Finance Leaders Archives - X3 Consulting

With the latest announcement, businesses need to be able to adapt quickly to enable remote working and keep their businesses functioning smoothly, even if you’re not all in the same office. Most employees have had to adjust to a work-from-home environment again, and many of them are having to do so with their spouses and children in tow.

For finance, this remote work environment, combined with a troubled economy is even trickier. Finance departments are doing some of the most critical and challenging remote work in order to keep the business operations running smoothly. But their unique issues are often overlooked by how to make the business at large more productive and collaborative.

Although thought of as a backend function, Finance teams are on the front lines of the business now more than ever before. Along with customer service teams, they hear the financial distress of their customers firsthand. The effect that this alone can have on team morale can be significant.

As finance leaders continue to embrace their new normal, they not only need to lead a high-performing, remote finance function but also find ways to boost team morale.

Working remotely brings it own challenges so here are five areas worth focusing on.

Empower your employees to be confident decision-makers

Giving your employees more authority, trust, and flexibility in their remote working environments can pay dividends. Start by evaluating key finance processes for common bottlenecks and find ways to streamline.

Payment extensions are a good example of this since they often go through an upstream approval process. In a situation like this, consider whether you can empower employees to become decision-makers during the negotiation process up until a designated threshold.

Not only will this remove unnecessary bottlenecks and save time, but it can also contribute to higher productivity, greater confidence, and professional growth for your team.

Look for creative ways to scale your team

For smaller, two-to-three person finance teams, bandwidth can feel challenging in traditional environments. In a remote environment, it can feel overwhelming.

As Chief Financial Officer, helping your team become more scalable is critical. Here are some ways you can build a more scalable remote team.

  • Automate your dunning and reporting as much as possible. On average, one collector can handle over 300 accounts with a manual dunning process. If the process is automated, they can handle over 1,000.
  • Develop more meaningful training resources. Look for ways you can build out more resources and training processes for your team. Video recordings and finance playbooks are great assets to make readily available to your team.
  • Consider utilising contractors for short-term goals. If budget allows, outsource smaller, more time-consuming projects. You’ll free up your team’s capacity to focus on higher-value, more rewarding work.

Be a beacon of light in a dark time

During challenging times, finance teams have to have challenging conversations. You’re going to have to guide your team through some really tough situations. Avoiding surprises is generally a good thing, so give your team frequent updates about your bad debt expectations, DSO changes, and collections forecasts.

Spend more of your 1:1 time debriefing your employees and preparing them for what’s ahead and how to handle different scenarios. Consider building out a playbook for how to engage with customers and successfully navigate through different situations.

Feeling connected and rapid learning is important, so be sure to hold regular, virtual group meetings for the team to share experiences, insights, and best practices with each other.

Above all, make team morale your top priority. Now more than ever, CFOs need to be the finance team’s champion. Keep an eye on your team’s big wins, and find ways to call out individuals for their great work while celebrating the team as a whole.

Use data to gauge performance and morale

Take a closer look at the metrics you use to track the team’s performance, individual team members, and their productivity. Do they still make sense in the current environment, or do you need to make appropriate adjustments?

For example, right now many customers are struggling to pay their bills. This not only affects the performance of your company but also the performance of your finance team. Look at your portfolio as a whole, and then look at 30-plus days past due as a percentage of the portfolio. What number can you live with as a past-due percentage? Some folks even target the overall portfolio’s percentage of invoices past 60 or 90 days.

Then, update your team’s performance targets based on these adjusted percentages to better track individual performance against the new portfolio-wide target.

It’s also important to remember that during tougher times, regular 1:1’s and weekly meetings should remain your primary focus. These ongoing touchpoints and communication methods will allow finance leaders to gather the most reasonable data around their team’s performance and morale.

Remember that empathy matters most

Lastly and above all, empathy matters. Not only is your own business likely struggling right now, but so is your customer’s customer and their customer.  As a CFO, your top priority is keeping attuned to the feelings, challenges, and circumstances that your team and customers are going through, and then looking for ways to guide them through the uncertainty.

As humans, we’re biologically wired for connection, which can make the remote life even more challenging. Make it a priority to look for ways to celebrate small wins or personal achievements with your team. Encourage them to take mental escape days or establish a weekly meeting-free afternoon to help them catch their breath.

One of the positive outcomes of this pandemic has been the great lengths that individuals and organisations have gone to in order to connect with one another. As a CFO, keep looking for ways you can help your employees and customers in the spirit of generosity—and not worry solely about ROI.

If you’re a CFO preparing to lead your company into digitisation, no transformation is more important than making customers’ experience with your organisation better.

