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Covid-19: the wake up call for finance to move on from legacy systems

finance
(Image credit: Image source: Shutterstock/wrangler)

The pandemic has taught us many lessons, but one in particular brought the nation's attention to the continued use of Excel spreadsheets in data recording. There was national outcry as headlines reported that around 16,000 cases were not recorded in the official NHS Test and Trace system. Declared as a ‘technical glitch’ by the media, the true issue at hand was Public Health England storing data in spreadsheets that weren’t compatible with its reporting dashboards. Rows and rows of data were not processed, and it had very serious consequences. It goes to show the very real importance of efficient data management, but also highlights how organizations, even outside of the public sector, should not still be relying on spreadsheets and outdated legacy systems.

When it comes to business, the finance teams most likely to be affected by outdated systems tend to have a lot of manual processes and very little collaboration between teams. This year in particular it has become obvious as almost overnight they were required to build, plan and create more forecasts and scenarios than in previous years and have been redoing them regularly ever since. In those spreadsheet systems the FP&A team face many challenges like data protection or security, lack of collaboration, data visualization, file limits, and manual errors. But the crisis highlighted one in particular: the time required to generate a new version of the budget.

This need to revisit financial planning on a continuous basis has shed a light on the dangerous reliance on legacy systems. It raises the question, if more than one in three finance executives say identifying and managing risk is the most important skill, why are these systems still being used? It’s time to address the lack of agility within finance teams across the UK, and the compromising position this places businesses in.

Digital transformation: the worst kept secret to success

Pressure for finance, and other teams working in the back office, to undergo digital transformation has increased massively since the pandemic hit. Seventy-five percent of finance leaders found that their current planning processes were unable to prepare them for the economic disruption this year has brought. From redundancies and furloughing staff to ensuring rewards were engaging enough for retained staff, finance teams had to swiftly rework their forecasts and replan for a struggling economy.

However, without first overhauling the existing legacy systems, finance teams are faced with the struggle of old-fashioned document versioning and flicking between varying spreadsheets. Simply put, these processes are no longer viable as finance teams can’t make the quick and accurate decisions businesses need to protect themselves from the disruptive effects of Covid-19.

Take John Lewis for example. During lockdown, it successfully digitized its payroll system. The project allowed the payroll team to deliver pay slips on time for a workforce that was dispersed between furloughed workers, people working from home and frontline employees. Ultimately, this reduced operational workload and pressure for managers by over 20 percent and increased efficiency across the organization. It’s clear that for finance, digital transformation will pay off far beyond 2020; and is a critical part of business recovery.

Increased agility, increased recovery

Business success is determined by how leaders manage change. This is evident as the financial teams that are leaving older systems behind, and using data to help, are the ones now reaping the most rewards. In fact, Workday research showed that today’s top-performing companies are ten times more likely to react quickly through the adoption of continuous planning, and it’s the functions like finance that should sit at the heart of their strategy. Finance is woven into every aspect of business decisions – from payroll and recruitment, to onboarding new partners.

For Workday customers, adopting driver-based modelling has been key to them planning successfully, especially over the past few months. This approach ensures the whole business is moving toward the same goal as it builds out forecasts which link operational activities to key variable revenues and expenses. Here are three basic steps that every finance team should be taking:

Sync with the business plan: we’re told communication is key, and it’s particularly true for making sure all areas of the organization are working towards the same goal. Align with other senior managers across the business on the priorities and goals for that planning period, to inform any “what-if” scenarios.

Identify the largest business drivers: leaders should forecast based on the things that have the largest financial impact on the business. Opening conversations across all levels of the business will help you to identify whether that’s a disruption in the supply chain, a significant impact in sales demand or new customer acquisitions.

Focus on three meaningful scenarios: while it is still unclear what each month will bring at this point in time, you probably have an idea of what could go wrong. We’ve seen a second spike in cases, regional lockdowns, and customers that are spending less. Focus your resources on these main changes and only refine scenarios that will have a bottom line impact on your business.

While these may seem obvious, we’ve found that many finance functions are still not doing this or do not possess the tools required to this at scale and within the necessary timeframes. Once in place, the planning technique of driver-based modelling will empower decision makers to analyze any potential impact on the business priorities such as recruitment, incentives and rewards. By continually forecasting various scenarios, finance teams can ensure that their plans are effective and relevant to the current business landscape.

Leave your legacy systems behind

With these data insights in their pockets, finance teams can improve their planning processes such as forecast modelling and scenario planning and spend less time and effort on manual admin – such as filling out spreadsheets. Instead, the teams will be an integral part of the business’ success, providing strategic insights that all areas of the organization need to make quick, accurate decisions with agility. It’s time for business leaders to ensure that the future of the finance department will enable organizations to not just recover from this pandemic, but to thrive in any crisis the future may bring.

Tim Wakeford, VP Product Strategy, Workday

Tim joined Workday after 15 years' experience in financial management, and has responsibility for helping to build, maintain, and grow the strategic direction of the Workday Financial Management product in EMEA.