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The Finance Function in the Digital Era

Workshop
by

Mats Frantzen

on 30 October 2016

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Transcript of The Finance Function in the Digital Era

62
ECG
bpm
Thank You!
Adapt and respond:
Terminate the budget
Design adaptive systems from the customers perspective
Manage through continuous planning cycles
Make rolling forecasts the primary management tool
Report key metrics daily and weekly
Enable fast access to resources
Focus accountability on the relative improvement of teams
Learning and action
Measure to learn and improve
Choose the right measures
See measures as patterns, trends, and abnormalities
Provide external reality checks
Use a range of measures to inform a dialogue
about management performance
CFO as project owner
Key takeaways
KPIs and scorecards
for the Finance function and Company
Culture
Innovation
SMT agenda
Learning loop
Measure

Improve:
Drive learning and action by right measures
-Context
-Simplify
-Analyze

-Adapt
-Improve
-Key take aways
The Finance Function in the Digital Era:
Finance function basics
Compliance
Financial Reporting
Cost control
Analysis
Capital planning
Business partnering
Decision support



Simplify
-to avoid information overload
Analyze
1
2
3
Company focus
Understanding
historic performance
Optimizing the future
Future
Past
Present
?
Deviations to budget/Forecast
Understanding drivers:
-budgetting error or wrong assumptions?
-On off or lasting change?
-Income or cost
-Income: price or volume
-Cost: variable or fixed?



Managing based on rolling forecast and relative performance
A CPM culture starts from the top
Senior management team should focus on strategic planning with a long horizon
Setting direction and limits for focus of lower level mgt
Empower the organisation to operate and succed within those limits.





Finance function context
Global context
Consumerization
Sustainability
Regulations
Selfservice
Collaboration
Sharing
Bring your own device
24/7 society

Technology context
Internet of Everything
IT companies
Country context
Population
Highly educated population
Growing and aging population
Urbanization
Advanced technology consumers
Fixed working hours

Macro
Flattening growth
High labor costs
Low and declining entrepreneurial activity
Dependance of fossil industry income
4
Mats Frantzen
Senior Advisor / Business Manager

The Finance Function in the Digital Era:
A Profitbase Workshop
Snapshot
03 What is a finance function doing?
Where is the management focus?
Why should the Finance function take lead?

-An ideal finance function spends:

very little time
on reconciliations and minimal amount of time reporting
on what has happened
.

the majority of its time
trying to
anticipate what's going to happen in the future
,
and to ensure that the company operates with
tight controls and great processes
.

Gary Crittenden, former CFO American Express
Manage by Exception
Don't wait

Create favorable conditions
Define the scope, sucess criteria, ect,
Own solution and process.
Set the expectations
Launch when ready
Simplicity is the ultimate sophistication

-Leonardo da Vinci

Transaction processing
General ledger
Reporting systems
Signal vs noise
Devolve decision making
Control vs decision support
Agenda
Social
Mobile
Analytics
Cloud
Turbulence
Improve & measure
Simplify
Analyse & advise
Measuring or adding value?
04 Why avoid information overload?
05 What challenges will we face?
07 Why would anyone terminate the budget?
Shared service centers or outsourcing
Costs
Flexibility
Careers
Redundancy
Accounts payable, general ledger and mgt reporting operations
1 ERP
1 GL
Value asessment
Lean

Goods received
Match PO?
Yes
No
Payment
Goods returned
Lean Finance
Value asessment
Automate standard
Self service
Remove Variance reports

Internal detail vs external risk and opps
Variation: common cause or one-off?
Statistical process control

Filtering
Filtering data
Decisions and data delegated
Patterns and trends
Costs under control?
Right direction?
-To become an advisor
Automatic reimbursment
Design controls for 99%
Random sampling (simple, powerful, inexpensive)
1% cheating -> dismissal


Patterns and trends
Costs under control?
Right direction?
Strike the balance
Finance specialism:
Tax
Treasury
Statutory reporting
Compliance, policies and best practises
Accounting and control
Decision support
Consolidate systems
Automate processes
Consolidate activities (SSC)
Process control
Corporate Function
Strategic Planning
Forecasting
Data Capture and Analytics
Business Performance Analysis
Business Case Support
Mergers and Acquisitions (M&A) / Divestiture
Finance function focus
Low
High
Control
Role of finance
Low
Decision Support
High
Analysis and advice
Problem solving
Business partner
Involvement in decision making
Front office (business team) support role

Minimal central finance operation
Accounting and control within shared service centers
Decision support within business teams
Best-practice focus on improvement

Stewardship
Accounting and reporting
Compliance and control
Back-office (corporate) functional role

Unacceptable performance
self-driving cars, smart cities, connected homes, health and fitness apps
How are you feeling after yesterday?
OPtimistic?
How are your job prspects?
Yesterday was about showing ywhat tools are availabel and how it is used today.
Today I will try to make you a bit worried about what challenges you and your emplyers will face tomorrow, if not already now, and the innovation preassure it is putting on finance functions and the organisations.
The added difficulty for finance is that it is in its nautre a concervative function with concervative people.
The innovators are attracted to marekting, product development and so on.
The rutine tasks are going to dissapear to a large extent. Automation, outsorcing and robotics will take care of that.
What will remain, is some specalised roles around compliance, processes and regulatrions, and strategic roles invovleing decision support and advisory.
Beacuse the time are chanig, as always. but thtime is different.

What is the digital era?
customers and employees
mistaken for being netshopping and facebook
the major impact is within companies how they operate
automation
robotics
analytics

No ordinary disruption
The rise of emerging markets
The accelerating impact of technology on the natural forces of market competition
An aging world population
Accelerating flows of trade, capital and people

The Four Global Forces Breaking All Trends:
No Ordinary Disruption: The Four Forces Breaking All the Trends
(McKinsey Global Institute)

Example:
NCH Shared Services
Example: EnterCard
Quality information
Develop integrated systems
Reduce dependency of spreadsheets
Performance team
Recruit the right people (attitude)
Communication and teaching skills
Understand the business
Pipeline and sucession planning
Data driven
Challenge conventional wisdom
Don't settle
Skeptic, not cynical
Is increase in market share always good?
Is every customer a good customer?
Do sales incentives drive performance improvement?
Is maximizing production volume the best way to reduc unit costs?
Finance function basics:
Compliance
Improve performance
Improve customer experience
Amazon Web Services
a $5 billion business, and growing 50% a year
08 Why should Finance drive learning and action within the company?
Full transcript