Well, all too often these processes utilise simplistic methods, such as spreadsheets. This ignores the multiple benefits that more technologically advanced processes can bring, most notably far greater accuracy. More accurate forecasts will help businesses in many ways, from securing funding from banks or investors to identifying future shortfalls. While rethinking how to approach cash flow forecasting will always be relevant and beneficial for businesses, in today’s uncertain climate of business instability due to COVID-19, it is especially important. 

In fact, cash flow forecasts are almost useless if they are inaccurate and it is only the businesses with accurate forecasts that will flourish. Accurate forecasts allow businesses to run predictably, generate funding and make informed decisions on capital investment. In contrast, inaccurate forecasts can lead to potentially devastating outcomes. At the lighter end of the scale, an inaccurate cash flow forecast can result in missed opportunities while the business had surplus cash in the bank. Whereas, at the heavier end, an inaccurate forecast could lead to overtrading and the end of the business. It is clear that this must be avoided and remedied, but how? Andy Campbell, Global Solution Evangelist at FinancialForce, shares an alternative method with Finance Monthly.

The Difficulties

Although popular, the spreadsheet presents many issues as a tool for cash flow forecasting. The first of these is that future income and future expenses are typically completed in monthly increments. This is an issue because it means that the future is generated using data from the past so by the time the forecast has been generated, the data is out of date and, therefore, no longer accurate. Another issue is that it takes a lot of time to assimilate data from the many different sources required for this process which causes further delays. A solution to this problem is that all data from each department be made visible to the finance teams so that they can create an accurate and real-time data set.

A well-built data set will become the foundation for accurate forecasting, so it must be able to process the variety of data produced by each department. This is because companies generally process a combination of both product and service-based revenues. Therefore, the data set must be able to manage both of these sources and their different payment structures.

Although popular, the spreadsheet presents many issues as a tool for cash flow forecasting.

Volatility presents another difficulty to be reckoned with. As the current pandemic has shown, volatility can come in unexpected forms and not all can be protected against. However, preparation is key, and some volatility is more predictable. For example, businesses themselves are volatile by their very nature with the changing of business models in line with the latest developments. Therefore, it is to be expected that business revenues would also be prone to volatility. This can be mitigated against by ensuring that all data has human oversight and is regularly reviewed. Doing so will ensure that any projection is in line with the company’s strategy and should prevent unexpected outcomes.

Cash flow forecasting comes hand in hand with revenue forecasting, which is the greatest of all these challenges. Revenue generation crosses all departments: starting in marketing, it is then delivered by sales, realised by operations and, finally, measured by finance. As already stated, the collating of data from multiple departments is tricky, revenue generation crosses all departments so presents a tangible difficulty here. Currently, the typical finance department addresses this using a complicated interlinking system of spreadsheets which often presents further problems. Another issue is that there can be disconnect between departments where a lack of trust means that data is not readily shared. To solve this, businesses must remove the culture where each department treats its goals separately rather than looking at one overarching goal and working together.

How to Overcome These Difficulties

The problems can be broken down into two main categories – technology and people. In terms of people, this comes down to the business culture and only a business that can successfully change its culture will be able to successfully implement new technologies. It is very important that employees are properly briefed and trained in the new processes or technologies that businesses want to implement so that they feel part of the processes and are adequately prepared. Simply enforcing a new process and expecting it to be a success will not work and there will be no visible improvements to the business.  Successful change to a business culture, at all levels of seniority and across all departments, will result in more tangible improvements.

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In regards to technology, the days of spreadsheets are over, it is time to retire them and let new technology take over. Finance needs to have clear and direct visibility into active opportunities to be able to generate accurate cash flow forecasts. A simple way to do this is to integrate the CRM with finance which will give a window directly into the required processes. The data set can be further strengthened using data from the past, for example past win rates and payments can indicate what the future may hold. AI can analyse historic data sets to identify customers who were slow to pay in the past and, therefore, are likely to be slow to pay in the future.

Ultimately, the more integrated a business is, both in terms of people and technology, the more smoothly it will run and the better its outcomes will be. Having a finance team that can produce accurate cash flow forecasting and a business reaping the rewards is not as difficult as it may seem. There are tools and technologies to help along the way. It is time to say goodbye to spreadsheets and to embrace the new way to approach cash flow forecasting.