Nearly half (46%) of CFOs are facing increased demand to provide overall business counsel. Additional factors driving the changing CFO role include the availability of real-time data and increased compliance and regulation requirements, as well as the expansion of the role beyond financial management to include functions like IT and cybersecurity.

The enthusiasm behind introducing new innovations is, in part, being driven by the benefits finance leaders are already seeing. Approximately three-quarters (76%) of financial decision-makers currently drive digital transformation in their business. In addition, more than nine in 10 (94%) agree that financial management solutions are helping their teams optimise operations, while 92% believe these efforts can help automate and streamline the compliance process.

Here are four steps CFOs can take to ensure the digital transformation they lead creates value rather than simply cuts costs:

Examine the business model to understand what you’re providing to the customer

Any transformation that doesn’t keep the customer at the centre is a wasted exercise. Ultimately, you will digitise your processes, but be clear on intent. It must be about transforming your customer experience, the way the customer does business with you, and consumes your product or services with the latest tech.

Finance transformation on its own won’t produce impact, results or value if you’re not fundamentally changing your customer experience. You might automate, and you might make back office processes better, but if it doesn’t involve customers quickly getting information at their fingertips and finding your company easier to deal with, then it’s cost reduction, not value creating.

Examine finance, accounting and legacy processes

Upon examination, re-engineer them to fit the business model. Don’t adapt technology to your processes, which does not add value. Rather, change your legacy processes so you can leverage the power of new tech. The modern CFO is evolving from being a backwards-looking number collector to a trailblazing strategic leader who uses data and emerging technologies, like artificial intelligence and predictive analytics, to create a vision for the future of their business. The digitalisation of business is changing the way finance leaders work and embracing technological evolution will separate the leaders from the laggards in this new era. However, a lack of cultural readiness in the office of finance may slow adoption of new technology and hinder achieving optimal results with any digital transformation.

The enthusiasm behind introducing new innovations is, in part, being driven by the benefits finance leaders are already seeing. Approximately three-quarters (76%) of financial decision-makers currently drive digital transformation in their business. In addition, more than nine in 10 (94%) agree that financial management solutions are helping their teams optimize operations, while 92% believe these efforts can help automate and streamline the compliance process.

Right people, right skills

Use the right people, with the right skills, to understand tech and data, so they can analyse it and provide insights. A CFO must have all of these skills. You don’t need to make your finance people data engineers or scientists, but they need to understand and leverage data science within your function so you’re taking the maximum advantage and leveraging the new capabilities. What finance needs to know is the art of the possible. If you don’t understand the breadth of the available new tech, you can’t leverage the power new tech can provide.

Collaborate across teams

Build your capabilities around human skills by creating a function that’s able to collaborate with the rest of business, operate cross-functionally, and understand the needs of other parts of the business. Be able to influence, impact and change behavior based on clearly communicated insights.

The CFO and the office of the CFO are both positioned to look across the business from the front seat. They know, because of their involvement in numbers and reporting, that they understand the cross-functional impact. They should be driving that enterprise-wide transformation from that vantage point.

To do that, you need people with those human skill sets around collaboration, being able to problem solve, and think critically. These skills, widely talked about in the finance profession, are critical in today’s environment.

These are the four essential building blocks to successfully transform your enterprise, and how finance can play a pivotal role in driving that transformation.

DOWNLOAD OUR DIGITAL TRANSFORMATION GUIDE HERE.

SOURCE: Sage

Sage has published a Total Economic Impact (TEI) report on Sage X3 created by Forrester. The seventeen-page report uses the standard TEI methodology developed by Forrester to analyse the benefits, costs and risks associated with using Sage X3 in a global mid-sized composite company based primarily in the US and EMEA. The findings are based on nine in-depth interviews with companies that have used Sage X3 for more than three years.

The financial benefits

The report looks at the quantified financial benefits across a range of departments. In total, the composite organisation realised a risk-adjusted present value benefit of $2,366,986. This was broken down further by function with the top three benefits by value as:

  • Sales Management – sales discount savings $559,542
  • Purchasing – materials and productivity savings – $528,456
  • Inventory Management – reduced inventory levels $367,059

The report then breaks down each of these savings analysing how they were achieved and justifying the figures used. The Sales Management discount was calculated from the benefits that Sage X3 delivers through a centralised discounting approval process. With a centralised control of discount approval, organisations can ensure that guidelines are followed, and local discounting does not breach guidelines. This is perhaps the hardest number for Forrester to justify. Discounting can adversely impact baseline sales (Kopalle, Mela and Marsh).

