Given the challenging role of the CFO, what are the key skills and competencies that a CFO must possess in order to fulfill their duty? The day-to-day financial focus is still necessary but is diminishing in proportion to the demands of business leadership. Fundamental finance skills are still of paramount importance, but other skills are necessary to provide the service that the CFO of today and tomorrow is expected to provide.
There should be good quality of leadership and strong understanding of company business model and industry. CFO also plays a key role in prioritizing and ensuring that the strategy can be funded. The finance skill set is also applicable to building predictive modeling, analyzing macroeconomic trends, and incorporating non-financial information. This also includes communicating the strategy and progress against it to external stakeholders and investors.
Today’s CFO’s finance function is to provide real-time, data-enabled decision support. And,in the most recent survey of finance executives, CFOs themselves say they want to spend more time on digital initiatives and the application of digital technologies to finance tasks but they have lot of challenges in the existing financial area. CFO should look for the digitization of complete financial system. I have given example of SAP S/4 HANA technology verses their organizational challenges. It may differ from organization to organization.
S/4 HANA Finance solution
Challenges
S/4 HANA Finance solution
S/4 HANA Finance solution
Margin analysis Today’s business is more complex and most of the multinationals earn significant revenue by services, repair, revenue projects, make to order engineering, etc. in addition to traditional sales of goods. They are looking the real time Margin (Profitability).
Increased flexibility of profitability reporting based on the universal journal
1) HANA provide the real time profitability without waiting for settlement job
2) Improved flexibility to add additional dimensions for profitability reporting
3) More precise COGS split for multiple currencies
4) Improved top-down distribution based on the universal allocation
5) New report to display margin analysis line items
Predictive Analysis
1) SAP S/4HANA comes with embedded analytics: a set of analytical features that enable users to perform real-time analytics on live transactional data
2) Cash Manager categorizes cash flows by different liquidity items, such as cash flows from operations and cash flows from investment. By leveraging HANA machine learning capabilities, Cash Manager can gain predictive insights into liquidity item by comparing actual and predicted results
3) Extended predictive accounting to include documents originating outside of SAP S/4HANA
4) Simulation of process steps based on replicated sales documents created in non-SAP S/4HANA software systems
Accounting and Finance Close
There are lots of issues coming of data and integration from complex technology landscape; This often renders efficient closing and reporting impossible within expected timelines. Such cumbersome systems hamper the management of working capital while making it difficult for finance departments to obtain reliable figures for profit and loss or forecasted budgets.
Accurate soft close at any time, enabling instantaneous financial statement insights and eliminating inefficient reconciliation activities
1) Things like the Universal Journal provide a single source of truth: journal entries across multiple applications are posted in a single table, reducing data redundancy and the system footprint.
2) Simpler and single step periodicclosing activity wrt to multi ledger. Merging Asset and all finance related data on single table ACDOCA
3) The SAP Financial Closing cockpit enables automated tasks along with a user-friendly dashboard reflecting all the manual activities assigned to a particular user, FI and CO are closed simultaneously with help of AP Financial Closing cockpit, which is available via Transaction FCLOCOC and Transaction FCLOCO.
Treasury and finance risk management
A wide range of risks and challenges are handled by the treasury every day, e.g. commodity trading, volatility of foreign exchange (FX), market uncertainty and changing regulations. They affect businesses in different sectors of the market in different ways, placing increased pressure on Management to stay on top of current and emerging issues.
1) Instant visibility into working capital to drive optimal liquidity and investment planning, leading to increased cash flow and profitability.
2) S/4Hana provides for cash flow analyzer which is integrated with bank account management and provides real time cash inflow and outflow detail analysis
3) money market transactions for short-, mid- and long-term investments and borrowing
4) foreign exchange transactions for all types of spot and forward transactions, including swaps, plain vanilla options and many exotic options, through knock-in and knock-out structures and average rate options
5) loans covering both bilateral contracts, such as bank loans and syndicated contracts, issuing programmers and facilities
6) derivatives covering many types of over-the-counter (OTC) derivatives, such as caps and swaps as well as futures and options dealt on the stock exchange
7) securities containing both bonds and stocks (equity), with all types of rights and corporate actions and active, passive and lending position
8) different types of commodities with matching of long/short future position and margin management
9) Trade finance which includes instruments such as letters of credit and bank guarantees.
Finance Operations
Account Receivable
Failing to follow up on overdue invoices.
Writing off overdue receivablesas bad debt.
Errors on bills and invoices.
Allocating payments incorrectly
Real-time receivables and payables, enabling immediate reaction to collection efforts and collaboration with business partners.
1) Manage accounts receivable data efficiently for all customers
2) Trigger postings automatically to accounts receivable in response to sales and logistics transactions, and record postings in the general ledger
3) Integrate data with SAP or third-party applications for dispute, collections, and credit management
4) SAP Fiori–based user experience across all process steps: Accounts Receivable Accountant, Accounts Receivable Manager, Cash Management Specialist, and Credit Controller.
Account Payable
Slow Process
Matching error
Exception invoices and manual follow-up
paying invoices before a service or product is delivered
Duplicate payment
Unauthorized purchase
1) Simplify the way you record and manage accounts payable data from vendors
2) Streamline accounts payable processes through real-time integration with purchasing software
3) Keep records current by updating postings to accounts payable simultaneously in the general ledger
4) Enable effective liquidity planning by updating cash management records with invoice data in real time
5) Support compliance with local country rules and regulations using country-specific payment formats
Enterprise Risk and Compliance Management
Sox and Regulation – Driving better visibility and management of access risks to key systems
Emergence of business control functions – Demand for technology support to improve the overall process for managing controls
Technology providers have expanded solutions to include broader control management capability
Transparency and accountability for controls as increased business activity is shared
GRC Access Control .Module Provide and Benefits
Real-time analysis of SoD and sensitive access violations , Transparency of access risks ,Self-service access requests and password resets , Streamlined user and role access reviews, Centralized audit documentation, Super-user access management (mitigates the most common audit issue) ,Customizable methodology for role definition ,Preventative compliance
GRC Process Control Module.
1) Get scalable support for multiple internal controls and compliance management programs
2) Improve efficiency by identifying, prioritizing, and focusing resources on key business processes and risks
3) Gain real-time visibility into all compliance and internal control processes
4) Speed internal control audit cycles and reduce audit costs with automation
5) Detect issues earlier, proactively analyses control failures, and monitor remediation
6) Comply with a range of regulations: anti-bribery and corruption (e.g. FCPA), Data Protection Acts (e.g. GDPR, CCPA), financial compliance (Sox, IFRS, EU Directive 8…), IT controls (e.g. CobIT), industry requirements such as Basel II / III, FDA (GxP), FERC / NERC, and more
Future and Strategy
A good start would be for CFOs to work with the CEO, the board, and others on the senior-leadership team to proactively and systematically identify tasks and processes within the finance function that would most benefit from digitization. They can then locate and invest in the technologies and capabilities required to improve these areas.
The technology such as S/4 HANA Finance is the most promising for use in finance. Look for the automation and robotics to improve processes in the area of finance and advanced analytics for financial operations to accelerate decision support. SAP S/4HANA is ‘the’ technology that supports the evolution of the finance function today and into the future. However, this journey is not easy. Companies must develop a business case for SAP S/4HANA that will support their strategic vision. By leveraging the right finance technology innovations and partnering with a trusted SAP solutions provider, companies can maintain global regulatory compliance and engage in efficient finance processes.
