Financial systems are an essential component of today’s organization. They have replaced manual ledgers and transformed how finance organizations operate. Gone are the days of manually tabulating sub-ledger transactions and transferring totals to the general ledger.
Many organizations have implemented financial systems solely as a way to collect transactions and summarize performance via traditional financial reports (e.g. balance sheet, income statement, cash flow). However, this approach fails to recognize opportunities to improve business performance that can arise from enabling business processes beyond traditional financial reporting. Here are a few examples.
Workflow: Organizations get their work done by executing various business processes such as new customer acquisition, product development, and production. Implementing a workflow system provides the benefit of creating audit trails that can answer key questions about how these processes operate, in real time.
In a manufacturing environment this information can include looking at scheduling manufacturing orders by breaking down the steps in the process and identifying who is responsible for each. This will allow the organization to analyze pending scheduling tasks and who is responsible for outstanding actions. This information can then be used to evaluate and improve performance, either by comparing performance of the same resource over different time spans or by identifying particular resources whose workload has exceeded capacity and require assistance.
Organizations that carefully think about their work processes will recognize that the opportunity to leverage workflows to increase business performance applies across the industry spectrum.
Management Dashboards: It is an established fact that goal setting can lead to performance improvements. This benefit arises from creating a clear link between actions and the impact those actions have on organizational goals, then aligning employee and divisional goals to the organization’s goals. Without a formal process around dashboards however, including making the results visible to the organization, the benefits of this exercise can diminish over time.
Management dashboards provide a framework to capture key performance indicators (KPIs) and demonstrate progress toward reaching those goals. Financial systems enable management dashboards by providing the information necessary to measure each KPI. Organizations that are able to identify a core number (think, less than 10) of KPIs and rally employees around reaching the goals specific to their roles should expect increased performance across the organization.
Planning: Financial organizations have long engaged in budgeting processes. These result in an annual budget against which financial statements can be measured. Sometimes the process is expanded to include future years, or revisited via regular updates during the year.
Financial systems now provide sophisticated modeling tools to capture underlying planning assumptions. These can combine very detailed employee/position, item, or customer information along with key business drivers, making it possible to generate and measure against various scenarios by controlling key business driver values. For example, what is the profitability forecast based on varying raw material inflation assumptions combined with wage levels and market growth? These questions can now be answered via planning applications without requiring brand new models and recalculations by the team. The insight provided via the planning process translates to a better understanding of the organization, better decisions, and increased business performance.
High performing organizations are those that get maximum value out of the resources at their disposal. Increasing business performance through better utilization of financial systems is a key component to achieving business performance that cannot be overlooked.
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