Today’s CFO is the hero of the hour – a leader who can drive the adoption of Cloud-enabled processes and deliver digitisation across the organisation, says Jeremy Marchant, Head of Pre-sales, International, at Aptitude Software
If financial services focus on a shiny frontend user experience, without a reformed backend supporting it, success will always be limited. Think of a Rolls Royce, but with a broken engine. Clients will be unlikely to part with their cash for a luxury car again.
“If the backend isn’t revolutionised, then no matter how good the frontend, at some point, the back office systems will be a brake on the organisation,” says Jeremy Marchant, head of pre-sales, international, at Aptitude Software. And not only will this stop new products being launched, but there will also be control issues and limits imposed by regulators further down the line, he warns. So, the cost and effort of updating back-office legacy systems will inevitably be worth it in the long run.
As such, Marchant believes the person best placed to lead this digital transformation in any organisation is the chief financial officer (CFO). For it is he or she who can drive change across the company if they get a true handle on data and then automate processes in the Cloud to achieve cost efficiencies.
That’s not been the archetypal image of an accountancy-driven role, he admits, but, increasingly, it is now the expectation.
“If you look at survey after survey, the CFO is expected to be the digital leader in an organisation, not just in his or her own function but across the organisation,” he adds. “If the CFO won’t do it, then the chief executive will find someone else who will. If you’re a CFO who only talks about compliance and regulation, you probably won’t last that long in your job.”
Research appears to bear him out. Accenture’s CFO Reimagined report of 2018 notes that the role has evolved from ‘accountant to analyser, to strategic advisor’ in recent years, with 77 per cent believing that it is within their purview to drive business-wide transformation.
It also notes that the CFO’s ‘greatest potential strength’ is the ability to capture and make better use of data to increase the effectiveness and efficiency of both their own department and others across their organisation. This backs up Marchant’ assertion that any form of digital transformation requires getting the company’s financial data in order first. It needs to be accurately identified, sifted and sorted, which is where Aptitude Software comes in.
It offers users a range of solutions for finance teams to help run their companies, comply with complex regulations and forecast the outcomes of decisions. For example, the Aptitude Accounting Hub is designed to centralise and automate enterprise finance, accounting and reporting, while also building a detailed financial data foundation.
This enables finance teams to gain control of accounting rules and processes, be agile when it comes to adopting new business models and exploit finance data to provide actionable insights to the business. In other words, to futureproof it. And that’s where fintech providers can help.
A major problem with legacy systems is that data tends to be held in silos, leading to what Marchant refers to as ‘data chaos’.
“That means you have umpteen reconciliations: you’ve got to keep everything in line, you’ve got manual journals everywhere, you’ve got people checking things, doing analysis, understanding why numbers are different,” he explains.
“So, essentially, you’ve an army of people doing manual processes and, if you are able to automate them, then all of those people can stop doing that and do something of more value instead.”
Marchant cites the example of regulators asking European banks for data on their exposure to certain countries during the eurozone crisis back in 2009. “A lot of banks didn’t have that [information] digitally stored. They had it in boxes,” he says. “One bank had to hire literally a thousand people to go and open up a load of boxes and check in the contracts where all their loan exposure was,” he says.
“So, that is the cost of not fixing your data; ultimately, you’ll end up spending the money anyway.”
The solution, he says, is not only organising that data in a centralised place but also then storing it in a way that is easy and efficient to access – which is where Cloud technology can prove invaluable.
“Firstly, you have to create that single place where the data is. And, where the Cloud comes in, is about how cheap and available that data becomes,” says Marchant. “So, if you think of the currentsituation, in terms of ‘data chaos’, you’ve probably got the same piece of data, that covers the same thing, in maybe four or five different systems.
“Our solution to that is to bring everything together in one place, so that finance knows where it goes to get certain data points, and that then leads to efficiencies.”
Spelling out the benefits of this further, he says that if a single source of data can be found across finance, risk and treasury, it not only enables a business to manage its data better internally and helps the business deliver what it wants, but it also leads to between 25 and 40 per cent of efficiency savings among finance teams.
“In one organisation, there were about 30 people who just didn’t need to do what they did anymore, so they could all move on to other things and deliver projects that were just in freefall before,” he says.
“Automating reconciliations in a big organisation can mean multimillion dollars of savings and payback within a two-year period.”
The great enabler
It’s not just about driving technological change; it’s also about changing things at an organisational level.
“It’s governance, as well, and having the right people to do drive through change. Technology is the enabler,” says Marchant.
Looking to the future, having a data model that is granular, detailed and controlled – and can be enriched at a later date and kept in alignment with other data that a company needs to report on – helps futureproof a business for upcoming needs or regulations. Aptitude helps organisations to achieve this by becoming a single source of pre-Cloud data.
“We then integrate all the data across the organisation that’s relevant for finance, and that then moves onto the Cloud,” Marchant explains.
The benefit of this is that more data can be added as and when it’s required, rather than changing the interface or the underlying technology each time.
“In other words, you don’t have to do everything at once. You start small and you grow; you prove that it works for part of the business, for part of the product line,” says Marchant. “Then, once it works, that data can go into the Cloud and you incrementally migrate other businesses, products or entities onto Aptitude. It’s a scalable way of moving to the Cloud across all of your businesses.”
Aptitude can also help clients address the issue of having too much transactional data on a general ledger (GL). “By moving to a subledger and taking the data away from the GL, you get a thin GL, which is much easier to handle when it comes to processing the data – as well as being quicker and cheaper,” says Marchant.
“That data sits, logically, in a tool that was designed solely for that task..”
Getting a handle on data
As well as outlining the benefits, Marchant is very clear on the pitfalls of not streamlining back-office systems and getting a handle on data – especially in the long term.
“One of the clients I have worked with in the last 10 years, quite a big global bank, almost had its licence taken away and faced regulatory trading limits in one of its product areas because of financial reporting and control deficiencies,” he says.
That stands as a warning to other institutions to update their systems, not least so they are ready for unforeseen events – the coronavirus pandemic has only heightened that awareness .
“People think situations like COVID-19, like the banking crisis, are black swan events, that they don’t happen that often,” says Marchant. “Well, it turns out they do, and you need to have the data to hand, and the flexibility in your finance architecture to be able to respond to it.
“And that means finance becomes a key competitive differentiation in the industry. If you can respond in an extreme situation, you’re going to come out of it better, right? I mean, it’s just common sense.”