The 8 Biggest Questions About Finance Transformation, Answered

September 15, 2023 Theresa Rex

Elmer Sarmiento CPA Expert in the Finance Transformation Strategy Q&A Graphic

If there were a 2024 finance function bingo card, finance transformation would be the free space right in the middle. The rapidly evolving mandates and roles within it coupled with innovative new tools that enable success in managing both have driven the conversation within finance and accounting for some time now. Still, it feels like the finance transformation strategy is everywhere this year. It's even the topic of our September CFO Leadership Live panel discussion!

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We're not the only ones talking about it, either: last month, Personiv's own Sr. Associate VP of Finance & Accounting Operations — Elmer Sarmiento CPA, MBA — led a fireside chat on the finance transformation strategy topic at the DigitalCFO Asia 2023 Symposium.

We're never one to miss a chance to showcase the expertise of our outstanding talent, so we asked Elmer to help us take a deep dive into financial transformation with this Q&A. In between graduating with a master's degree in business and lending his expertise to a whole other panel on artificial intelligence, he was kind enough to sit down with us.

Without further ado, here are eight expert answers to eight burning questions about transformation within the finance function:

What is a Finance Transformation Strategy, Anyway?

Q: What is your definition of finance transformation strategy, and what are its benefits?

A: Transforming a company's finance department is an all-encompassing strategic initiative to boost productivity, sharpen decision-making, and increase value. It entails rethinking and improving financial procedures, adopting cutting-edge technology, streamlining business operations, and coordinating the finance department with the company's long-term objectives.

Q: What are some common drivers that cause organizations to embrace transformation in the finance function?

A: Internal and external causes often drive finance transformation, such as technological progress, market disruptions, cost optimization, regulatory changes, strategic considerations, and shifting company and customer needs. Companies that value agility in the face of constant change are more likely to embrace finance transformation and reap its many rewards.

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Q: Can you share any real-life success stories that demonstrate the benefits of transformation in the finance function?

A: At my previous company, we were among the first to deploy RPA technology in our industry; it was perceived as a gamble due to the high investment needed. It took quite some time before our board was convinced — we needed proof of concept.

We invested in a few licenses and deployed them on highly repetitive and time-consuming processes such as tax calculations and return filing as well as three-way matching of accounts payable documents. The result was increased efficiency in the form of a 70 percent reduction in the time spent on those tasks. We learned from this project that automation entails digital acceleration as a precursor, and that to keep seeing results from technology like this we'd have to be willing to take initiative.

Why Do Finance Transformation Initiatives Fail?

Q: What are the most common challenges that you see businesses face during finance transformation strategy initiatives?

A: Any time you're talking about "transformation", you're talking about a process — probably a lengthy and complex one — that requires the synchronization of its moving parts. When companies bump up against challenges, it's usually because they've encountered:

  • Resistance to Change: The most critical problem is workers who don't want to change. Changes in roles, duties, and new technologies are typical parts of finance transformation. Employees might not like these changes because they fear the unknown, feel unsafe in their jobs, or need to know the perks.

  • Poor Data Quality and Integration: Financial transformation depends greatly on data, and it can be hard to ensure that data is correct, consistent, and integrated across different systems. Data quality can lead to accurate financial information, which makes it easier to make decisions.

  • Legacy Systems and Processes: Many companies still use old, manual processes and systems that have existed for a long time. Integrating these systems with current solutions can be tricky and take a long time, making moving data and automating processes hard.

  • Lack of Skilled Talent: Implementing finance transformation projects requires employees with specialized skills in data analytics, data science, and financial technology. Finding and keeping these skilled workers in a competitive job market can take much work.

  • Budget Constraints: Organizations may have to spend money on financial change. Small budgets and other economic problems could make it hard to implement specific technologies or grow the transformation effort as much as would be ideal.

  • Organizational Silos: Finance transformation projects may involve breaking down silos and getting different teams or business units to work together. Transformation can take longer if organizations don't want to share information and work together on goals.

  • Underwhelming Change Management: For finance transformation to succeed, you must be able to handle change well. Change management that needs to be done better can cause confusion, lower output, and project delays.

  • Regulatory Compliance Changes: It can be challenging for companies in highly regulated industries to adapt to new regulatory requirements and ensure compliance during the transformation process.

  • Data Security and Privacy Vulnerabilities: As we digitize and use technology more, data security and privacy have become critical issues. Finance departments deal with private financial information, so it's essential to ensure data security and privacy laws are followed.

  • Multiple Transformation Initiatives: Organizations may have several transformation initiatives simultaneously, such as digital transformation, process improvement, and culture change. Integrating these projects and ensuring they work well together can be difficult.

  • Time Constraints: Finance transformation projects can take a long time, especially if they involve making significant changes across the company. Finding a good balance between the need for quick results and the need for careful planning and execution can be challenging.

Q: What are some proactive steps they can take to overcome these transformational challenges?

A: Leadership is critical. So is clear communication, organizational engagement, risk assessments, and mitigations. Set clear and attainable targets and celebrate every milestone. Manage stakeholders' expectations that only some objectives will be met as initially planned. As we go further into the process, more nuances and exceptions will be discovered, leading to further plan iterations.

Can Leaders Align Transformation in the Finance Function to Goals Outside of it?

Q: What key strategies or best practices can businesses implement to effectively align their finance transformation efforts with their overall organizational goals? Does it even matter?

A: Yes! Transformation in the finance function is vital to organizational success strategies and moving the needle on bigger goals depends on smart alignment. Here are some ideas to think about:

  • Define & Understand Goals: Start by stating the general goals and objectives of the organization. This means knowing the long-term vision, growth goals, cost-optimization goals, and other key performance indicators. Finance transformation efforts should align with these goals to directly contribute to the company's success.

