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Changing Roles and Responsibilities for the Office of the CFO

Wed, Sep 26, 2018 @ 06:08 AM / by David Fellers posted in CEO perspective, S/4HANA

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As companies grapple with accelerating changes across most global markets, they face critical challenges for staying ahead of competitors, sustaining growth, maximizing profitability, complying with regulatory requirements and establishing organizational agility to respond quickly to the unexpected.

In the face of these important forces, the Office of the CFO is evolving beyond a traditional focus on accounting, controlling and reporting and is now taking on a much broader scope within most organizations. 

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In addition to the traditional short-term, quarter-to-quarter pressures of closing and reporting financial information, CFOs are increasingly responsible for strategically important existential issues and business innovation programs.

Some of the Key forces driving change for CFOs:

  • Compliance with regulatory mandates
  • Unification of data sources and legacy data
  • Asset management, utilization and financing
  • Machine Learning
  • Cybersecurity and privacy issues
  • Movement to Cloud Solutions

Let’s take a brief look at each of these forces.

Compliance Requirements – New Mandates and Reassessment of Existing Regulations

Recent and impending regulatory changes to Revenue Recognition (ASC 606 and IFRS 15), Lease Accounting (ASC 842 and IFRS), General Data Protection Regulation (GDPR) and others are forcing companies to undertake significant changes to their accounting and reporting processes.  In addition, each of these major changes to accounting processes also will generate reassessment of Internal Control over Financial Reporting (ICFR) procedures and Sarbanes Oxley (SOX) compliance.

Beyond the accounting issues, these waves of regulatory change are also having major impact on overall business performance and investor relations, such as the income statement impacts of RevRec and the balance sheet impacts of Lease Accounting changes.  CFOs need to help guide their companies through these issues to assure compliance while mitigating or avoiding any negative business impacts.

Unification of Data within a Single-source-of-Truth

One of the most important challenges that companies must overcome to effectively compete in today’s fast-moving environment is the ability to make better and faster decisions.  In this effort, data is our friend, but it doesn’t always seem like it.  For most companies, the explosion of big data is happening across a diverse landscape of disconnected legacy data structures that are not conducive to fast or easy decision-making.  All too often, participants in the decision-making process are operating on separate sources of information that must be reconciled before they can even understand the issues that they’re trying to address.

Here again, CFOs are at the center of the financial transformation process that is vital for solving these “disagreeable data” issues.  By proactively moving to advanced platforms such as SAP’s S/4HANA that can bring together all data and transactional operations within a unified and highly scalable environment, CFOs can provide a “single-source-of-truth” to streamline the decision process and use data to bring people together rather than keeping them apart.

Asset Management, Utilization and Financing

Accounting organizations have always been responsible for the numbers related to corporate assets but in too many cases the actual acquisition and management processes for many leased and purchased assets take place in widely dispersed and often autonomous organizational units.  This has made it difficult to get a clear picture of asset deployment and utilization processes throughout the company.

In this case, one of the big regulatory changes around lease accounting (ASC 842 and IFRS 16) can have a positive and transformative effect on overall asset management processes.  Compliance with these changes requires companies to get a better handle on their assets inventory and conduct appropriate assessments for financial reporting.  A major side benefit of implementing ASC 842 & IFRS 16 will be the unification of information on assets within a single end-to-end process that not only meets the accounting mandates but gives decision-makers and line managers at all levels a shared view and standardized criteria for asset acquisition, financing, utilization and lifecycle management.

Machine Learning

This is an exciting arena that is destined to impact companies across a wide range of functions, including within the accounting group and beyond.  Machine learning uses statistical techniques to give computer systems the ability to “learn” and to automatically improve performance based on data.

Within the CFO’s domain, machine learning can significantly improve productivity and processing speed in transactional areas such as procurement, order-to-payment, cash management, etc.  By leveraging a unified data-and-transactional environment such as S/4HANA along with integrated analytics, new initiatives in machine learning can automate many of these repetitive processes and free up staff to more effectively manage the bigger picture.  In addition, machine learning is destined to transform many front-line processes in operations and even sales – so CFOs can act as a vanguard and guide for helping optimize these machine learning initiatives throughout the organization.

Cybersecurity and Privacy Issues

Everyone knows that cybersecurity is a major risk area that all companies need to continuously address. In addition, heightened focus on privacy issues such as GDPR in Europe along with similar initiatives in the US and around the world are spurring companies to improve controls over their collection and usage of other people’s data. 

