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Finance Transformation in India

Narendra Kumar

| Updated: Nov 01, 2017 | Category: Finance Business

Finance Transformation

Finance transformation is used to describe strategic initiatives aimed at improving Finance within a company

What Is Finance Transformation in India

In recent decades, India’s growth story has been difficult to ignore. Today, organizations are squeezing their finance and accounting functions like never before. Process owners are challenged with managing dual organizational mandates around cost optimization and revenue growth. While one involves raising efficiency – looking for ways to automate and reduce organisation cost the other involves investing in transformation and business innovation to capture and dominate the market.

What is Finance Transformation?

Finance transformation is used to describe strategic initiatives aimed at improving Finance within a company.  It can include a variety of tasks, from shortening a budget cycle to implementing new Accounting software to reducing overhead costs. The goal of any transformation is to align Finance with the overall company strategy in order to become more efficient and provide better service to their internal customers.

Finance: Traditional approach

  • Multiple vendors owning and managing different contracts for development, maintenance and operation outsourcing.
  • Huge investments from the customer organization into vendor management
  • Customer owning the capital assets
  • Inflexible/inelastic capacity which does not ramp up or down easily
  • Fixed price or T&M based commercials with little relevance to operational volumes or performance.

The Finance Transformation Roadmap:

Traditional approaches worked very well as transactional work. However, the expectation is rising. Organisations are rethinking operational structures and capabilities needed to power tomorrow’s shared services engine. Newer models will be built at the synergistic intersection of technology, analytic techniques and processes:

Focus on fewer vendors and capital assets:

Newer centres are consolidating technology, process and analytics to create platform agnostic F&A solutions.

Best in class delivery:

Providers of shared services are expected to bring in deep industry knowledge and domain expertise. They need strong technology fabric that allows optimum utilisation and automation of processes.

Automation to maintain long-term cost controls:

Shifting, simplifying and standardizing corporate processes into the shared service centre will continue around F&A and Human Resource. We believe that shared services success increasingly depends on higher levels of automation around transactional work.

Enabling next-generation shared services value:

Taking a best of breed approach, next-generation shared service centres will require organisations to reconfigure service capabilities to support areas such as cash flow management, optimisation of material costs, more operational transparency and better risk management.

New commercial models:

As shared services move up the value chain, commercial models for the ecosystem of companies will need to evolve. This will allow shared services centres to deliver value and throughput based models to internal business groups.

Biggest Hurdles to a Successful Finance Transformation:

Specifically, benchmarking against “world-class” metrics can lead to the following problems:

Cost focusing: Managing costs is indeed an important aspect of Finance transformation, but it must be realistic. Companies incline to use an industry standard benchmark, often cost as a percent of revenue, as a target for their own team, which usually means significant blanket budget cuts.

The complexity of Business: Rapidly changing markets, technology, and business ventures make it increasingly difficult to anticipate the analytical needs of a company. Consequently, it is important for companies to allow for some churn as they go through and learn new integrations, analysis, and processes.

Satisfaction of customer: By trying to do too many things, a company can be detracted from focusing on areas that are most profitable for the company.

Financial Transformation – Newer operational model:

Integrated process and technology to enable finance and accounting transformations. Automating financial and accounting processes has some significant advantages. Which formalize workflows and enforce financial controls, and ensure uniform reports and analyses.

The most important aspect of Finance transformation is having a clear vision. What your Finance team should play a role?

Finance transformation is not a matter of choice. Any Company wishes to remain competitive, they must consider the changing role of Finance in helping the entire organisation create greater value. Through international corporations operating across a score of markets, many of them emerging and fast-growing, old financial operational models are simply not effective.

The identical challenges of compliance and globalisation, international corporations must transform both the way their Finance function operates and its relationship with the wider business. The acquiring new skills and new technology, as well as an understanding of the impact of the new regulations on the whole organisation and then Finance, must take the lead in advising the board and management on how to operate under them. Which meant a new, more strategic role and mandate for the Finance function at the heart of the business, combining greater visibility, agility and efficiency with a firm grasp of the business’s long-term strategic needs.

Set goals to guide you to your future state;

Focus on the return on investment for the company, rather than cost to serve. As you go about this, remember to:

  • Be specific: For example, to be more efficient, you need to standardize Accounting close cycles between every global office or to provide more analytics, perhaps you have to integrate accounting/financial systems with marketing customer data systems.
  • Decide what to stop doing: This is an often overlooked strategy in transforming Finance. In order to truly deliver value to a company and focus on the most profitable initiatives, you must eliminate low-value activities.
  • Manage business partner expectations: Do not aim for universal business partner satisfaction, as that will prevent you from putting enough time into the most important tasks. Work with each of your constituents to scope out and prioritize work.
  • The transformation shall be continuing process and not a one-time exercise: Do not be afraid to revisit your transformation plan as the business continues to evolve.

Conclusion:

Over the years organisations have benefited from consolidating their finance functions across multiple sites to one or multiple centralised locations. With emerging digital value chain and business focus on agility, these process and systems are being stretched to perform roles for which they were not traditionally built.

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

Business Plan Consultant


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