5 Keys for Finance Dept to Best Use of ITInformation technology [IT] plays a key role in the Finance Departments – and with companies looking to expand as they come out of the recession, never has it been so important. So, how can Finance Departments make the best use of IT? As businesses grow and explore new markets and activities, the challenge for the finance department is how to keep control of costs. The key is to create a standardized financial IT infrastructure that is agile enough to support the business’s growth and provide business intelligence to the desktop.

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Here are five keys to best use of IT in today’s economy:

 

Key#1. Harmonize Financial Processes

As the role of financial information technology should be to support financial processes, the first crucial action is to standardize financial processes across the organization. Larger organizations need to minimize the number of chartered accounts or global entities, and harmonize financial processes. For some projects, this can be as simple as making sure that the approval processes are the same for all departments before rolling out a company-wide expenses system.

However, for international companies it might not be possible to completely standardize financial processes across the organization. For example, if you have subsidiaries out of the country, you should realize that your organization has to file its tax returns in the country where the subsidiary is according to GAAP [generally accepted accounting principles]. In this case, you would need to rely on your local finance teams to find out what their needs are and try and incorporate those needs into the organization’s global strategy and systems, otherwise you will need to find a workaround. 

However, in long run you would need to harmonize it all on a single system rather than the use of duplicate accounting systems in some countries.

 

Key#2. Standardize On a Single Global Instance of Financial IT

With harmonized financial processes in place, it’s much easier to standardize on a single global instance of a finance package. Even if companies aren’t running different software packages, the chances are that they are running different versions and that these are hosted locally.  Take ERP for example, some companies have 14 different instances. Having too many instances means there is no real data flow in the organization. There is a need for them to have a single global instance, or regionally at the very least. This drives greater transparency for the organization.

For many companies, choosing their financial software is a fairly simple process. Sometimes there’s a package designed for their industry vertical, such as Elite for law firms, or they use an ERP package such as the one from SAP, and the financial function of that is a good fit. However, companies should be careful of buying SAP for the sake of it. Why?

Yes, I must admit that SAP is a super fast solution but it is big and expensive and takes long to implement. In my personal experience, Sage is emerging as a real competitor to SAP in some scenarios. For Example, a company may divest a business unit, which they will run more cheaply than their parent company. They would look at Sage as a general answer to the SAP quandary and they are still a very big business in their own right. While SAP can take nearly a year to implement, Sage can be fully functional in around a month.

 

Key#3. Automation, Automation and Automation

The key activity for Finance Departments looking to control costs is automation, I believe finance departments are starting to reverse the trend for transactional process offshoring that has served them well over the past decade. Thirty per cent of world-class organizations see the future in tools such as automatic invoice matching and payment allocation tools.

Tools such as these help Finance Departments digitize the whole financial process, from e-invoicing to payment allocation, with the so-called three-way match (invoice, PO and receipt). Through automation the whole process is sped up and errors such as duplicate payments are virtually eliminated.

Ultimately the system will give the finance organization more control, such as through enforcing budget checking, so that users are warned about going over budget before ordering. It will also allow companies to standardize on suppliers and gain economies of scale by channelling users towards ‘approved‘ suppliers.

 

Key#4. Consider the Benefits of New Technology

Of course one way to cut down the length of implementation is to look towards using a hosted solution. For example, Toy developer Bluw is one company that took that step. Growing from a small base to having offices in China, the UK and US, it needed a hosted package that met both its needs in finance and CRM. They ended up going with NetSuite primarily because of the cloud aspect and its scalability.  Not having the application on their server meant they didn’t need to worry about where they moved to: it is always there in the background and fully backed up. It also allowed them to support their office in Hong Kong where they do a lot of invoicing in HK dollars and US dollars and gave them have visibility in terms of control from the UK.

 

Key#5. Move From Transactions To Intelligence

The other benefit of moving towards automation is that the finance department is freed up to focus on higher-value activity – and the most important of these is business intelligence.

There is a lot of investment happening in technology solutions in finance around data warehousing and business intelligence to allow better forecasting, analysis and business support. This intelligence is crucial for companies as they look to expand after the recession, because the business will be able to rely on solid financial figures and forecasts to back up their strategic planning.

For example, an organization can strongly on business intelligence through Redwood BI tool, which allows it to put information directly into the hands of the people who will be able to make best use of it. It allows you to move away from paper-based reporting and put more information onto the desktop of the fee earners. They will have drill-down facilities so that they can dig down deeper into the data that they are receiving. And by giving this information directly to the end-user, the business is able to become more agile. In essence, much as in IT, the right technology helps align the finance department with business needs.