Because of these external driving forces from the compliance side, in many companies the primary responsibility for privacy and security is shifting more toward the CFO rather than being handled solely within the IT department. While the implementation responsibilities and duty to safeguard information will continue to be shared across many functional areas, the overall mandates for cybersecurity and privacy compliance are most often landing in the laps of CFOs.

Movement to Cloud Solutions

This last area of change for CFOs is perhaps the most wide-ranging and is interrelated with all the issues discussed above.  Moving applications to the cloud enables companies to gain many benefits, such as lower infrastructure and capital expenditure costs, improved scalability, increased collaboration between users, consistent user interfaces, shared data structures, and easier upgrades.

Most companies have been moving toward the cloud already but in many cases it has been a piecemeal process of using targeted Software-as-a-Service (SaaS) applications for specific functions, such as CRM, marketing automation, sales support, etc.  Many enterprises are already running parts of SAP in the cloud as well with solutions such as SuccessFactors for human resources and Ariba for procurement.

CFOwordcloud2What is needed going forward is a more comprehensive approach to cloud migration that addresses the strategic issues relating to cloud solutions.  Here again, CFOs need to take the lead on defining the overall goals and laying out the roadmaps for implementation. 

With S/4HANA’s unifying approach and options for either on-premise or cloud deployments, CFOs have an excellent opportunity to chart a course for their companies that includes both near-term incremental opportunities and an overall vision for cloud across the organization.

The bottom line for CFOs is the need to step up and lead their organizations in all the six areas discussed above and to provide the enterprise-wide perspective to pull all these transformational pieces together. 

At Bramasol, we only have one question for you: “How can we help you get there?”

New eBook: S/4HANA is the Future: Understanding Why and How to Get There Download Now

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Compliance is Not a Sprint; It’s a Marathon.  Your Strategy Needs to Go the Distance

Fri, Sep 7, 2018 @ 06:30 AM / by David Fellers posted in CEO perspective

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Over recent years, companies throughout the world are experiencing a series of major changes in regulatory and compliance mandates that are disrupting existing accounting and business processes. 

Implementing new revenue recognition standards (ASC 606 and IFRS 15) has been the key emphasis during the run up to the January 2018 deadline.  Now, lease accounting (ASC 842 and IFRS 16) has taken the main spotlight with less than four months until the January 2019 compliance deadline.

There’s nothing like some hard deadlines to help focus our minds and energy, however for the sake of your company’s future, it’s important to not see these dates as short-term finish lines.  Instead, these deadlines on the calendar are actually just milestones in the longer run toward a culture of sustainable compliance that is woven into the core fabric of your . Taking the long view also enables companies to institute a Comply, Optimize and Transform strategic approach that leverages analytics and data integration to turn compliance into a competitive advantage.

In short, compliance is not a sprint.  It is a marathon and you need to view it as such.

You can’t just treat compliance as a short all-out sprint in your street clothes, after which everything goes back to normal.  This approach will just leave you and your organization exhausted and still well short of achieving important long-term compliance integration goals.

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For example, it is way too soon to breathe a sigh of relief and declare victory over revenue recognition. Although new standards were effective on January 1, 2018 for most public companies with calendar year-end closing, the mandated disclosure and reporting requirements are continuing to drive ongoing ripples of change throughout most organizations.

Those long-run minded companies that invested in purpose-built, comprehensive RevRec solutions, such as SAP Revenue Accounting and Reporting (RAR), have proactively laid the foundation for continuous compliance that enables tight integration with advanced analytics and core finance processes.

On the other hand, sprint-minded companies that focused instead on minimizing disruptions by using “solutions” such as offline spreadsheets or other non-integrated RevRec software are now facing even harder choices ahead.  This means that every quarterly or annual reporting cycle going forward will perpetuate the inherent hassles of their short-term thinking.  Instead of smoothly extracting the needed RevRec information directly from finance operations and keep a steady pace over the long run, CFOs and their staff in these companies find themselves running that same sprint over and over again.

Even some choices that seem safe in the short run can turn out to be dead ends. Take for example, companies running SAP ECC environments that opted to use SD RevRec in ECC as their quick road to revenue recognition compliance.  Now, as they look ahead to the future of SAP with S/4 HANA, these companies have discovered that SD RevRec will no longer be supported. Oops, dead end!

