In a fast-moving economy, innovation is crucial to staying ahead of the pack, yet for many finance professionals, innovation remains a low priority. According to FSN’s Innovation in the Finance Function Research 2018, 11 percent of finance professionals say they rarely, if ever, discuss innovation. A further 54 percent say they would like to be more innovative but rarely get the time, funding, or support from the rest of the board to invest in finance process innovation. (Click to tweet.)
As a result, many CFOs consider that their finance processes will not be able to keep up with developments in the rest of the organization and that they could be in danger of falling behind their competitors.
Balancing front- and back-office investments
The reasons for the lack of investment in finance process innovation are vast and varied but chief among them is that for the last decade, organizations have become resolutely customer-centric—sometimes to the detriment of core financial processes. Revealingly, the FSN study shows that only 12 percent of investments in innovation are finance-inspired, as compared to nearly 50 percent of projects that are initiated in response to customer-facing demands.
Although few would deny the crucial importance of investing in the customer experience, there comes a point where a lack of investment in the back-office puts the customer journey in jeopardy. Imagine, for example, a situation in which a customer is given an outstanding choice of products, colours, sizes, and delivery options yet the wrong goods are invoiced, or pricing errors are made.
Furthermore, an imbalance between customer-facing investment and the back office can lead to valuable, forward-looking information becoming lost in the cracks between them. For example, information about customer behavior and buying patterns captured in an e-commerce system can greatly inform budgets, plans, and forecasts when the two environments are linked.
Why innovation is critical to moving the finance needle
All of this is borne out by the research, which shows that organizations taking a balanced approach to innovation are able to forecast more accurately and quickly. Furthermore, those finance organizations that are early adopters of technology have an active culture of innovation, making time for it, rewarding it, and outperforming their competition in all respects.
For instance, 55 percent are able to forecast accurately (to within 5 percent), as compared to just 31 percent who rarely discuss innovation. Furthermore, 30 percent of true innovators are able to close the books within three days of month-end, as compared to just 17 percent of the technology laggards.
The icing on the cake, so to speak, is that finance functions that are innovative attract the best talent. Even though 58 percent of technology laggards struggle to get access to tech-savvy talent, citing it as a major stumbling block to innovation, only 18 percent of innovative finance functions found this to be a concern.
Smart CFOs know that innovation is not only crucial for their organizations as a whole, but also vital for finance function effectiveness.