A Companion Guide to Finance Transformation:

Finance transformation. It’s a term applied to a wide range of business initiatives, but it isn’t a catch-all endeavor, and the drivers of finance transformation initiatives vary greatly.  In some cases your initiatives will be driven by specific events, including system migrations, or a change in operating model such as outsourcing to shared services. In others, they will be inspired by a general realization that your organization needs to become leaner, more resilient, and more intelligent to remain competitive and financially robust in a changing landscape.  And finance transformation initiatives often have different priorities or focus areas. Perhaps improving cash flow, reducing costs, or accelerating productivity?

Process mining is a technology that’s used to model, analyze, and optimize business processes. Think of it as an MRI that shows how your processes actually run — not how you think they run — and identifies value opportunities within those processes.  Faster and far more accurate than subjective process mapping, process mining offers objective, fact-based insights to enable data-driven decisions. It layers on top of your existing systems, helping you to leverage existing technology investments without disrupting your business.   Within the finance organization, opportunities to drive immediate value and accelerate transformation initiatives include optimizing working capital to improve cash flow, cutting costs in processes such as Purchase-to-Pay (P2P) or Order-to-Cash, or accelerating productivity across the Accounts Receivable (AR) or Accounts Payable (AP) teams.

There are value opportunities to be found across processes in AP and AR that will improve working capital, and ultimately free cash flow.  In AP, this may mean purchasing with the most favorable terms to ensure optimal payment time, for instance by addressing short payment terms. It may also mean eliminating payment term mismatches that unnecessarily drive down Days Payable Outstanding (DPO). In AR, opportunities include optimizing payment terms and reducing late billing, as well as streamlining and intelligently prioritizing collections based on data-driven insights.

Cutting costs is a common goal of strategic finance transformation initiatives, whether that’s by reducing the cost of goods sold (COGS) or minimizing selling, general and administrative expenses (SG&A).  Improving contract usage is one example that encompasses multiple use cases, such as eliminating contract leakage or analyzing spend to create new contracts. Cash discount realization can also be improved by prioritizing invoices to drive on-time payments, and leveraging real-time reporting on open blocked invoices.    In addition, duplicate payments can be eliminated by using real-time analysis to flag similarities in invoices or outgoing payments. And bad debt expense can be minimized by using real-time, data-driven risk assessment to inform credit limits.

There are multiple ways you can boost productivity and drive immediate value to accelerate finance transformation initiatives. Simplifying procurement is one use case, which could include reducing discrepancies between purchase requisition (PR) and purchase order (PO) documents by matching against the organization’s master data.   You can also minimize AP throughput time by streamlining common actions such as goods receipt (GR) follow up that may otherwise delay invoice processing. And you can accelerate dispute discovery and shorten dispute cycle times in AR through data-driven identification of likely issues.

Your finance transformation initiatives rarely just involve one team. And they rarely stay with the finance organization itself, but are often impacted by other departments across the business. That means they involve a complex web of interconnected processes. Without full visibility into these processes, finance transformation initiatives are almost guaranteed to fail. To understand where the real value opportunities are — and implement the data-driven apps and automations that will allow you to act on them — you need end-to-end visibility.

When organizations are looking to improve high-level financial results — whether that’s by reducing costs, improving cash flow, or increasing productivity — the focus is rarely on individual business processes.  Business leaders are unlikely to think small changes to individual operational processes can achieve the type of impact they want to make on high-level KPIs. But these hidden value opportunities can have an enormous impact, and that case will inevitably have to be made when your organization is considering process mining.