Forrester is basing the figure on annual revenues of $125 million with discount avoidance levels of 0.2%. There is no reflection on if the more uniform discounting impacts revenue. It is also not clear from the report whether this saving is based on any statistical model or just an assumption. Did Forrester simplify the composite revenue number to show no growth over three years? A similar TEI report (registration required) about NetSuite indicated significant growth for the composite organisation across three years.

The savings for purchasing are better evidenced, though Forrester still uses some assumptions. Global pricing that Sage X3 can help manage and a reduction in FTEs annually make up this figure. Inventory Management benefits are probably the best quantified. The organisation saw a 12% reduction in average inventory levels (for some inventory)  and a reduction in headcount. The report is comprehensive, yet when analysed, deeper does not seem to fully evidence all of the findings.

Other benefits

While the main focus is the financial benefits, it is the qualitative benefits that may hold greater interest. These benefits include:

  • Workflow Automation enables the creation of alerts and notification that enable employees to work by exception. It makes jobs more efficient, as employees do not need to spend so much time reviewing and can spend more time taking actions and thereby make a difference
  • Streamlining document management with documents ingested into Sage X3 means employees across an organisation can see the same version of a document quickly. This reduces paper costs and decreases error rates. There is no financial saving analysis of either of these in the report.
  • Highlighted but not investigated are the benefits of Sage X3 working on mobile devices and the benefits of a centralised solution through M&A activity. There are several other benefits mentioned but not expanded upon in the report.

For example, benefits from implementing the manufacturing module include: “accessing manufacturing transactions and inventory in real-time with more accurate inventories and production schedules”. Other benefits also accrue from this simple statement: time saved from not having to do the monthly stock take, efficiency savings from using an online system rather than paper-based, both in terms of time and accuracy. One of the problems of taking a generic organisation is that some companies will adopt bar code scanners and mobile technology to drive greater savings. While some of this technology is mentioned, its use is not analysed.

Costs and Risks

The report also analyses the costs associated with deploying and maintaining Sage X3. As an aggregated example, it is interesting in that it shows the potential costs of deploying and maintaining an ERP solution. While the total NPV amount is $756,397, this will vary considerably. The sample organisations interviewed ranged across different industries and employee numbers from 50 to 900. Forrester calculates that an ROI is delivered within the first six months with a total ROI over three years of 213%. It caveats this by noting that most organisations would expect to receive payback within six to 12 months.

Paul Struthers, Executive Vice President for Medium Segment, Sage, commented: “For industries that typically operate on low margins, technology investment must come with a rapid and significant ROI. As businesses navigate the new normal, they will increasingly seek ways to make their operations more agile, optimised, and efficient – Sage X3 is an ideal foundation for just this.

Disappointingly Forrester only highlights the risks associated with its financial analysis. There is no separate category that looks at any risks associated with the project and whether these were mitigated.

Enterprise Times: What does this mean

The TEI methodology does provide a uniform way of analysing the benefits of ERP solutions. Without further details of how Forrester reached all of its numbers, it is hard to challenge or validate many of the figures used. However, the high-level findings from the report appear valid. Costing savings due to a reduction in FTEs is more straightforward to validate than some of the savings used.

The report also highlights some of the competitive advantages that Sage X3 offers. Notably the ability to deploy on-premise or in the cloud. One customer, a technology manager, noted: “The biggest advantage with Sage X3 was additional flexibility and on-premises installation, whereas other vendors were pushing for cloud services. On-premises was our preference, and Sage X3 was instrumental in its support.”

This also means that savings as a result of a cloud deployment are not analysed. The world is likely going to adopt cloud more fully in the coming months, partly as a result of the pandemic and lockdown. In virtually ignoring it, Sage has left itself open to criticism from other vendors. The diverse nature of the companies involved in creating this report is also a weakness. While it demonstrates the flexibility of the Sage X3 solution, it also makes the findings less relevant.

Prospect of Sage will find some findings interesting. It includes understanding the possible savings that they could achieve and the likely costs of any solution. Most importantly, what functions areas they need to consider as part of any project and what changes they can make. This latter point applies regardless of whether any ERP solution is implemented. Tighter control of discounting is an issue for many companies apparently. If there are savings to realise there, perhaps sales and finance need to first validate whether they have an issue.

The right partner is key for successfully implementing and supporting your Sage X3 solution. Whether you’re looking for a new ERP solution or migrating from another platform we’re here to help. If you’d like to find out more about how we can help you contact a member of our team on info@x3consulting.com or you can complete the contact form on the contact us page and we’ll come back to you shortly.

SOURCE: Enterprise Times: https://www.enterprisetimes.co.uk/2020/07/23/sage-x3-can-deliver-a-213-roi-within-three-years/