Finance teams are still spending too much time in ‘excel hell.’ Every hour spent grappling with spreadsheets, pivot tables, and pie charts are hours that could be spent helping make better business decisions. And yet, astonishingly, top finance functions are still devoting 75% of their time to data analysis, according to a recent PWC study. Eugene Hillery, Senior Director of International Operations at Tableau, offers Finance Monthly his thoughts on the issue and why it should be turned around.

Spreadsheet drudgery isn’t just frustrating and inefficient, it’s outdated. There is a huge range of intuitive, interactive and highly visual data software available – what some call ‘visual analytics’ - designed to help knowledge workers see and analyse the data that matters to them, faster.

Delivering insight from data should be the core competence of finance – not spreadsheet navigation. Yet, research from Sage shows two thirds of CFOs (64 %) are still unable to make data-driven decisions to drive business change. Here are five reasons to kick-off an analytics overhaul:

1. You Can Work (And Collaborate) From a Single Source of Truth

Conventional spreadsheets are capable of handling many tasks, but real time collaboration has never been their strongest suit.

Inconsistent version control, restricted server access and unnecessary duplication are a drag on far too many finance teams. When there are multiple sources of ‘truth’, hours of time are needed to make sure conclusions are built on accurate and up-to-date data. The longer this process takes, the less value you can claim from any time-sensitive data.

With more advanced analytics products, finance teams can bring diverse data sets together from across an entire organisation, allowing everyone to work from a single source of truth. This offers a holistic view and saves time especially when everyone, whether from AP, AR, Tax or Purchasing can collaborate on the same data in ‘real time’.

Inconsistent version control, restricted server access and unnecessary duplication are a drag on far too many finance teams.

2. You Can Get Insight Overnight

More than ever, the ability to connect to offices around the world is a business necessity. The power of a rolling international handover between knowledge workers using accurate, up-to-date data, is tremendous.

For example, if daily sales or staff performance data is be collected at the close of a business day in London, it can be turned into insight by teams in the US literally overnight. This means recommendations for action land on desks at the start of the next day in the UK, and issues can be resolved faster.

If a coherent view of your accounts means drawing information from data sources in China and the US, for example, trying to reconcile them through different spreadsheets will only bury insight. Quick answers are critical for teams operating across different time zones, as for any business that needs an accurate overview of what’s going on in a hurry.

When diverse data sources are unified in a single interactive dashboard, drilling into the numbers can be done by anyone, wherever they are.

3. You Can See Both Granular Detail and the Big Picture

Managing business expenses is a never-ending task, but it’s another area where working smarter beats working harder.

Data analytics software helps uncover the kind of hard to spot correlations that can be invaluable in finding new ways to keep costs down. Dashboards should make it easy, for example, to see which employees are in the habit of booking flights well in advance (saving the company money) and those who rack up huge bills by making last minute purchases.

A faster understanding of data outliers is also valuable in the quick response to business challenges that may exist. Instead of questioning ‘what’ is happening, conversations are led with ‘why’ it is happening. Data analytics makes it easier to uncover cost drivers and make predictions about cash flow. This equips finance teams to identify the source of a challenge faster than ever and help drive the solution.

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 4. You Can Put Your Focus on the Future

Access to an organisation’s accounting full history means the finance team is best placed to offer predictions for its future. In general, the richer and more diverse the data that underpins those forecasts, the more accurate and useful they become.

With data analytics, finance teams can use a cash flow summary dashboard to help management understand the outlook in aggregate. They can ask useful questions like “what are our balances by currency, subsidiary, country, banking partner or geography?” The ability to reveal and answer these is fundamental to supporting other financial processes like preparing for audits and SOX compliance.

Combining effective data analytics and artificial intelligence support allows teams to compile and comprehend far bigger data sets, and even help present larger, more evidence-laden projections. This level of authority is what enables finance teams to play a more strategic role in the boardroom - advising CEOs, boards and investors, not to mention staff or customers. In fact, eight in 10 CFOs in the UK (78 %) say their role has changed recently and they are focusing more time and effort on business-wide operational transformation, according to Accenture.

