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In a world where technology is continually turning business on its head, is finance technology delivering on its promise, asks ACCA’s Jamie Lyon

This article was first published in the March 2014 International edition of Accounting and Business magazine.

Technology has historically been a catalyst driving efficiency in finance operations, lowering costs, fostering standardisation and improving controls. But can it also be critical in creating the value that finance should provide to the business through commercial insight and data analysis?

In the past decade, companies in all industries and of all sizes have deployed technology to change the fundamentals of finance delivery, using enterprise resource planning and other applications to provide cost control and quality in finance transactions, reducing manual transaction processing by up to 85%. As Simon Newton, the John Lewis Partnership’s FD for partnership services, says: ‘There’s more standardisation and there’s better quality data everywhere.’

However, many business leaders see opportunities for further technology application in finance services. George Connell, Shell’s vice president strategy, finance operations and centre finance lead (Glasgow), says: ‘Working for a big corporation, there’s still far too much manual work, too much reliance on spreadsheets. We’re not properly leveraging technology and I don’t think we’ve got full agility either.’

The extent to which technology is changing the face of delivery and providing value for the organisation – and its potential to do so in the future – is discussed in a new ACCA report, Is finance function technology delivering on its promise?

Julie Spillane FCCA, managing director of Accenture Global Services, believes the technology focus has been on ‘better, faster and cheaper’, rather than on creating value. ‘Up until now, technology has been applied within the four walls of finance – using technology to increase finance efficiency.’ But for many finance departments the financial returns from more efficient processing are marginal. Today, the goal of finance technology is to develop the business more profitably.

Risk-averse mindset

Reticence in the face of new technology may come from the historic caution and risk-averse positions that finance professionals often take. Finance relies heavily on proof; if leaders believe that tighter business rules have primacy over the implementation of new technology whose payback and functionality are not clear, then transformation through technology will probably be marginal. Technology at this level is an enabler rather than a transformer. The focus on rules and risk may be obstructing new thinking, not only about finance processes themselves, but also about how value is created. Specsavers’ Dilesh Magdani FCCA, head of finance shared services, says: ‘I think finance is way behind the curve. We lack imagination and we are too conservative.’

There is also the fundamental question of what is the future of a finance organisation if its customers can process their own transactions in real time? Ultimately, will technology move the business to self-service or ‘lights-out’ finance?

Deloitte partner Peter Moller says: ‘We are not lights out yet, but we are a lot darker than we used to be… Why do we need anyone doing routine back-office processes? The objective should be to create straight-through processing and lights out for all the back office. When you have exceptions, change the business rules and get rid of them.’

For many leaders, lights-out finance may be a vision worth pursuing even if it is not viewed as fully achievable. For example, Shell reduced its 1,700 purchase-to-pay jobs to 350 by applying available technology and, more importantly, eliminating non-compliance through new business rules.

And what about the SMAC pack? Do finance departments sufficiently understand social, mobile, analytics and cloud technologies, and are they keeping pace with the rate of adoption by sales, marketing and even HR departments?

Few finance leaders fully embrace the SMAC potential. When it comes to social and mobile technologies, they point to the greater imperative of investing to enhance customer-facing functions such as sales and marketing rather than back-office functions.

The cloud’s potential for risk naturally makes some finance leaders nervous. Concerns about software as a service for many finance applications are exemplified by security issues, including the physical location of servers. The inability (or refusal) to adopt the standardisation that is the cloud’s core value proposition hampers implementation. These concerns obscure the greater returns in cost, time and flexibility that the cloud has given other functions.

SMAC will probably be adopted unevenly in finance operations over the next few years, with a focus on analytics and the cloud, if finance leaders can understand the benefits and risks. Many finance leaders admit they do not focus on – or perhaps understand – the application of social and mobile technologies beyond efficient communication with their teams. But they know that these technologies could eventually affect finance processes themselves – once they can work out how to use them.

In terms of finance delivery, technology can turn prevailing models upside down. Successful, more aggressive implementations of so-called BPaaS (business process as a service) could eliminate the need for service centres (whether managed internally or outsourced), moving organisations further towards truly lights-out finance.

Alternatively, a new breed of technologies, branded ‘cognitive’ or ‘robotic’, are purported to be able to transform the economics of finance offshoring by eliminating labour arbitrage. But what is the likely scenario?

No role for robots

Liz Ditchburn, relationship leader at Kimberly-Clark, says: ‘We are dealing with data and payments, so I just don’t see a role for a robot. I struggle with the concept. I think that it’s marketing hype. We should be focusing on getting rid of processes.’

Perhaps FDs are not ready to take a leap of faith. They tend to implement bespoke tools, such as workflow and e-invoicing, where payback is obvious. For applied technologies that could be really transformative, the business case is not as clear because finance leaders may not understand how these technologies should be used, how or where finance could interact with these technologies, and what their impact will be on costs and profits.

Experts believe global process owners must take more responsibility for technology deployment, resulting in a new relationship between finance and technology. They believe the finance function must create the vision and set the requirements. At the same time, finance professionals should work very closely with technology experts who understand the capabilities and the enterprise environment and can drive innovative thinking about deploying applications.

As Ditchburn says: ‘The people who are best placed to work out the requirements and the opportunities are the finance people. The people best equipped to understand what technology can do are the technology people. It’s about collaboration and innovative thinking.’

So is it going too far to assert that technology will be a genuine game changer for finance over time? Although such a transformation is unlikely to happen overnight, perhaps emerging technology will, nonetheless, begin to prompt some fundamental questions on the role of the finance function within the organisation.

If, through technology, finance is able to rebalance its preoccupation with processes – and their elimination – by using technologies that mine financial data for patterns, the function will be better placed to meet its aspirations to create business value in the future.

Jamie Lyon FCCA is ACCA’s head of corporate sector

Last updated: 16 Jun 2014