ups and downs. But it’s likely that for many organizations, year-end finance challenges remain much the same. Tasks like closing the books on the year just passed and finalizing plans and budgets for the year to come remain top priorities for finance teams. But planning, budgeting and forecasting are still hindered by some pretty common problems.
What keeps the CFO up at night?
A recent survey by CFO Research, summarized in CFO Magazine, explored “a variety of management and workflow-related challenges facing the modern CFO.” It found that “the most common problem that keeps CFOs up at night is creating and maintaining the capability for the finance department to be flexible, in particular to meet deadlines and to address process snags.” 1 To meet those deadlines and unravel the process snags, the article noted that “many are working weekends to keep up.” Sound familiar?
Here are five frequently mentioned causes of year-end finance headaches. See if these sound familiar, too:
- Too much time is spent collecting data. Finance teams often spend as much as 60–70 percent of their time in laborious detail work, simply collecting and verifying data from disconnected data sources and making sure that everything ties together correctly. 2 Not a good use of time for highly trained professionals.
- Spreadsheets are notoriously prone to error. “Whose numbers are right?” When spreadsheets go through multiple iterations with multiple contributors, errors and disputes over whose numbers are correct are almost inevitable. The fact is, spreadsheets were never designed for complex, enterprise-scale planning. Furthermore, research shows that most spreadsheet errors are not due to carelessness. They’re simply a fact of life with any manual activity, like cutting, pasting and keying in hundreds of numbers. 3
- Workflow bottlenecks increase the workload. Workflow bottlenecks are a consequence of the data collection difficulties mentioned above. That means working nights and weekends in order to meet deadlines, especially inflexible reporting and tax deadlines.
- Budgeting buy-in is hard to come by. The process of creating budgets is time-consuming and fraught with gamesmanship and politics. In addition, budgets are often obsolete by the time they see the light of day. Budget spreadsheets circulate by email and are sometimes modified in unexpected ways. When they come back, combining and reconciling the different versions is an exasperating exercise.
- Finance numbers only tell part of the story. Revenue, cost and cash flow numbers all tell how the business is doing. But they don’t tell the whole story behind the P&L. Non-financial data can be just as important in explaining the why of business performance, but that data is often hidden away in departmental silos, unavailable for analysis.
Heading off next year’s finance headaches
Analysts and consultants have been studying the finance function for years. They’ve consistently found that up-to-date solutions and business practices can make finance professionals’ jobs much more efficient — and much less headache-inducing.
As CFO noted, “Work processes have to evolve with a greater emphasis on analytics and analysis, but at the same time, finance has to ensure that the day-to-day operational work is still high quality.” “Fortunately,” they added, “business process solutions can help effectively manage workflow challenges.”
Here are five process and practice changes to consider that could make next year go more smoothly:
- Automate repeatable processes for collecting and verifying data. Automation can speed up the data collection process dramatically. It’s more accurate and efficient than emailing spreadsheets back and forth. Most important, automation frees up the finance team for more value-added work.
- Reduce spreadsheets. Eliminate spreadsheets where you can, but keep the familiar Microsoft Excel interface where possible. A solution that lets you retain the Excel interface takes advantage of your team’s existing skill set, while eliminating unproductive activities like tracking down numbers, fixing broken links and debugging macros.
- Use solutions to speed workflow. CFO observed that, “Business process solutions allow CFOs to reallocate work assignments in real time to prevent workflow bottlenecks.” Even simple features such as color-coded icons to track the status of contributions helps make workflow progress more visible — and people more accountable.
- Institute continuous planning. Best practices such as continuous planning and rolling forecasts enable organizations to improve forecast accuracy and increase forecast frequency, instead of tying plans to a static annual budget that becomes progressively more outdated as the calendar pages turn.
- Include more non-finance data in the planning process. Plans and budgets are more realistic when they’re based on operational data and input from those at the front lines of the business. In addition, people will accept budgets and plans more willingly when they’ve had a hand in creating them. CFO noted that “Analytics tools . . . connect finance to operations and other business units, requiring collaboration and the capability to incorporate new data sources.”
Time to survey planning and budgeting solutions
While those year-end finance pains are fresh in your mind, it’s a good time to consider the planning solutions and practices that can make next year’s process less painful. A good place to start is by checking out IBM’s planning solution for yourself with our guided demo.
1 Chris Schmidt, “The Shifting Nature of Finance Work,” CFO, November/December 2018 http://ww2.cfo.com/human-capital-careers/2018/12/the-shifting-nature-of-finance-work/
2 Keith Button, “Let the Fun Begin,” CFO, November 2017
3 Professor Raymond R. Panko, University of Hawaii Shilder College of Business, “What We Know About Spreadsheet Errors,” Journal of End User Computing, Volume 10, No. 2, Spring 1998, revised May 2008 http://panko.shidler.hawaii.edu/ssr/Mypapers/whatknow.htm