Access to an organisation’s accounting full history means the finance team is best placed to offer predictions for its future.

The best visual analytics software make comparisons between external data sources like economic trends, and internal sources like operational numbers or sales figures. This in turn empowers finance teams to be more efficient and intuitive, making better recommendations with longer lasting impact.

5. Investing in Your Money People

The pace and scale of digital transformation is something finance teams understand better than most. After all, they are the ones processing payments for every major IT investment a company makes.

It’s not surprising then that it is so frustrating to see finance teams often overlooked for technology investments which could in fact create efficiencies that drive business forward.

Of all business areas that stand to benefit from the ongoing revolution in data analysis, finance departments have the most to gain. Gartner research shows that the number of finance departments deploying advanced analytics will double within the next three years. Visual and AI-empowered analytics can untap the insight and creativity currently locked in finance teams across the UK – but only if they can look up from their spreadsheets and see them.

Finance Monthly hears from Colin Rowland from Apptio who asks the question: “Is this a trustworthy way to manage spend that is often billions of dollars across thousands of vendors and contracts, hundreds of employees, and more?”

Since the spreadsheet was popularised in the 80s, it has become the tool of choice for CFOs managing data and tracking costs across businesses. But in today’s digital age, spreadsheets are too cumbersome, slow, complex and constantly changing, to provide truly comprehensive oversight of costs and data in business.

Nowhere is this more evident than in managing technology spend, and it is abundantly clear that the IT department needs to upgrade its approach in order to properly provide CFOs with the monetary direction necessary to make smart, informed and strategic budgeting and investment decisions.

CFOs are required to oversee budgets across the whole business, yet while sales and finance have a wealth of tools such as CRM and ERP to assist them, there has been no purpose-built system for the technology department. With Gartner predicting that by 2022 businesses will be spending more than $3.9 trillion on IT, there is a huge level of pressure on finance professionals who need to track and manage these outgoings.

CFOs are required to oversee budgets across the whole business, yet while sales and finance have a wealth of tools such as CRM and ERP to assist them, there has been no purpose-built system for the technology department.

Kickstarting the culture change

To kickstart a move away from managing spend in static spreadsheets, organisations need to implement a culture change when it comes to technology, tracking spend, and understanding value of investments. Once viewed as simply a running cost of the business, technology is now a key deliverer of business value and revenue generation. That means the way investments are tracked, managed and communicated needs to be clear, open and transparent between IT and the business in a way that was previously unnecessary.

One method some organisations are adopting is the discipline of Technology Business Management (TBM). It focuses on providing a practical framework for finance and IT leaders seeking to manage and communicate the value of technology spend. It encourages translating IT usage and cost data from a list of bills into a source of business intelligence that can drive digital innovation. This allows the CFO to make more informed decisions when it comes to IT spending.

However, legacy tools simply don’t provide the added value needed to enable the communication and discussion needed around technology costs. It’s effective for data input and manipulation, but that’s no longer enough when complex technology costs need to be given to finance leaders in a digestible manner. Where this budgeting data is stored in various spreadsheets that are all siloed from one another, it can be nearly impossible to settle upon a single source of truth for the overall figures.

Spreadsheets do not enable actionable insights and cost analysis needed in the modern technology landscape for several reasons: they’re clunky, they’re rigid, and they’re slow.

Managing technology costs using… technology

This is where custom tools come in. They can provide additional capabilities and processes that enable businesses to not only accurately track their IT costs, but analyse them quickly and effectively, providing insights which are intelligible for those not well-versed in technology. And the more advanced technology solutions will be able to leverage machine learning to make this automated and free up employee time and resources for more value-additive work.

IT and finance leaders can then work together to drive forward business strategy based upon this knowledge. Spreadsheets do not enable actionable insights and cost analysis needed in the modern technology landscape for several reasons: they’re clunky, they’re rigid, and they’re slow.