If you’re facing this specific challenge of how to get from SD RevRec to RAR supported in S/4 HANA, you should check out Bramasol’s upcoming webinar on September 20, 2018 titled “SD RevRec is Dead. What Now?”  Listen as our RevRec Center of Excellence experts talk about the right sequence – RAR first or S/4 first, or is it simultaneous. What are my data considerations and how can I ensure a smooth transition?

Viewed from the big picture, trying to run an endless series of sprints puts a lot more wear and tear on your organization when compared to setting out with a marathon strategy from the start and charting out a pace that considers all of the hills, obstacles, curves and straightaways that must be traversed to achieve your end goals.

But take heart; even if you started out with a sprinting mindset, with a good understanding of long-term compliance strategies and effective coaching from a knowledgeable partner that knows the terrain ahead, you can effectively shift to a well-planned long-term strategy built to keep on winning over the long run.

Marathon

 

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Building Finance Innovation upon a strong Compliance Foundation

Sat, Aug 11, 2018 @ 04:43 PM / by David Fellers posted in CEO perspective, finance innovation

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We can all agree that any physical building needs to have a strong foundation to assure safety of the occupants and sufficient resilience to maintain structural integrity against external forces, such as wind, flood, earthquakes and other potentially damaging events.

StrongFoundationFor CFOs facing the challenges of dynamically changing regulatory requirements, establishing a strong Compliance Foundation is also vital for avoiding the risks of non-compliance, such as legal sanctions, while also ensuring adaptability for accommodating ongoing changes driven by both internal and external forces.

Some companies view new accounting standards as specific painful topics that need to be handled with ad hoc, standalone solutions.  The thinking behind this approach is to “limit the impacts” and minimize changes to other related financial and operational processes.

However, this line of thinking is inherently shortsighted.

Over years of helping many companies on their journeys to compliance with new standards such as ASC 606, IFRS 15, ASC 842, IFRS 16 and others, Bramasol’s experts have found that embracing the changes and making them an integral part of core financial operations is a much more effective and efficient approach. 

Rather than trying to limit the impacts of changing compliance regulations, forward-thinking companies proactively incorporate them as key elements in the central foundation for all related processes.

FoundationDetailAt Bramasol, we firmly believe that Compliance Innovation Empowers Overall Finance Innovation.

Every new compliance program and solution should be treated as an additional important building block to be tightly integrated into the underlying core foundation, and bound together using connective “mortar” such as comprehensive analytics, shared in-memory data sets, agile reporting, configurable dashboards, and built-in disclosure processes.

When deploying compliance solutions that should integrate seamlessly within comprehensive business processes, we always start by looking for solutions that are designed to work with core ERP and Finance systems.  For example, SAP Revenue Accounting and Reporting (RAR) is integrated with SAP FICO and has the flexibility to act as an agnostic engine for revenue recognition with other ERP environments. On the lease accounting front, SAP Contract and Lease Management provides a compliance solution that integrates across existing SAP platforms and directly accesses core data sets.  Looking forward, both of these solutions are designed to integrate with S/4HANA (on-premise or cloud) and Bramasol is proactively providing analytics and disclosure solutions to leverage these integration opportunities.

To help with rapid deployment while still maintaining tight integration, we’ve created purpose-built compliance and disclosure solutions, including our Rapid Leasing Compliance Solution and Rapid RevRecReady Compliance Solution.  Both solutions expedite the implementation process by leveraging pre-built capabilities while providing robust compliance coverage for the relevant regulations.

In keeping with the overall philosophy of building a solid and comprehensive Compliance Foundation, all our purpose-built solutions make use of core SAP Cloud Analytics and data sources, which minimizes duplication, enhances productivity and eliminates isolated pockets of data.

As illustrated below, by building all your compliance activities on a solid foundation of SAP S/4HANA, SAP Cloud Analytics and agile dashboard technologies, each pillar of compliance and finance innovation can be directly integrated with core processes and data.  This makes the entire structure more efficient and improves the coherence between various compliance efforts and ongoing operational activities.

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If you’d like to learn more about this approach to building a comprehensive Compliance Foundation, visit here to request a consultation.

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New eBook: S/4HANA is the Future: Understanding Why and How to Get There Download Now
Download the eBook: Transitioning to ASC 842 using the Portfolio Approach to Group Leases

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