The latest Deloitte UK CFO survey, for the third quarter of 2022, demonstrates just how badly external economic factors are impacting businesses. Some 91% of CFOs expect operating margins to decline over the next 12 months, and cost reduction and cash control are now their top priorities.
Faced with these challenges, finance departments need to shift away from dealing with basic accountancy tasks, and instead become more strategic, identifying ways to add value to the business to ensure survival through the economic crisis.
One of the best ways to achieve this is with technology that helps CFOs not only predict, forecast and plan, but also apply automation to reduce manual finance tasks.
Through its enterprise performance management (EPM) and analytics technology, Oracle offers capabilities around planning, budgeting, forecasting and reporting, as well as risk management and automation. With EPM, Oracle says firms can also bring in third-party data from other parts of the organisation so that planning can be done holistically, and everyone is using a consistent data structure to achieve visibility across the business as a whole.
According to Oracle finance transformation leader Nick Jackson, this enables businesses to bring in scenario planning rapidly.
“With the pace of change we are seeing at the moment, everything is changing all the time,” he says. “Assumptions that were made six months ago have got thrown up into the air. How can you quickly rerun your planning scenarios, understand what the implications of different decisions are, and deploy that?”
Oracle’s offering in this area is bolstered by fusion analytics, which enables firms to interrogate finance, HR and supply chain data, using analytics to predict, understand trends, identify exceptions, and deploy machine learning. Companies can learn about user behaviour, pre-empt decisions, offer advice, and start automating more of the data management that is currently managed by staff within a finance function.
To cater for global organisations such as Nestlé, Oracle offers Analytics Cloud, which enables large global companies to funnel vast amounts of data and into the financial planning and analysis (FPA) function.
“They can then provide recommendations to decision-makers, such as: here’s what we think is likely to be a sensible way forward and also here are the implications of that in terms of risk, in terms of scenarios that might apply to the decision,” says Jackson.
According to Jackson, these latest financial planning tools are vital for businesses wanting to react to fast-changing market conditions. “We’re growing much too quickly not to leverage automation, but it hasn’t been leveraged in a lot of the ways that I had hoped to at this point,” he says.
SAP is another enterprise resource planning (ERP) provider offering a range of finance analytics and automation technology that can be added to its core ERP system. These include predictive analytics to identify the optimal processes to automate, embedded artificial intelligence (AI) and machine learning (ML) to provide intelligence in the application, and financial planning with embedded forecasting, all tightly integrated with ERP.
These different technologies can be applied to automate operational processes, for example invoice receipt reconciliation, mapping incoming payments to open accounts receivable (A/R) items, and intelligent automation to analyse business results as well as to predict, simulate and create scenarios, including anomaly detection.
SAP provides out-of-the-box embedded AI/ML scenarios, for example predictive liquidity forecast, and offers AI/ML tools that can be integrated with applications such as SAP S/4 Hana. A modelling framework is available to generate specific scenarios without the need for programming.
For CFOs, one of the core benefits of such planning tools is reducing the time spent on basic finance tasks. According to Michel Haesendonckx, global solution owner for financial planning and analytics at SAP, its customers have seen a shift in allocation of employee time from 80% preparation-20% analysis to 20%-80%, respectively.
“This is a clear shift from operational activities to added value activities for the organisation,” he says. “Automated forecasting has improved accuracy by 7% and process automation reduces errors and improves employee satisfaction. It allows for faster cycles, for example predictive modelling allows for many more ‘what if’ scenarios and simulation, bringing greater scalability.
“Trust in ML applications through the addition of insights into how they work also gives organisations the ability to act with confidence. This enables them to save time, allowing them to focus on value added tasks as well as cost savings.”
Managing fluctuating costs
For cookie company Crumbl, getting visibility into the business was proving difficult. The firm currently has 600 franchise locations across almost every US state, and is opening between seven to 10 new stores each week. Crumbl has doubled its size annually year on year, and is on track to continue doing so.
But this rapid expansion was making it difficult to get an accurate view of the firm, leading to a decision to upgrade from QuickBooks Online to NetSuite ERP to manage its financial reporting and planning.
The NetSuite technology is helping Crumbl deal with the fluctuating costs and supply chain challenges affecting so many businesses at present. While Crumbl has been able to maintain costs for staple ingredients, for rotational products that are needed more irregularly, this is trickier to manage.
Michael Card, vice-president of finance at Crumbl, explains: “It is unreasonable for us to stockpile gummy sharks for Shark Week. But in those instances where we have to supply almost a just-in-time approach to certain aspects of our supply chain, we have been able to leverage some of the technology that we’ve been developing through NetSuite, through efforts on our procurement side, to ensure that we have all of the product that we need at a reasonable price.”
Card was impressed with some of the new automation features on show at NetSuite’s SuiteWorld event in Las Vegas in September. He could see Crumbl taking advantage of automations on the banking and reconciliation side to improve business processes in finance. NetSuite AP (accounts payable) automation embeds banking services into the ERP system, with automated payment services provided by HSBC.
According to HSBC, business customers are increasingly looking for integrated and accessible systems. The embedded banking software with NetSuite enables companies to manage payments and automate reconciliations at the point of need, without switching screens or multiple logins.
Card agreed with the view that businesses want integrated systems rather than having to support various standalone products.
“I have a fear of being SaaS-ed to death,” he says. “Wherever I can, I avoid having to have so many systems that I’m integrating to NetSuite, as opposed to NetSuite offering a built-in capability or with a native-to-NetSuite-type solution. The AP solution that was presented was very attractive to me and my team.”
Anaplan’s business-planning software can sit on top of any data repository, whether Excel or a supplier such as Oracle or SAP, and aims to help companies model and solve some of their most pressing financial planning and budgeting problems.
One company using these tools is building materials supplier Onduline. During the Covid pandemic and a subsequent slowdown in business from its trading in Russia, the company has been able to connect supply chain planning with revenue and forecast planning. This enabled it to identify which plant to select if it needed to close one, or which materials to move from one area to another based on demand.
The role of AI
On the AI side, Anaplan offers Optimizer, an algorithm-driven optimisation engine that aids complex business decisions by analysing billions of possibilities. AI and ML remove any emotional bias of the planner, according to Nadine Pichelot, vice-president of finance EMEA (CFO) at Anaplan.
“I remember that in the financial crisis of 2000, at the company I worked at, sales was very optimistic,” she says. “In finance, we were doing mathematical calculations and we were always right.
“It’s very good to have a modelling tool that brings you what the reality could be, to be compared with the human forecast. That’s what Anaplan enables.”
Other tools are available that apply AI to a specific aspect of the finance function. Sidetrade, an AI-powered order-to-cash platform, is designed to help firms manage and unlock cashflow.
Managing accounts receivable in large organisations can entail finance teams dealing with huge volumes of customer invoices. Doing this manually or using spreadsheets for order-to-cash tasks can cause headaches for businesses around overdue invoices.
Rob Harvey, chief product officer at Sidetrade, says: “By implementing an AI business solution in the order-to-cash space, CFOs can not only streamline manual tasks and reduce human error, but they can also leverage powerful insights from the AI and strategically plan for what is ahead.
“AI tools with large enough datasets can analyse historical transactions to forecast future outcomes and give users intelligent recommendations on the next best action moving forward.”
In an environment dominated by supply chain challenges, fluctuating costs and a bleak economic outlook, the key job of the CFO is to optimise resources in this new world of constraint.
CFOs need tools that enable them to go fast and shift quickly. For those companies not already using analytics and automation to enhance business processes in the finance function, the smart move would be to invest in this technology soon to deal better with the current and any upcoming financial turmoil.
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