Take the complex nature of public cloud spend, for example. A pay-as-you-go costing structure generates masses of data in by-the-minute billings that need to be tracked; meaning there is no guaranteed regular monthly spend to budget against. Even the most finely-tuned spreadsheet would struggle to track the thousands of lines on a cloud bill from separate business units, especially when many businesses are now embracing cloud services from multiple vendors.

The agility that disciplines such as multi-cloud bring also means that businesses must be prepared to adapt their cloud strategy quickly to suit their needs. Approaches that work now may be obsolete in three months’ time, and it is necessary to have a solid framework and the right tools to allow such changes to progress smoothly. For example, using Apptio’s TBM solutions, Unilever was able to move away from legacy infrastructure to cloud and increase the company’s digital innovation budget by more than 20% to provide consumers with an ‘intelligent’ buying experience online and in-store.

When it comes to technology, using spreadsheets to track and manage spend is holding businesses back.

Another complicating factor is the staffing cost associated with manning spreadsheets. Consolidating various spreadsheets to get a transparent view of IT spend can be a painstaking task, taking many hours and potentially resulting in human error. Custom tools can work to streamline and speed up these processes, while ensuring that errors do not occur. This allows IT teams to spend their time more effectively elsewhere, improving the overall efficiency of the department.

When it comes to technology, using spreadsheets to track and manage spend is holding businesses back. While custom tools may necessitate an upfront investment, they are undoubtedly worthwhile as a flexible long-term solution, providing agility, speed and clarity where spreadsheets cannot. By using such tools in conjunction with the principles of TBM, CFOs and the IT department can move away from spreadsheets and work towards a partnership in which insights into technology spend form a key part of the business’s ongoing strategy.

CFOs no longer rate Excel as most important skill, turning to new technologies, automation.

Adaptive Insights recently released its global CFO Indicator report, exploring finance automation progress and expectations of CFOs. The survey reveals that CFOs are embracing automation across various areas of finance, driven in large part by a requirement to be more strategic and provide better analyses. Financial reporting and period-end variance reporting top the list of automated processes today, according to the survey.

Automation initiatives are also impacting required skills for finance professionals. Whereas two years ago, 78 percent of CFOs considered proficiency in Excel as the most important skill for their FP&A teams, only 5 percent feel the same today. Looking ahead, only 7 percent of CFOs list better Excel skills as important for new hires. Instead, CFOs rated the ability to be adaptable to new technologies as the top skill for new hires, signaling a shift in desired skillsets for finance professionals in the future.

“We’ve seen CFOs increasingly take on the role of chief data officers in their organisations,” said Jim Johnson, CFO at Adaptive Insights. “At the same time, CFOs recognise the limitations in the way they manage and analyse data today and know it will only get worse with the proliferation of more systems with siloed data. That’s why Excel skills aren’t ranked as a top skill any longer. Proficiency in Excel is a given today. The new skills finance leaders need are those that can use technologies to access, analyse, and amplify data for insights to better manage the business.”

Limitations with manual processes like spreadsheets were recently documented in a Wall Street Journal article, Stop Using Excel, Finance Chiefs Tell Staff. The article noted that ubiquitous spreadsheet software that revolutionised accounting in the 1980s hasn’t kept up with the demands of contemporary corporate finance units, citing a lack of automation.

(Source: Adaptive Insights)

By Henry Umney, CEO, ClusterSeven

 In the financial and banking sector, M&A activity is expected to be healthy, due to disposal of non-core businesses by global banks, potential relaxation of regulation in the US, and the European Central Bank encouraging cross-border diversification and consolidation for value creation.  

 Strategically, M&A offers a great opportunity to organisations, with the potential of propelling some banks and financial institutions to top positions in the industry. This said, for organisations to truly take advantage of M&A scenarios, it’s crucial that from the word go, the new entity is able to demonstrate to and convince the regulators and the market that they are agile, effective and well-managed businesses. The regulatory deadlines are stringent and carry huge non-compliance penalties, which have the potential to inflict chaos and havoc for the new entity in the market. 

Extricating businesses

Organisations involved in a M&A need to disentangle processes from their original environment to migrate them to the new entity so that the merged business is operational from day one. For instance, traders need to connect to the new entity’s systems and market data feeds on the very first day of the cross-over so that their trading activity is not compromised.