  • Take a Collaborative Approach: Get critical people from different areas involved in modifying how finances work. Work with business leaders, operations, IT, and other essential teams to determine their needs and expectations. This collaboration will ensure that the changes to the finance department are made to meet the needs and opportunities of each part of the company.

  • Deploy Data-Driven Decision Making: Stress how important it is for the finance unit to make data-based decisions. Make sure that the efforts to change how finance works lead to better data analysis and reporting, which will give the company helpful information for strategic planning and decision-making.

  • Develop a Thorough Transformation Roadmap: Make a detailed transformation roadmap listing specific projects, timelines, goals, and expected results. This roadmap should align with the organization's general strategic plan, and progress should be measured and shared regularly.

  • Hone Your Change Leadership Skills: Change management should be a top priority in order to deal with the "people side" of development. Let people know why finance transformation is essential, explain the benefits, and get workers involved. To get people on board with the changes, address concerns, give training, and celebrate wins.

  • Empower Teams to Take Ownership: Give finance teams the power to own the change process. Encourage groups to think of new ways to do things and let them try out new technologies and methods. This will help drive continuous growth.

  • Remain Flexible and Embrace Agility: Changing how finance works is a continuous process, and business situations can change quickly. If teams can maintain a flexible mindset and build agility into the finance transformation process, they'll respond well to new challenges and possibilities.

  • Keep it Customer-Focused: Make sure that the changes you make to finance help improve the customer experience and happiness. Align financial processes with what customers want and need and give helpful information that can be used to support customer-focused strategies.

  • Measure and Share Success: Set up key performance indicators (KPIs) to measure how well finance change projects are doing. Track progress against these KPIs regularly, and let partners know what you find. The transformation attempts will be more valuable if they show real benefits.

  • Always Be Learning and Improving: Ensure the finance department has a culture of always learning and improving. Encourage employees to stay current on industry trends, best practices, and new technologies to ensure that transformation efforts are valuable and practical.

  • Secure Buy-in From the Top: Get strong backing and sponsorship for your finance transformation projects. Having the support of top leaders will help overcome potential roadblocks and show the whole organization how significant the change is from a strategic point of view.

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Q: How do you ensure effective communication and collaboration between finance and other departments during the finance transformation strategy process?

A: During periods of transition and transformation, it is crucial to establish the stakeholders, the project champions, the process owners, and the project team members.

Establish clear communication channels and how you'll use them, such as a regular reporting cadence, issue and opportunity tracking, escalation matrices, aligned metrics, deciding factors on project deviations, and who can authorize such actions.

Deviations may be inevitable as there are unknown variables during project inception, so current and future state process maps must clearly articulate task ownership, output metrics, and who owns what.

Collaborative tools and technologies can facilitate real-time information sharing and streamline workflows across departments, ensuring everyone stays aligned and informed from start to finish.

Q: How can finance leaders ensure that their teams have the necessary skills and capabilities to adapt to the changing landscape of finance transformation?

A: Leaders must invest in functional training and development programs! Finance executives can equip their teams with the know-how needed to navigate the evolving terrain of financial transformation, the future of work, and the changing overall market landscape.

Offer opportunities for cross-departmental learning and cooperation with programs designed to help workers become more proficient in areas like data analytics and automation. CFOs can — and should — build an environment where employees are free to try out novel solutions to problems by cultivating a culture of innovation and adaptability.

Can CFOs and Other Leaders Build a Future-Proof Finance Function?

Q: How can businesses leverage emerging technologies to optimize finance processes and enhance decision-making capabilities?

A: Organizations can leverage emerging technologies such as artificial intelligence (AI), machine learning, and robotic process automation (RPA) to optimize finance processes and enhance decision-making capabilities.

These technologies can automate repetitive tasks, improve accuracy, and provide real-time insights for better financial analysis. Additionally, there has been a massive shift towards cloud-based solutions and data analytics tools, which offer scalability, flexibility, and advanced data visualization capabilities for more informed decision-making.

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Q: What trends or developments do you foresee in finance transformation, and what should businesses do to stay ahead of the curve and remain competitive?

A: I think we'll continue to see a lot of what we've discussed here. It's on everyone's minds and needs to be built into their strategies, as well. Gartner's annual study does a great job of highlighting finance leaders' top 5 priorities for 2024: finance transformation, change management, technology strategy, and employee experience.

Finance departments will likewise prioritize digitalization and automation in 2024. Digital tools and systems for collaboration, communication, and efficiency are needed more than ever as remote work and distributed teams become increasingly common. I expect to see continued use of AI, machine learning, and RPA to improve procedures and cut costs in 2024. We'll also see growth in the adoption of cloud-based solutions and SaaS models, allowing financial professionals to access critical data and insights anytime, anywhere.

In a nutshell? Financial transformation in 2024 will be driven by digitization, automation, data and analytics, ESG and sustainability, resilience, and risk management.

Elmer Sarmiento during digital cfo asia event discussing the finance transformation strategy

Elmer Sarmiento is currently the Senior Assistant Vice Principal of Finance & Accounting Operations with Personiv. He has 23 years of finance experience and is an adjunct faculty member in the College of Business, Management & Accountancy of De La Salle Araneta University.

Before joining Personiv, he served as CFO of Business Process Outsourcing International. He also served in leadership roles focusing on process transitions, project management, and service delivery for Conduent-formerly Xerox Services, She Shared Services Asia BV & Maersk Global Service Center.

Want to work with Elmer and his team? See what else makes our Manila's finance and accounting bench so special, and then let's talk!

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