And yet, it is ironic in a sense that finance has this fiduciary responsibility to help companies run when they often don’t have the tools, the data, or the talent to successfully run their own department. Finance may have keys to the city, but, most finance teams are reconfiguring tools, data, and talent in their own households.

Why is this? Why are finance teams still operating with old data, old tools, and frankly, old talent?

It’s harsh and it is true. Finance teams often house 20-year plus industry veterans, who operate just as they did when they first joined their respective companies. These are the employees who opt to keep score instead of dreaming what is possible and dreaming a data-first culture and analytics method of managing.

By having employees maintain the status quo and stick to keeping score, organizations cannot leap into the next frontier. Companies stay in the Ice Age by implementing the “approved” Ice Age mentality.

WHAT, THEN, CAN YOUR FINANCE TEAM DO IN THE FUTURE THAT IS GOING TO SET YOUR ORGANIZATION APART?

We know that companies who advance forward have bigger volume, velocity, and variety of data. However, for those operating with old talent, old data, and old tools, the “bigger” is too much to handle to venture into the new frontier.

Here are seven challenges that finance team face as they try to get to that new horizon and how they can overcome them.

DISCONNECTED PROCESSES

Let’s state the obvious: the common disconnected processes lie in the budgeting and planning space. Finance attempts to forecast what’s going to happen by acting as a surrogate for the organization to do the budgeting rather than involving the appropriate manufacturing, operations, production plans, and sales personnel.

On top of that, the tools finance uses limit the reach of who participates in the planning process. Even if it would be appropriate to loop in other functions, clunky tools force the finance team to act alone. They are the only ones who know the ins and outs of the system; they don’t want to burden “the field” when it’s easier if finance just does it themselves.

How finance can fix this:

Tie budgeting and planning together by getting more people involved. By collaborating with other functions and departments, this leads to a more realistic scenario creation. Then, finance can evaluate each at a more detailed view and pull in subject experts to refine and continuously plan. 

LACK OF VISIBILITY INTO KEY BUSINESS DRIVERS

Finance is an island of islands unto themselves and as a result, there are opportunities to link what drivers matter to other departments and functions. Most teams plug in dollarized numbers to guess the “number” and occasionally flex and trend the data over time.

How finance can fix this:

Transition to a business-driver approach and collect more detailed data. This permits finance to run more scenarios and test hypothesis. What if tariffs are increased? Decreased? What if benefits cost rise? What’s the effect on the cost of labor? As a result, finance tracks more factors in the company’s plan rather than less and leads to a better more flexible outcome that can do “n” number of scenarios and shock the plan to run more robust scenarios of “what if.”

LONG CYCLE TIMES FOR PLANNING, FORECASTING, AND REPORTING

The annual event for teams to set their budget is a Goldilocks exercise. Most teams come in too high, it’s a rare occurrence when they come in too low, and in the history of the planet, a handful got it just right. Trying to find a perfect number is the financial equivalent of a needle in a haystack.  

And that’s it. It’s an annual event. Teams set it and forget it, only checking in to monitor progress.

How finance can fix this:

Instead of setting and forgetting, companies can constantly and continuously plan and roll numbers forward. They can use history and most-current information to naturally derive a plan-scenario. Keep in mind, both single-event and continuous planning do require care and feeding. Each cycle requires the right inputs at the right level to get the right result. Trying to predict the future can be a lot of work but rewarding exercise if it allows organizations to allocate resources more proactively and make course corrections while the market is changing instead of after the market event forces change.

SLOW ADOPTION OF DRIVER-BASED PLANNING AND ANALYTICS

People don’t like change. Plain and simple. Walk by any office going through a transition and you’ll hear any one of the following:

That sounds like a lot of work.

Wow, that sounds risky.

We’ve always done it this way.

It already takes so much time to create the plan. Won’t this take longer?

Companies roll out new products all the time. Websites roll out updates. In the same way, finance teams need to change and update the techniques they use to manage the company as it adapts.  

How finance can fix this:

Deriving the plan in a complementary and in a different way using driver-based techniques and analytics helps finance to focus on the ingredients of the plan rather than magically picking a number. For example, if finance teams partner with lean and Six Sigma specialists, it allows them to understand what the drivers are, and where and how to improve the quality of the product or service. When linked, the plan and operations both value and track the same key drivers.

LIMITED AVAILABILITY TO DYNAMICALLY ADAPT AND REDEPLOY RESOURCES

Think about planning for people resources. If a company wants to hire ten people in March, they may focus on recruiting in January and February; however, those new hires don’t expect to start until October.

Those who asked for the money for their projects can’t help but feel frustrated. An April project that should have a green light is sitting on the back-burner because March had funds allocated to a new hire starting their job. Companies are trying up dollars and resources and as a result, there’s a lot of organizational angst.

How finance can fix this:

Continuously plan and create a resource allocation dialogue. When you’re continuously planning, you can be proactive enough to say “I won’t need those resources or people for another 6 months. Those dollars would be better served pushing to another group.” Now your organization can commit to another area (engineering, R&D, etc.) that would have a bigger payback.

“TYRANNY OF SPREADSHEETS”

It’s amazing given the advancements in technology (self-driving cars, HD TVs, watches that make a phone call!) and yet Excel seems to the enterprise standard for financial analytics. Excel is a desktop, single-user tool playing in a world that is big, vast, and collaborative.

The moment you save a document the questions come back: What version are you working on? Is this the most recent version? Who updated it last? What are the latest assumptions?

There always seems to be something outside of the spreadsheet that you need to know. And this isn’t an Excel-only issue. Excel’s evil twin sister, PowerPoint, suffers from the same constraints because anything created in Excel is then updated in PowerPoint and who knows what version of her is correct. (honestly, ask your sales team).

How finance can fix this:

Modern tools have incorporated the benefits of Excel and added collaboration, deep financial analytics, tremendous visualization, and ability to truly be audible, certifiable, and reliable. Finance can alleviate a world of headaches by switching to one of these solutions.

MANUALLY INTENSIVE DUE TO LACK OF AN ENTERPRISE DATA AND INFORMATION REPOSITORY

If we are living in an Excel world, that’s Latin for “let’s just get it done now” vs. “let’s get it done right right now.” There’s data everywhere. Users hunt and peck for information they need to be successful.

How finance can fix this:

Fortunately, the tools of today and tomorrow make it easier to capture data volumes larger than we can imagine, correlate the data faster than we remember doing in the past, and produce a cleaner and more thoughtful analysis. Encourage employees to name it and claim it by setting significant data requirements to do it correctly.

Tactically taking the time to continually add to and build your financial analysis value chain helps to institutionalize both the thought process and the data chain for more reproducible process. Once you have this base of stability with your financial analytics, it will allow you time to do the one-off and unique, creative one-time event analysis.

The goal for any organization is to get to the next frontier before the competition does. You want the best land, river, street corner, minerals, and best views.

For finance to be competitive into the future, we need to take a couple giant steps forward. Out with the old and in with the new, as they say. The only way you can do this is to modernize your tools, talent, and process. We need to organize the data, analyze it against unique fields and find opportunities to take risks.

The next frontier is upon us. Is your finance team ready to take the journey with you?