However, there are many technology-related operational challenges to divesting and merging entities, including poor IT integration, data amalgamation, compliance and regulations and the rampant use of the Microsoft Excel spreadsheet. In fact, the impact of the spreadsheet is often under-estimated, which threatens the success of these highly strategic, M&A-driven transformational initiatives.

The financial controls that are in operation in organisations are spread across multiple enterprise systems and a multitude of critical spreadsheets that span the entire business. Most organisations understand the importance of extricating the enterprise systems and connecting them to the new environment in a M&A scenario. However, there are also a number of complex, business-critical processes that reside in intricately connected spreadsheets, that organisations don’t always have visibility and indeed an understanding of. This makes securely disentangling and migrating key processes and financial controls to the new entity problematic, risky and challenging.

Ensuring timely knowledge transfer of financial controls and business processes is yet another challenge that organisations undergoing an M&A situation face. As companies amalgamate, organisations make significant cost savings through combining processes and merging personnel roles, frequently resulting in employees departing the organisation. To suitably transfer the knowledge from the acquired or merging entity, organisations need to have a full understanding of the complex critical spreadsheets that are relied upon for financial control, information on the individuals who control and manage those processes, their integrity and where they exist in the business.

Manually separating processes costly and error-ridden

In the first instance, many organisations attempt a manual approach to understanding the spreadsheet landscape and the complex interlinkages across the environment in order to extricate businesses. It rarely works – the process is complicated, time-consuming, costly in man-power, error-ridden and with stringent deadlines to provide documentary evidence to authorities, it is commonly wasted effort.

On the other hand, technology enables the merging or acquired entity to understand its business processes, identify the individuals who are applying the controls and put automation around those procedures. This also reduces the key man dependency and ensures the necessary knowledge transfer to the new organisation.

Scottish Widows Investment Partnership (SWIP) separates from Lloyds Banking Group – a case study

The disentangling of the Scottish Widows Investment Partnership (SWIP) from Lloyds Banking Group to Aberdeen Asset Management in 2014 is a prime example of the value of a technology-driven approach to M&A-led operational transformation.

Following its acquisition, SWIP needed to separate its business from Lloyds so that the necessary and critical processes could be migrated to Aberdeen Asset Management. For example, where certain processes relied on market data feeds that were owned by Lloyds, or had linkages to systems owned by Lloyds.

Due to the number of intricately spreadsheets across the vast spreadsheet landscape and the complexities of the business processes residing in this environment at SWIP, manually understanding the lay of the land was impossible. So, by utilising technology, SWIP was able to inventory the spreadsheet landscape, identify the business-critical processes, understand them and pinpoint the files that required remediation. Simultaneously, the technology helped expose the data lineage for all the individual files, clearly revealing their data sources and relationships with other spreadsheets. SWIP was able to securely migrate the relevant business processes to Aberdeen Asset Management and where necessary decommission the redundant processes.

Paying heed to role of the spreadsheet is prudent

In any M&A initiative, there is always a substantial amount of work related to complex, business-critical processes that reside in spreadsheets and the dependencies of such processes on enterprise systems and vice versa.

Technology offers a fail-safe and automated mechanism – including everything from identifying and understanding the processes, establishing the data linkages across the spreadsheet landscape through to remediation, migration and decommissioning. Teams that prudently adopt a technology-led approach to drive M&A-led operational transformation initiatives, find it extremely constructive and beneficial to the business. It mitigates the risks, minimises the disturbances that separating financial controls and processes can cause for the new entity and gives the organisation the best possible start from market, regulatory and financial standpoints.

About the author

Henry joined ClusterSeven in 2006 and for over 10 years was responsible for the commercial operations of ClusterSeven, overseeing globally all Sales and Client activity as well as Partner engagements. In July 2017, he was appointed Interim CEO and is strongly positioned to take the business forward. He brings over 20 years’ experience and expertise from the financial service and technology sectors. Prior to ClusterSeven, he held the position of sales director in Microgen, London and various sales management positions in AFA Systems and DART, both in the UK and Asia.

Website: http://clusterseven.com/

Twitter: @ClusterSeven