In its perspective, Finance 2025: Digital transformation in finance, Deloitte predicts that with the automation of operations, finance will double down on business insights. Interestingly, Deloitte cautions that despite these efforts, success is not assured.
"Whether finance continues to direct the resources currently under its control will be dependent on its ability to add value. That will require quality insights and exceptional customer service. Some finance organizations will evolve into full-fledged business service centres." Deloitte
FutureCFO spoke to Mike Polaha, senior vice president for finance solutions and technology at BlackLine, for his take on how CFOs and other finance leaders can improve the odds of successful transformation.
What are the primary objectives of finance transformation?
Mike Polaha: Finance transformation aims to revolutionise corporate finance strategy and processes with three main objectives in mind - driving operational efficiency, ensuring functional effectiveness and improving employee experience - all while progressing to improve the function’s overall compliance footprint.
"Digital technologies aid in managing the workload of existing employees by relieving the burden of repetitive backend work. With improved operational efficiency, finance professionals are then able to focus on more important strategic tasks at hand; making better decisions and identifying new opportunities."Mike Polaha
As traditional compliance processes are typically rather manual and fragmented, they often result in a data silo. Therefore, leveraging cloud-based automation can help the finance function streamline its internal processes to achieve greater accuracy in lesser time. This is particularly useful in providing the team visibility into real-time data and key insights to tackle wider business challenges.
Who should be involved in setting up the parameters for a successful finance transformation initiative and why?
Mike Polaha: Chief Financial Officers (CFOs) are the key players in determining the objectives and parameters of a finance transformation initiative. CFOs are central to driving insight, growth, and revenue across various omnichannel interactions, all seamlessly integrated into business operations.
Hence, they can step up to the broader role of working with the other members of the executive team to ensure that proper resources are allocated, and progress is monitored regularly to ensure successful implementation.
However, this cannot take place without the buy-in and support of Chief Information Officers (CIOs). According to Gartner, success in digital investments and intended business outcomes are highly dependent on strong CFO-CIO partnerships.
As a shared responsibility, this requires CFOs and CIOs to speak the same language, which includes productive discussions on how to turn investments in digital technologies into real digital capabilities for the organisation. Overall, commitment from top management is essential to the quality of implementation and impact towards any initiative.
How do you set up the metrics that will serve to guide the initiative?
Mike Polaha: The first step is always to have a clear understanding of what the organisation hopes to achieve with finance transformation. Is the company looking to improve the accuracy of its financial reporting, or to increase the efficiency of its financial close processes?
Alternatively, are they looking at reducing costs related to financial processes? These are just a few of the questions that every organisation should ask and define clearly before gearing up for finance transformation.
Another good starting point is to look at other companies of similar size and scale within the same industry, which have already gone through a finance transformation process, as a benchmark for your organisation.
These metrics need to be concrete, measurable and directly linked to transformation outcomes. Some examples include the number of manual financial processes, the accuracy of financial reporting and financial forecasts, the time taken for the month-end close process and so on.
On top of that, it is also important to establish baselines, prior to kickstarting the finance transformation initiative. This will allow the organisation to track and quantify changes and improvements over time, which may come in handy for future reporting.
Any best practices for when course corrections need to be met as the initiative moves along?
Mike Polaha: Finance transformation is a complex process that involves making significant changes to an organisation’s financial systems, processes and operations. Like any major organisational change, there may be unexpected roadblocks or setbacks that require course corrections to keep the finance transformation initiative on track.
Best Practices for CFOs' Considerations
Monitor progress and performance: Establish clear goals, objectives, and key metrics at the outset to provide all stakeholders with a clear overview of the progress. This will also help the team quickly identify areas where transformation is falling short and take the necessary steps to address it early on.
Maintain communication and collaboration: The organisation should establish an effective communication plan, to ensure that all stakeholders understand how the organisation, responsibilities and procedures are changing – and importantly, why.
"It is critical to implement a regular communication cadence to provide updates on the latest changes, outcomes and wins, to ensure that all stakeholders are informed of the progress of the finance transformation initiative. Clear avenues for communication also ensure that different teams are able to come together to address challenges and resolve issues when necessary."Mike Polaha
Be flexible: Given the complexity of finance transformation projects, unexpected challenges could arise and derail the project. As such, there needs to be flexibility to adjust the plan and timeline accordingly.
Any best practices for encouraging active participation among the finance team members?
Mike Polaha: Companies are often eager to announce any form of transformation initiatives to show that they are progressing but it’s also important to remember that engaging employees or in this case, finance team members, is a process itself.
It’s only when employees see that they are actively roped in to not just take part, but also work on some areas of the transformation effort, will they then be encouraged to want to actively participate in such initiatives.
Guide for organisations:
Education-first approach: It’s critical to get buy-in early on for any transformation efforts. But rather than diving into the methodology immediately, CFOs and leadership should take a metered approach in defining the objectives of undertaking an initiative and get everyone in the finance team grounded in speaking a common language.
The level of digital finance technology acumen can vary amongst finance team members, so it’s needed to invest in a common, referenceable understanding of digital finance components so that members are able to better comprehend why such a change is taking place.
Create a safe space for transformation vetting: Transformation initiatives are expected to come with its challenges and there might be team members who may have concerns or resistance over the value of such efforts. Having a safe space where members can voice their unease will allow for critical questions to be answered prior to any substantive action.
Moreover, the ability to separate true transformational concerns from misinformation or lack of understanding will help avoid frustration in both the finance team and leadership.
From education to action: It’s important to quickly pivot to action after education by laying out the tactics or actions taken towards finance transformation. This could include organising technology strategy workshops where best practice use cases are discussed to showcase possible outcomes.
Continuing the path of transformation: It doesn’t stop when the transformation initiative has launched. Organisations can look at developing a framework where there’s constant feedback or discussions on how to improve certain processes to help finance teams be better at their jobs and also keep up with ongoing technological changes.
Any advice for CFOs and finance heads looking to jumpstart a transformation?
Mike Polaha: Each organisation’s digital transformation process is different as it depends on their industry, company size and scale, digital finance technology acumen and so on. However, a common factor among organisations that have had success in introducing digital initiatives, is having a clear understanding of what they hope to achieve with digital transformation.
As a first and critical step, CFOs will need to determine the organisation’s objectives and define success for them. They can then set clear, quantifiable goals by benchmarking their organisation against others of similar size and scale, which have already undergone transformation.
CFOs will also need to closely involve CIOs in their finance transformation program. CFOs and CIOs who partner closely have a shared understanding of how technology impacts corporate financials and how to better evolve financial management to support enterprise digitalisation. From there, CFOs and CIOs can also engage in more productive conversations on digital investments for the organisation.